London - The Bank of England (BoE) is determined to improve business standards at banks, and has already forced an unidentified firm to limit its lending and deposit-taking until it met regulatory requirements, it said on Thursday.

Policymakers and regulators see changing the business culture at banks as essential to lasting reform in an industry that had to be bailed out by taxpayers during the 2007-09 financial crisis.

The BoE's supervisory arm, the Prudential Regulation Authority (PRA), on Thursday set out how it already has - and will in future - use its powers to enforce change in an industry tarnished by scandals over mis-sold products and the rigging of benchmark interest rates.

In a policy statement, the PRA said it was looking out for firms that failed to conduct their business in a safe and sound way, poorly functioning boards that did not challenge executives, and inadequate control of risks.

The first step would be to step up the intensity of supervision, increase reporting requirements and set a deadline for improvements, it said.

“The PRA may proceed to an enforcement investigation without having exhausted all other supervisory options,” it added.

In June 2013, Britain's parliament published a report on banking standards that made several recommendations, including a new professional body and more women on trading floors.

It also called for a “special measures” tool for regulators, but the BoE said at the time that no new tools were needed and the PRA statement set out how existing tools could be used.

The PRA said it expected banks to cooperate in resolving cultural issues but wouldn't hesitate to use formal powers if it felt a lender wouldn't respond appropriately.

The watchdog could appoint an outside person to review operations at the lender's cost, or if a bank's board or top staff lacked the necessary skills, deposit-taking could be barred for six months, it added.

The PRA gave examples of where it had already used its powers to improve standards, such as ordering a firm to put in place committees to tackle regulatory concerns or requirements.

It has also appointed an outside person, reporting directly to the PRA, to oversee compliance with its requirements.

A firm also agreed to limit its balance sheet growth - essentially lending and/or deposit-taking - to a set percentage a year until the watchdog was satisfied that more robust governance structures were in place.

The PRA did not identify any of the firms in its examples.

Martin Wheatley, chief executive of the Financial Conduct Authority, launched last year to crack down on bad behaviour at banks, has said top bank executives were getting the message but that it had yet to fully trickle down to lower levels.

The most dramatic attempt to change a bank's culture came in July 2012 when the BoE pushed out Barclays' chief executive Bob Diamond a month after the lender was fined for rigging the Libor benchmark interest rate.