Since the banking collapse of 2008 there have been hundreds of newspaper articles and media programmes about scandals in banks arising from the poor ethics of banking. In the past few weeks the unethical conduct of some major banks has cost them billions – yes billions of dollars for charging customers when they should not have, rigging the libor interest rate (the rate on which all other interest rates are based) and manipulating foreign exchange markets.
When one does a Google search on the “ethics of banking” or “ethical banking” many of top ten results are about how banks strive to invest in ways that reduce adverse in pacts on society and the environment. However, this focus on ethical investing does not deal with the real problem, individual bankers doing things which are unethical. The question being asked by many people (including banking regulators and very senior management) is why some people choose to act unethically. Again a Google search will show that there are, in some places, code of banking ethics. So what would drive someone to do something which is so unethical it is criminal ( illegal)?
- We could blame the whole short-term banking culture where an investment manager has to make massive returns of be regarded as under-performing by his/her boss and shareholders.
- We could say that the codes of ethics are not clear enough and do not spell out what is unethical. (More research needed to test this).
- We could blame the incentive structure, where the more money you make the more you bonus or rewards. In other words, encouraging greed and not putting controls in place to reduce rewards if the profits made were made unethically.
- We could accuse senior managers for not being aware of the unethical conduct of their juniors, and if they were, for not stopping it immediately.
- We could even say the the people behaving unethically did not really regard what they were doing as unethical .. it is merely numbers on a screen moving from one account to another.
However, does it really require codes of conduct and ethics education classes to know that lying and cheating, and stealing is wrong? What seems to have gone wrong is that bankers have lost their professional intuition – the utmost care for your clients. Anything which betters the bank ( and the banker) by hurting, demeaning or hurts, “screwing” the customer is unethical. Is not the root of lack of ethics of banking, a lack of care for customers – fellow human beings?
Of course. much research probably been done ( and will continue to be done) on