PrefBlog

A silly publication titled Virtuous Banking: Placing ethos and purpose at the heart of finance has just hit the streets with a thud:

While it cannot plausibly be argued that a systematically stable system is not to be desired, the current approach focuses far too much on this and ignores the crucial root cause of the banking crisis: a calamity that has its origins in the profligate and irresponsible actions of a significant number of bankers and banking institutions, urged on by a banking culture that was at its core fundamentally self-serving. There was on the part of organisations and people,a systemic disregard for the regulatory system, a belief that the pursuit of individual advantage would act for the advantage of all. The banking sector had, in short, lost its ethos. Instead of a culture that prioritised its own self-interest, it should look towards the fulfilment of a broader common good and its wider social purpose.
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Given the failure of rule following ethics as evinced by the crash and multiple scandals, bankers evidently and most obviously need to be of good character. Bankers need to know the good, do the good and be good.
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In short, if we want to place ethos and virtue firmly at the heart of banking, policy makers will need to ensure that there are suitable internal checks on banking institutions through better governance, and that there are adequate external checks on banking behaviour through improved competition and diversity. The ten recommendations below outline how such a programme for reform could be pursed in the next parliament, regardless of which political party assumes power.

1. Define and enshrine an overarching purpose for banking: A criticism often levelled at the banks is that they either perform no clear social purpose or, if they do, this is often not reflected in the actions of bankers.
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2. Co-design codes of conduct to place customers at the heart of standards:
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3. Require all bankers to swear the Bankers’ Oath::
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4. Toughen shareholder fiduciary duties to promote activism:
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5. Encourage the banks to compete on customer satisfaction:
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6. Reclassify small businesses as consumers:
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7. Launch a competition to kick-start the online advice market:
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8. Conduct an immediate review into the diversity of UK banking:
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9. Localise the British Business Bank through [Local Enterprise Partnerships]:
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10. Utilise public funds to boost the digital finance market: …. we recommend that the Department for Business, Innovation and Skills conduct a review to determine the viability of utilising local government funds to increase lending to small businesses and social enterprises through digital lending platforms.

How sweet. Wency Leung in the Globe quoted one instant rejoinder:

A proposed version of the bankers’ oath reads: “I will remember that I remain a member of society, with special obligations to the financial security and wellbeing of my customers, their families and the communities they reside in.”
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“People pledge allegiance to flags and all sorts of things, but it may or may not affect their behaviour,” says Gini Graham Scott, a Lafayette, Calif.-based consultant specializing in business and work relationships, and author of The Truth About Lying: Why and How We All Do It and What to Do About It.

For some, she says, an oath may simply represent a token formality that doesn’t really have much meaning. And people tend to lie more often in cultures that emphasize competition and monetary, materialistic values, Scott says.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts off 1bp, FixedResets gaining 7bp and DeemedRetractibles up 9bp. Volatility was minimal. Volume was below average.

This entry was posted on Wednesday, July 30th, 2014 at 12:34 am and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.