Banking chiefs need oath to regain public trust, says think tank
Finance professionals should make formal pledge to colleagues, customers and public to carry out duties in an ethical fashion, report argues
Bankers should be forced to swear to an oath that compels them to carry out their jobs in an ethical and responsible manner, as a means of winning back public trust following economic turbulence: that is the message from a new report released today by civic think tank ResPublica.
If the proposal becomes reality, professionals in investment banking from entry-level to the C-suite will take on a pledge similar to the Hippocratic Oath, adopted by doctors and healthcare professionals. ResPublica’s call arrives in the wake of banking scandals over missold products and manipulation of the Libor rate – the latter a hot topic again, following Bank of England governor Mark Carney’s suggestion that Lloyds employees who participated may be guilty of “criminal conduct”.
In ResPublica’s view, bankers have a lot of work ahead to transform public disaffection. With that in mind, its report, Virtuous Banking: Placing Ethos and Purpose at the Heart of Banking, claims that industry reforms over the past few years have failed to secure enough bank support for small businesses, and that individual customers are bereft of good advice.
While the Government has wrongly focused on improving regulatory or prudential issues, the report argues, it has ignored the crucial root cause of the banking crisis: an inherent lack of virtue among the sector’s institutions. As such, affirming a new Bankers’ Oath would automatically bring a higher level of personal responsibility to professionals, along with an understanding that ethics is a crucial factor of a banker’s role.
ResPublica Director Phillip Blond stressed that the introduction of the oath would mark a strong statement of intent from banks that could lead to a potential turning point in public opinion. “As countless scandals demonstrate,” he said, “virtue is distinctly absent from our banking institutions. Britain’s bankers lack a sense of ethos and the institutions they work for lack a clearly defined social purpose.”
Blond added: “In order for us to have the banks we desperately need and the country deserves, bankers must recognise the good, do the good, and be good. The Bankers’ Oath represents a remarkable opportunity to fulfil their proper moral and economic purpose, and finally place bankers on the road to absolution.”
Other recommendations from the report include:
1. Reclassify small businesses as “consumers” to ensure that banks treat struggling firms fairly.
2. Introduce tougher fiduciary duties for bank shareholders to ensure that banks are held to account.
3. Localise the British Business Bank through local enterprise partnerships (LEPs) to promote banking at a community level.
However, in the area of finance that counts the cost of banking crises and scours through the wreckage for evidence, ResPublica’s call for an oath has fallen flat. Phil Beckett – managing director of forensic investigations and e-disclosure firm Proven Legal Technologies – said this afternoon: “This oath misses the point. Simply signing a document or declaring an oath would not stop the majority of fraud or regulatory issues that we have seen over the last 10 years from occurring. From our experience working on these types of large-scale cases, in the heat of the moment people don’t tend to think about the historic things they said or did – especially when the pressure is on.
“In fact, the people committing these offences do not necessarily believe they are doing anything wrong in the first instance, therefore would not consider that they are breaking an oath at all – whoever made them take it.”
Beckett added: “Ultimately prevention is always better than cure. Regular, robust and intelligent analysis of company data – such as chat messages and emails – can provide better early warning signs of these issues far more than any oath could.”
Read the full report Virtuous Banking: Placing Ethos and Purpose at the Heart of Banking.
For further insights on these issues, read this CMI blog on the ethical collapses that can undermine management of major institutions.