Ethics in Banking

Concept of Values, Morals, and Ethics

Value
Values are the rules by which we make decisions about right and wrong, should
and should not, good and bad. They also tell us which are more or less important, which
is useful when we have to trade ff meeting one value over another.
It also can be defined as beliefs of a person or social group in which they have an
emotional investment (either for or against something). In example, "he has very
conservatives values".

Morals

Means things that are right and approved by the society. The right and wrong of
moral refer to the society that they are in. A behavior that is morally acceptable in one
society may not be acceptable in another society.

Morals are far more about good and bad than other values. We thus judge
others more strongly on morals than values. A person can be described as immoral, yet
there is no word for them not following values.

Moral Obligation is a duty which one owes and which he ought to perform, but
which he is not legally bound to fulfill.

Ethics
Its means character or custom. It concerns the individual character and social
rules that govern our character. Ethic can also be such a set of standard by definition.

Although the use of ethics does not to be associated with specific aspects of life or
activities, it makes sense to discuss it within a restricted are or in reduced.

Ethics is what you do when no one is looking. It starts in our minds, where
we become what we think based on our experience, training, hindsight,
intuition, effect on the company and self esteem. We must factor this
issue of ethics into all of our decision making and carefully analyze what
price we and others around us will have to pay for that decision.

Ethics of principled conviction asserts that intent is the most important factor. If
you have good principles, then you will act ethically.

Ethics of responsibility challenges this, saying that you must understand the
consequences of your decisions and actions and answer to these, not just your highminded principles. The medical maxim 'do no harm', for example, is based in the
outcome-oriented ethics of responsibility.

Business Ethics
Business ethics is what is right and wrong in conducting business or norm
in business. For example, non-acceptance of bribery, not bias in decision making,
not engaged in immoral activities. However, accepting bride ( token with any
commercial value) may be norm in some culture although it may not be morally
right.

Business ethic invite a challenge with three parts, which is :

Developing managers as moral individuals

Building an environment in which standards and values are central to

the companys strategy

Formulating and implementing policies that support ethical

performance as well as safeguards to assure they are observed.

Business and Ethical Consideration

Do Not Harm
Refraining from harming others is an ethical consideration that also helps hold society
together. People must have a fundamental trust of one another to be able to work
together and function as a civilization. Business commerce also relies on this basic rule.
No one would buy anything if they thought that every company may try to harm them.
The idea of doing no harm also extends to preventing harm by creating a safe
environment and considering the consequences of actions.

Be Fair
Fairness can be demonstrated in the way resources are distributed, how offenders are
punished or the manner in which unjust situations are fixed. In society "distribute
fairness" means ensuring that everyone has the same opportunities. In business it can
mean using the same criteria to determine employee treatment, such as promotion or
firing, or providing equal consumer access to products and services. Society uses legal
systems to consider justice and fairness in punishment. Business uses contracts,
handbooks and codes of conduct to provide the standards for what's considered wrong,
who needs to be reprimanded and how it should be done. In both society and business,
individuals use their personal judgment and ethical codes to consider if a situation is
unjust and to determine how to make it right.
Communicate Honestly
Honest communication is telling the truth and ensuring that actions are taken based on
accurate information. The consideration of honest communication extends to protecting
confidential information, honoring promises and demonstrating trustworthiness. In
business this could mean honest advertising, observing contractual obligations and
fulfilling industry and public expectations.
Respect Human Rights
Human rights include fairness, access to justice, nondiscrimination, the pursuit of
happiness and freedom. These rights are described in detail in the articles of the United
Nation's 1948 Declaration of Human Rights. They can be applied to business through
thoughtful, considerate action that takes into account the well-being of others. Acting on
other ethical considerations often has the side effect of promoting human rights.

Ethical Issues facing the Banking Industry

1.- Usurious practices.
Banking is a business concerned with protecting and growing peoples money. As such, one of
its principal purposes is to generate wealth, in the form of financial returns for its shareholders.
As in any industry, it is understandable and acceptable that banks try their best to maximize
their investments and therefore, it is logical that banks charge interest rates on the loans and
financing activities they offer to their clients. However, banks that charge excessive interest
rates, abusive commissions, or ultra-profitable credit charges that go beyond reasonable
standards for taking an extra benefit from a specific situation in detriment to their customers,
are guilty of usury. Usury may be defined as demanding significantly more money back from
customers than is just and fair.
2.- Speculative banking.
The assets a bank lends and invest should be handled responsibly, even moreover so, when we
consider that the bank is investing and lending money that belongs to other people, i.e., the
individual and institutional investors whose money they manage. Engaging in excessively
speculative investments and irresponsible credit lending practices is morally unacceptable, and
in many cases, not even good business. We believe bankers and financial professionals should
take a responsible approach in all investment and lending operations with its customers
money. Even in the case of high-risk, high-return type of clients, a bank is the ultimate entity
making the investment decisions for the investors, and practices of speculatively investing
heavily in too-risky securities just for the sake of short-term returns should be considered
cautiously, especially given the massive loss of wealth that we have witnessed during the
current financial crisis.
3.- Financing arms manufacturing and trade.
Many banks are actively financing the military industry around the world. While we recognize
the moral acceptability of a country taking care to defend its population, and thus investing in
arms and weapons, we are concerned with excesses and human rights violations involved in

this activity. We are specifically referring to indiscriminately destructive, overly-damaging

weapons and their manufacturers and distributors. These usually fall in the category of socalled cluster munitions which are highly-destructive weapons which not only destroy an
enemys military target, but quite frequently kill thousands of innocent civilian victims.
Some weapon-manufacturing companies have obtained credit facilities of very considerable
sizes from well-kwon financial institutions. We are talking about credits in the billions of dollars.
We cannot pretend that Banks did not know the purpose of the financing facilities they were
arranging.
4.- Financing and supporting totalitarian regimes.
Banks frequently give loans to companies operating in countries governed by totalitarian
regimes such as Burma, North Korea, or Sudan. Those companies in turn use the money to
enter those markets. Some of these countries are plagued with corrupt government authorities
that frequently require them to give substantial bribes to allow them to operate in those
nations. By financing these companies, banks are allowing money to flow into these totalitarian
regimes which have no respect for human rights and who use this money to strengthen their
positions in their respective countries. The fundamental problem is not that a company be
present in a country with a repressive regime, but that its business there is somehow complicit
in propping up or perpetuating the repressive regime.
5.- Financing of companies with little or no commitment to social responsibility.
The banking industry usually grants credit facilities to companies, and helps in raising capital in
the financial markets, to companies operating with no socially-responsible agendas, or with
little commitment to one. We are referring, amongst others, to companies operating in thirdworld countries that allow child-labor, overwhelming pollution of the environment, black
economies, and so forth. We have observed companies that have little respect for their workers
and which have consistently violated labor laws (mainly in developing countries) having no
problem securing credits from well-known banks. So far, banks have not been interested in

questioning clients about their human-rights or social-impact agendas. Banks tend to look at
the risk-return ratio of their investment as the sole basis for granting the credit.

Social responsibility in Business

A companys sense of responsibility toward the community and environment (both ecological
and social) in which it operates. Companies express this citizenship through :their waste and pollution reduction processes
by contributing educational and social programs
by earning adequate returns on he employed resources

Basic Personal Attributes Required of a Good Banker

Trustworthy
- Maintain secrecy
regarding
customers account

Honest
- To perform duties
according to rules
and regulation of
the bank

Personal
attribute
required as
a Banker

Discipline
- To maintain
acceptable working
attitude such as
punctuality

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Good Faith
- To act in good
manner acceptable
to general banking
practices

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