Making greedy bankers more ethical–route to virtuous banking

Summer’s seldom prime time to offer thought leadership. Even worthwhile thinking may be given insufficient attention.  This could be the summer fate destined for a challenging new paper called Virtuous Banking from the independent think tank ResPublica.

virtuous banking2That would be a pity as Virtuous Banking takes an insightful look at the ethos and purpose at the heart of finance, arriving at some useful conclusions.

Written mainly by academics, the 30-page report on the banking sector is worth a read by anyone interested in promoting ethical leadership generally, and in the finance sector in particular.

The paper’s core message is one has been making since its inception in late 2013. The think tank authors argue

…more of the same regulatory and prudential responses to the ongoing crisis in banking will do very little if anything to improve the underlying culture of British banking.”

This has been the basis of our argument for ethical engagement–a complimentary strategy to the formalised systems organisations still need to have in place. These latter are insufficient to deliver real change, though they may reduce some of the risks leaders face in seeking to avoid compliance disasters.

Ethical engagement, or as the authors of Virtuous Banking call it, “root and branch” and “pursuing the spirit not the letter of the law”  can help introduce a clearer purpose into banking.  The three key areas supporting this are: improve internal governance structures; reform competition; develop significant levels of diversity

To achieve these the report makes 10 specific and neutral recommendations for the banking sector. That is, ones not tied to any particular political party or ideology—see box

vertuous bnaking3 BOXRather than concentrating on the more fundamentals of purpose and ethical engagement, recent banking sector reviews have over-dosed on legislative and regulatory practices. They do not address

a pervasive and inherent lack of virtue amongst our banking institutions…”

Along with just about everyone else, apart from the banking fraternity, the authors are not enamoured with the way banks treat their customers. Quoting an internal review at Barclays which found “no articulated and understood shared values”, this latest report report points to a general lack of this across all of banking. This results in an uncertain culture that in turn shapes and determines dishonest business practices and behaviour.

One of the more contentious assertions made in this think tank paper concerns the whole issue of profit. While the latter is fundamental to business, it should not, say the authors, be the main concern of a successful business.

Bolstering this assertion the authors remind us “the most profit-orientated companies are not always RIGHT WRONG
the most profitable.” Or as this web site has consistently argued: the “how of business” is usually more important than the “what.” That is, ends do not always justify means.

Ethical Engagement—the route to culture change

The new report also offers something of a route map for promoting “virtue through good governance and leadership.” In particular, it arrives at ethical engagement by arguing for “embedding the right ethos in banks. This requires both “root-level involvement and strong leadership from the very top of organisations.”

humilityWhat’s needed therefore is a new kind of leadership, based on moral purpose, character, critical thinking and decision making. Nothing new here– though the authors cannot resist pointing out that bankers are notoriously short on “humility and love” as shown by recent studies.

Most banks, and indeed many large corporations, are deeply immersed in the mechanics of compliance, including codes of conduct and ethical training. But the existing approach has mainly failed because of the over dependence on a philosophy of compliance and obedience.

The only way to trigger real culture change is to seek “buy-in from all levels of a bank’s hierarchy”, that is a commitment to achieving ethical engagement throughout the enterprise.

As part of achieving this the paper suggests employees should be “encouraged to bring their personal humanity to work and apply it accordingly.” However this rather assumes the ethos in which they do so is both responsive and highly flexible.

Another way of achieving ethical engagement, or “root level involvement of staff” as the authors call it, would be making bankers swear the equivalent of the Hippocratic Oath. Again not a new idea and rejected by the Banking Standard Review, although some bankers abroad have adopted it. More symbolic than substance, such an oath could never the less become a turning point, a helpful shift in the culture.

Duty of Care

HM Revenue and Customs formTo keep HMRC happy, I recently asked my bank to retrieve a record of past interest paid on a defunct account. It took five phone calls to obtain this admittedly rather insignificant data, which finally arrived by recorded delivery.

What is interesting about this otherwise minor incident, is how my bank handled the aftermath. Without prompting, customer service wrote an abject apology, offered a small financial compensation and a leaflet on how I could take any dissatisfaction further. There was a palpable sense the bank cared about its failure to deliver and it is not surprising this particular one has the highest ranking in the league tables of bank customer satisfaction.

“The banks must demonstrate a clear duty of care” argue the three authors of Virtue in Banking. They must demonstrate their ethos is a “commitment to customers beyond what they have done so far.”  Mostly attempts to do this have been PR gimmicks designed to dispel the image of unsympathetic bankers .

In the final section of their report the authors expand on this with arguments about promoting virtue through greater competition. However, again nothing new here, since everyone from politicians, small business owners and consumer groups have agitated for ways to reduce barriers to entry and creating a more competitive banking market.


Reforming our banks is a long way from complete, as this report makes clear. Its suggestions for change are thoughtful and grounded, mainly in reality.

It would be a pity if a summer launch of the paper meant its findings get lost somewhere on a beach or in the “to be read later” pending file. .


Virtuous Banking: Placing ethos and purpose at the heart of finance, Respublica, July 2014.

Humility picture courtesy of


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