Mainstream financial banks have had varying relationships with corporate social responsibility and ethical investment. These problems can be divided into two categories: the first concerns depositors, and the second concerns ethical banks. Download the full Ethics in Banking and Finance report. Credit unions are not banks but they offer many of the same services as banks (e.g. However statistics such as that given by the Cooperative Bank (UK), stating that in 2003 they reviewed 225 potentially problematic financial opportunities and of these 20% were found to be in conflict with their ethical statements and were subsequently denied further business, costing the bank 6,887,000 poundsCoro Strandberg 2005, give the consumer the impression that the banks’ proposed ethics, however ambiguous, are being taken seriously. The third view underlines the fact that banks cannot exist without ethics. An example of this in the United States is the Food and Drug Administration. He proposed that rather than prices being set through either the total control of government regulation, or the total lack of control of a free market, each industry could have self-regulating associations of producers, wholesale and retail businesses, and consumers. Legal, regulatory and societal expectations have been steadily increasing over recent years and a heretofore unseen volume of material now exists to help guide firms in the area of culture, conduct and ethics. 3. Bruyn, S. T. "The Moral Economy." For example, when Vancity/Citizen Bank states ‘we seek to work with organizations that demonstrate a commitment to ethical business practices,’ the depositor is unable to understand what ‘seek’ means. However, credit unions do not necessarily have the same potential to cause widespread change in business practices as ethical banks do. I am pleased to have the opportunity to speak today at this important conference on business ethics. However, when compared with many other sectors of the economy banks do not incur the same burden of energy, water and paper use.Jeucken & Bouma 1999 Many times such energy efficient changes are not based on moral concern but on cost efficiency. Even when given the opportunity to view an accountability report it is difficult to truly understand what their screening processes are. Christopher J. Cowton & Paul Thompson, "Do Codes Make a Difference? Similarly lending to businesses that do not "produce the reverse of happiness"(p. 10)Mill 1957 by, for example, giving to businesses that treat employees fairly and are concerned with such public goods as the environment would also be considered ethical according to Mill. In general bankers "consider themselves to be in a relatively environmentally friendly industry (in terms of emissions and pollution). Artha stands for generation and sustenance of wealth, including monetary wealth. The Bank Group's Ethics and Business Conduct Department (EBC) promotes the development and application of the highest ethical standards by staff members in the performance of their duties. There is a limit to how much more people will pay for that guarantee, after that point further initiatives will undercut the banks income and therefore are likely to not be followed. Credit unions are member-owned rather than shareholder-owned. It is arguable whether or not performing a triple bottom line analysis (an analysis that takes into account environmental, social, and financial performance) would be any more intrusive. Leadership, governance, systems and controls. Please enter your email address and if we recognise it, we will send you an email to reset your password. [8] (See Steiner's Threefold Social Order.). This is because of the wide range of laws throughout the world. Navigating the wealth of materials which exists in relation to ethics, conduct and culture is a monumental task, but one that must be undertaken in order for firms to successfully and responsibly operate their businesses. The kind of analysis that all banks partake in is termed a single bottom line analysis (this analysis only considers financial performance). 10)Mill 1957 If the bank in question acts in way that produces the greatest amount of happiness for the greatest number of people then it will be acting morally according to Mill. Strains and Challenges faced by Indian Banking Sector; Role of banks in develpoing of economy; Investment Banking in India; Indian banking system: Co-operative banks; Customer Services in Commercial Banks ; Organizational Structure and Role of Banks in India; … When a credit union has surplus, the profits made will either be invested into the community or will go back to the members in the form of "patronage rebates" (i.e. Banks may be able to support progress toward sustainability by society as a whole—for example, by adopting a ‘carrot-and-stick’ approach, where environmental and social front-runners would pay less interest than the market price for borrowing capital, while environmental laggards would pay a much higher interest rate.Jeucken & Bouma 1999 Banks can also develop more sustainable products, such as environmental, social, or ethical investment funds. A stated reason for this is that such an examination would ‘require interference’ with a client's activities. You are using an outdated browser. Banks are often reluctant to broaden the scope of their external ethical policies because of the significant nature of the changes. Download. This reflects the prominent societal morals against such drugs. This gives each member more influence in the decision-making process. In the first category lies the issue of understanding how ethical banks measure or qualify their ethical policies. While engendering trust through an ethical business approach demands an organisational mindset which is focused on achieving the right outcome, irrespective of legal or regulatory demands, complying with the rules and requirements which have been designed to deliver such outcomes is mandatory. Popular ethical theories that could be used include those of Mill, Kant and Aristotle. One argument against regulating banks is that the regulations would violate the proper functioning of the free market economy. To help you stay up-to-date with key regulatory developments in a time of accelerating change, we have collated a range of crucial horizon scanning content. External ethics looks at the impacts that their business practices, such as who they loan to or invest in, will have on society and the environment. They may also specifically seek to do business with law-abiding clients. Credit unions put a higher focus on local community development than banks do. Examples include an evaluation of the energy efficiency of a home and potential improvements in this; carbon-offsets;Coro Strandberg 2005 credit cards that benefit charities[4] or lower interest rate loans for low emission cars.[5]. Numerous ethical banks (as well as some conventional banks) allow customers to contribute to organizations that have positive societal/environmental impacts either in the local community or in developing countries. Explore our blogs for the latest news and insights across a range of key legal topics. For example, lending to a law-abiding corporation that does not pay its employees a sufficient living wage would be immoral. Review of Social Economy 57.1 (1999): 25–46. The Case of Bank Lending and the Environment". A rise in regulations that deal with moral topics is not out of the question. Community involvement is not limited to ethical banks as conventional banks also partake in such actions. Banking ethics rules, being highlighted as a separate class, have long evolved with the development of financial activities, which in time became banking. The importance of these intangible concepts and “getting it right” has been clearly communicated, with myriad speeches and initiatives in the financial services sector focussing on these issues. For example, extensive pollution and labor laws that would not be considered lawful in many developed countries are allowed in many lesser-developed countries. The purpose of this study is to study the influence of deontology ethics, virtue ethics, utilitarian ethics, and egoism ethics on the performance of banking SOEs. This statement does not give the reader the information they needs to understand the criteria used in assessing clients. The results showed that deontology ethics did not significantly influence the performance of banking SOEs, virtue ethics did not significantly influence the performance of banking SOEs, utilitarian ethics did not significantly influence the performance of banking SOEs, and egoism ethics had a significant effect on the performance of banking SOEs. When depositors allow a bank to invest for them they may assume that the bank will attempt to select investments to maximize their returns. Lawmakers, regulators and society have defined certain minimum expectations and standards of behaviour from the perspective of customer and business outcomes. "[6] This means that a bank needs to take into account the unjust/inequitable behavior of its borrowers to qualify as an ethical bank. Ethics is part of governance. EBC is committed to integrity, impartiality and independence in its work and reports to the Managing Director and World Bank Group Chief Administrative Officer and has direct access to the … In England, King Offa of Mercia in 791, then King Alfred the great (849-899), as well as King Edward the Confessor (1042-1066), outlawed usurers.