- Adjust your moral compass
He is the economist credited with having the most influence on the Archbishop of Canterbury. And Paul Dembinski is clear that regulation is not enough to improve banking - a fundamental cultural shift is needed
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The idea of bankers’ swearing a financial version of the Hippocratic Oath first surfaced in 2009 and I wrote about it in The Tablet a year later when the Future of Banking commission recommended a medical model of ethics for financial services. It was among a range of ethical ideas that the commission put forward in response to the financial crisis that had gripped the world’s developed economies.
Ever since that year, governments and international institutions have been gradually crawling their way back from the economic effects of the crisis and just last week the British Government announced that the economy had now regrown to where it was in 2008. This six-year crisis is officially over, but there is still a long way to go to fix its causes. There are now more robust liquidity requirements for banks, restrictions on how bonuses are paid, and an impending ring-fencing of the retail/investment banking interface. Nevertheless, these do not address the fundamental issue of ethical behaviour in banking.
This was thrown into shocking relief by the Libor scandal which emerged in 2012 and had nothing to do with the financial crisis. This involved traders at Barclays and other major banks systematically lying for personal advantage and to the disadvantage of millions of users of financial products around the world. This was fraud on a breath-taking scale and the current Lloyds Forex investigation may reveal similar horrors. What is doubly astonishing is that after all the public anger aimed at bankers, some of them still carried on lying and cheating.
The Libor scandal led to the setting up of the Parliamentary Commission on Banking Standards, whose report, which was issued in June 2013, described “shocking and widespread malpractice”. As a follow-on, the Government asked city grandee Sir Richard Lambert to set up the Banking Standards Review Council (BSRC). In his preliminary work for this he specifically rejected the General Medical Council model of swearing an oath, arguing that such a model would result in the Financial Conduct Authority having its regulatory powers clipped and there would be confusion over who was responsible for what. However, the problem with the whole BSRC project is that it only deals with the behaviour of major banks as institutions. So nobody is addressing the personal behaviour of bankers.
The report by the thinktank ResPublica published this week on “Virtuous banking” addresses personal behaviour head on and the bankers’ oath is the symbol of that. It also addresses the behaviour of shareholders and other key players in the industry. In addition, it firmly states the need for civil society and banks to agree on the social purpose of banks. The strength of this report is its recognition of ethical behaviour and common purpose as the keys to future reform of the financial services sector.
Many people have already mocked this report and seen it as just more banker-bashing and more regulation that will diminish this vital industry. Such views miss the point: until there are real changes in attitudes and behaviour, the industry will attract more and more regulation following the latest scandal as well as more and more public outrage. This report could be a first step in securing a much deeper foundation for one of Britain’s great industries.
Fr Christopher Jamison is the Director of the National Office for Vocation
The forthcoming issue of The Tablet's features a special focus on ethics and the economy.