Role Of Ethics In Banking

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Table of Contents Introduction 3 Ideals 4 The Reality 6 The Grey Area 8 BUSINESS ETHICS IN BANKING SECTOR Pompi Boro_Sec F_0427/54 Introduction I cannot think of any industry where ethics would be as important as in banking. Partly because financial institutions are such a crucial part of the world economy, and their trustworthiness is bound to have serious implications for countless individuals and institutions. Furthermore, the banks depend entirely on trust to sustain their business. A bank that shows itself not to be trustworthy will very quickly find itself short of customers, but of course the trust that we place on banks have survived because of the regulatory systems. The need for a financial system over the generation of…show more content…
Is there any fixed “formula” that employees follow to save their ethics from going into ruins whenever there is a hierarchical pressure? Ideals In light of the scenario discussed above, it is important that ethics in banking is very important. In my judgement, these are few things in banking that must be followed: Firstly, bank must comply with the rules and regulations set for them. These rules and regulations have been set up after years and years of experience and learning and past mistakes. These laws have been set up to ensure soundness of operations and to enhance confidence of the society. These rules cover all the bases related to banking; education qualification, maximum tenure, salary and other requirements of the Board Members and all the other employees, the shareholding pattern, credit rating requirements, liquidity and credit/deposit ratio, maximum limits on single party exposure etc. Banks are additionally subject to laws set by government, tax laws and securities law. This is because of the global nature of banking and its impact on economy. These rules are strictly followed and violation of it is considered…show more content…
The interests of various stakeholders like creditor, depositor, shareholder etc. does not necessarily coincide with each other. They should not, for the benefit of one stakeholder, harm the interest of another stakeholder. The conflict of interest must be balanced ethically for the greater good. Any violation in that is unethical. Thirdly, the banks must give a full disclosure of the financial health of the bank. A full, transparent and truthful picture of the bank is necessary for its stakeholders for them to make decisions about the firm. Many banks fail to do so in fear of losing customers or shareholders for their own benefit. They either withhold truth or lie in their balance sheets and profit and loss statement. An act like this is highly unethical or any other act where banks fail to present their concerned stakeholders with a clear and transparent financial health of the

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