Professionalism and Ethics in Banking

Question 1

What are three examples of employee misconduct?

Answer 1

• manipulating interbank lending rates
• mis-selling insurance
• failing to stop their banks being used for money laundering.

Question 2

What is the Chartered Banker Insitute?

Answer 2

The Chartered Banker Institute’s strategic purpose is to lead the re-professionalisation of UK banking, and to play a significant role in professionalising banking internationally, with a view to rebuilding confidence and trust in banks and bankers, and restoring pride in the banking profession.

In 2017, the Institute and Nottingham University Business School’s Centre for Risk, Banking and Financial Services designed a survey to gauge professional pride in the banking sector. This research, which was repeated in 2018, offers new insight into levels of professional pride.

Question 3

What is the Chartered Banker Professional Standards Board (CB:PSB)?

Answer 3

In 2011, the Chartered Banker Institute set up the Chartered Banker Professional Standards Board (CB:PSB), the purpose of which was “…to enhance customer confidence in every banker in every bank in the UK, by setting out the professional values, attitudes and behaviour expected of bankers in the Chartered Banker Code of Professional Conduct…developing and implementing professional standards for bankers, and providing pathways for bankers to meet and maintain relevant professional qualifications” (Chartered Banker Institute, 2019).

Question 4

What are the aims of the CB:PSB?

Answer 4

The CB:PSB’s aims were to:

• develop a series of professional standards to support the ethical awareness, customer focus and competence of those working in the banking industry
• facilitate industry and public awareness and recognition of standards in banking
• establish mechanisms for the implementation, monitoring and enforcement of the standards
• help build, over time, greater public confidence and trust in individuals, institutions and the banking industry overall, and enhance pride in the banking profession.

Question 5

What are the Banking Standards Board?

Answer 5

In its drive for professionalism, the Institute also welcomes the Banking Standards Board’s (BSB) Principles for Strengthening Professionalism which allow member firms and others in the sector to reference their own policies and practices against a set of aspirational guiding principles.

Question 6

What is professionalism?

Answer 6

Professionalism is “…the competence or skill expected of a professional”.

Question 7

What is acting in the Public Interest?

Answer 7

Acting in the public interest is usually about the professional’s duties and responsibilities to make decisions and act in a way that promotes the collective well-being of the community served by the profession. The community may include customers, employers, employees, investors, the business and financial community, and other key stakeholders who rely on the work of the profession.

Question 8

What are the codes of Practice, Conduct and Ethics?

Answer 8

A code of practice, conduct or ethics is a set of written rules or standards which explains how people working in a particular profession or organisation should behave. Members of a professional body are required to commit to its professional code. If a member breaches this code, they could be subject to disciplinary action, and may even be prevented from working in that profession in future.

Question 9

What are the two ways in which codes can be described?

Answer 9

Rules based: A rules-based code clearly defines the rules that are expected to be followed. It is prescriptive in the sense that it sets out details of what members of a professional body or employees of a company can and cannot do. It therefore focuses on literal interpretation, leaving little room for misunderstanding. A disadvantage of a rules-based code is that situations are likely to arise for which no guidance is given so the individual would have no clear rule to follow.

Principles Based: A principles-based code sets out broad, high-level principles or values that guide the behaviours and decisions of the members of a professional body or company employees, thereby avoiding the need to prescribe rules for every situation a business encounters. Principles-based codes are therefore more flexible and have a wider scope, focusing on the ‘spirit’ of the law or rule instead of specific rules. What this means is that everyone to whom the code applies needs to understand it, use their professional judgement to comply with it, and be accountable for their actions. A disadvantage could be that there is no specific guidance or rules to follow for specific situations

Question 10

What are the seven core principles/values om which codes can be based on?

Answer 10

• integrity
• objectivity
• competence
• fairness
• confidentiality
• professionalism
• diligence.

Question 11

What is ‘The Code’?

Answer 11

All individuals working in the banking industry are required to act in a fair and honest manner. This is to protect the interests of customers, colleagues and counterparties, and the wider interests of society as a whole. As a minimum, compliance with legislation, regulation, and industry/employer codes and standards is expected (Chartered Banker Institute, 2019).

Membership of the Chartered Banker Institute brings with it additional responsibilities. All members (including Fellows, Members, Associates and Students) are expected to display the highest standards of professionalism and a commitment to ethical conduct, giving at all times due care and consideration to others and putting the public interest first.

Question 12

What are the Chartered Banker Code of Professional Conduct?

Answer 12

1. Treating all customers, colleagues and counterparties with respect and acting with integrity
2. Developing and maintaining my professional knowledge and acting with due skill, care and diligence; considering the risks and implications of my actions and advice, and holding myself accountable for them and their impact
3. Being open and cooperative with the regulators; complying with all current regulatory and legal requirements
4. Paying due regard to the interests of customers and treating them fairly
5. Observing and demonstrating proper standards of market conduct at all times
6. Acting in an honest and trustworthy manner, being alert to and managing potential conflicts of interest
7. Treating information with appropriate confidentiality and sensitivity

Question 13

What is integrity?

Answer 13

A simple definition of integrity is maintaining consistently high moral standards. It is accepted by most that integrity is one of the fundamental building blocks of ethical behaviour.

Professional integrity is a matter of acting and speaking consistently with the core values of the profession (as set out in the Code) – even in the face of pressure or temptation to do otherwise and even where no-one is likely to find out. Examples of behaviour that lacks integrity include lying, cheating (for example in exams) and taking credit for others’ work

Question 14

Why is Banking considered a profession?

Answer 14

The Institute thinks that banking is a profession because those working in banking, regardless of their areas of specialism:

• require specialised skills and knowledge about banking – the business that they work in
• require to maintain and develop their specialised skills and knowledge throughout their professional life, reflecting on and learning from their experience to further enhance their practice, exercise professional and ethical judgement, and contribute to the development of the profession
• realise there is asymmetry of information between the banker and customer, whereby the banker generally has more specialised knowledge about their particular area of expertise than the customer, e.g., the banker whose role it is to explain different borrowing options to customers will typically know more about their lending products and services than the customer
• realise that their expertise is relied on by the public; as a result of this expertise, the professional has significant power to either harm or help individual customers and wider society
• have a role of service to the public and society; they must therefore act in the public interest with high levels of integrity, and provide a service based on meeting customers’ needs
• have a fiduciary relationship with customers; this means that the customer places special trust and confidence in the banking professional and relies on them to provide advice and assistance that is in their best interests – the professional therefore has a duty, as well as a moral obligation, to act in their customers’ best interests
• may belong to a professional body (for banking or other professions) which regulates their practice and requires adherence to ethical principles which the professional body oversees, usually in the form of a code of practice, conduct or ethics.

Question 15

What is a professional Banker?

Answer 15

We believe that a ‘professional banker’ is someone who is:

• socially purposeful; one whose individual values are aligned with the purpose of their organisation and the banking sector
• customer-focused; acting in the best interests of customers
• an agile learner; taking charge of their own learning, learning from experience with speed and flexibility
• a creative thinker; asking questions, seeking solutions and generating ideas
• a technical specialist; has core banking knowledge as well as their own particular area of expertise
• a leader in business, finance and society.

Question 16

What is ethics?

Answer 16

According to Nagel (2006), ethics is

“…the branch of philosophy that tries to understand a familiar type of evaluation: the moral evaluation of people’s character traits, their conduct, and their institutions. We speak of good and bad people, the morally right and wrong thing to do, just or unjust regimes, and how we should live”.

Ethics encourage us to think about:

• how to live a good life
• our rights and responsibilities
• moral decisions – what is right and wrong, or good and bad.

Question 17

What is moral absolutism?

Answer 17

Moral absolutism is the view that some things are always right and some things are always wrong. They are fixed for all time, places and people.

Therefore, according to this view, there are some moral rules that are always true and apply to everyone, and acts that break these moral rules are wrong, regardless of the circumstances or consequences.

Those who support this view might say that it is fair because everyone is treated the same, in that the same rules would apply to everyone. Also, if a moral rule is ‘good’ and ‘right’, then there would be no need to have different rules for different people – these absolute rules would be universal and relevant to everyone.

Question 18

What is moral relativism?

Answer 18

Moral relativism, on the other hand, says that what is right or wrong is what the majority of people in a particular culture or society would agree was right or wrong, and is related to a particular place and time.

An objection to moral relativism is that it reduces the meaning of what is ‘good’ and ‘right’ to what is socially acceptable. Just because something is socially acceptable, doesn’t necessarily mean it is morally acceptable.

Question 19

What is Utiliatarianism?

Answer 19

One of the theories that is based on consequences is called utilitarianism. Central to this approach is the idea that everyone’s happiness counts and everyone’s happiness counts the same. Utilitarianism is impartial: all people affected by the decision should be considered and no one person’s happiness is more important than any other person’s. Utilitarianism is therefore about maximising human well-being, and that the ethically right choice in a given situation is the one that produces the most happiness and the least unhappiness for the largest number of people.

A key question is therefore: What action would result in the greatest good for the greatest number of people?

Question 20

What is an objection to the consequence-based ethics?

Answer 20

A common objection to consequence-based ethics is that we never know exactly how things are going to turn out. It is difficult to judge the rightness or wrongness of an action in terms of its consequences because we do not know what the consequences will be, either in the short term or long term, and who will be affected. In response to this objection, the argument is that we should base our decision on the expected consequences. We should work out the best we can what the consequences are likely to be and base our decision on that.

Question 21

What is deontology?

Answer 21

Some ethical theories are concerned with ethical duties. These are called deontological theories, from the Greek deont – meaning something that is necessary.

What is distinctive about duty-based ethics is that actions are made right by something other than their consequences. Although different theories based on duty disagree about the detail of what makes right actions right, they all agree that the action’s consequences have no effect on the rightness of the action.

Question 22

What are the good things about duty-based ethics?

Answer 22

1. Emphasis on the value of and respect for people which provides a basis for human rights.
2. Bringing a degree of certainty to ethical decision-making; if an action is a right action, then we should do it. If it’s a wrong action, we shouldn’t do it. If there is a clear set of moral rules to follow, then we should be able to take decisions with reasonable certainty.
3. Recognition of intention and motives – a ‘good will’. If a person didn’t intend to do a wrong act – injure someone by accident say – then from a deontological point of view, we might think the person shouldn’t be criticised for their action, provided they did the right thing for the right reasons.

Question 23

What are the objections to duty-based ethics?

Answer 23

1. The setting of absolute rules; to deal with cases that don’t fit the rule would involve building a list of exceptions to the rule.
2. Allowing acts that make the world a less good place – because consequences don’t come into it.
3. It can be hard to reconcile conflicting duties, e.g., when short-term consequences conflict with potential long-term consequences – for the environment say, or future generations.

Question 24

What is virtue ethics?

Answer 24

A virtue is a trait or quality that is considered to be morally good. A virtuous person is someone who has or demonstrates high moral standards.

Question 25

What is aristole’s theory?

Answer 25

The majority of modern virtue ethicists take their inspiration from ancient Greek philosopher, Aristotle (384BC – 322BC).

Virtue is part of our character:

• For Aristotle, a virtue is part of our character, which usually means that we tend to behave in a certain way in certain circumstances, e.g., behaving courageously in circumstances that require courage. A virtuous person acquires virtue by learning over time to be that way. We develop virtues through learning, guidance and practice.

Examples of virtues are:

• Compassion
• Courage
• Fairness
• Honesty
• Wisdom.

Developing virtues:

• As we develop virtues through learning, guidance and practice, they become habits – once we’ve acquired them, they become part of our character. Take the virtue of compassion for example. If a person has developed the virtue of compassion, they are likely to be known as a compassionate person because their natural instinct will be to be compassionate towards others.

Taking a virtues-based approach to making decisions could involve asking ourselves questions like:

• What is the most compassionate thing to do here?
• What is the most courageous thing to do?
• What is the fairest thing to do?
• What is the most honest thing to do?
• What is the wisest thing to do?

Question 26

How should these theories be applied?

Answer 26

When considering what the right thing to do is, although we may lean towards consequences, duty or virtues in our thinking, most of us would probably not base our decisions solely on the basis of just one of those theories. We would probably want to be a good person and do what a good person would do, consider what our duties are and act accordingly, and think about the likely consequences of our actions before making a decision.

The key point here is that it’s not just one theory of ethics that can guide our actions and help us make ethical decisions – there could be many factors that influence us in deciding what is right or wrong and what is the right thing to do in a certain situation.

Question 27

What are ethical dilemmas?

Answer 27

Encountering instances of unprofessional and unethical behaviour can compromise our own ideas of what is ethical and professional. Sometimes, we can be faced with an ethical dilemma.

The Institute of Business Ethics (2019) describes an ethical dilemma as “…a situation that makes a person question what the ‘right’ thing to do is. Ethical dilemmas make individuals think about their obligations, duties or responsibilities. It is through a dilemma that most employees experience business ethics”.

Question 28

What are the examples of business values?

Answer 28

• Collaboration
• Excellence
• Innovation
• Reliability
• Service.

Question 29

What is organizational value?

Answer 29

As well as business values, an organisation’s values may also include ethical values which guide the way the business is done. These values tell us what our organisation thinks is acceptable, desirable and responsible behaviour, above and beyond compliance with laws and regulations.

Examples of ethical values are:

• Fairness
• Honesty
• Integrity
• Respect
• Stewardship
• Trustworthiness.

These values are typically expressed through an ethics policy and code of ethics.

Question 30

What is an ethics policy?

Answer 30

An ethics policy sets out the organisation’s commitment to high ethical standards and the management of integrity risks. It would usually detail how this will be governed, implemented and monitored.

Question 31

What is Code of Ethics?

Answer 31

A code of ethics is a document which shows how the organisation’s values and its commitments to stakeholders translate into how the organisation conducts its business – ‘the way we work around here’. It will set out the behaviours expected of employees and provide guidance around the ethical challenges and issues that are relevant and important to the organisation

Question 32

What is Code of Conduct?

Answer 32

This is slightly different from a code of conduct, the purpose of which is to tell employees about rules and regulations to follow where they have no discretion – these are things their organisations want them to do in certain situations.

Question 33

What is the Four Component Model?

Answer 33

In considering how we make ethical decisions, Rest (1994) presents a theory of what determines m
oral behaviour in his Four Component Model: Four Psychological Components Determining Moral Behaviour.

Moral sensitivity:

(interpreting the situation)

Moral sensitivity is being aware of how our actions affect other people. It involves being aware of the different courses of action we could take and how each of these options could affect the people concerned. It’s about imagining ‘what could happen if I were to do this?’

Moral judgement:

(judging which action is morally right or wrong)

Moral judgement is about (having thought about the possible actions we could take and how they might affect others) judging which option is the most morally justifiable – which alternative is just and right?

Moral motivation:

(prioritising moral values relative to other values)

Moral motivation is about the importance we place on moral values compared to other values. There could be a problem here if we are not sufficiently motivated to put moral values higher up our priority list. An example is when serving our own self-interests at the expense of others or protecting our organisation replace our concern for doing the right thing.

Moral character:

(having courage, persisting, overcoming distractions, and implementing skills)

Moral character is about having courage, conviction and confidence. It’s about being resilient and persistent. Although we may be morally sensitive, make good moral judgements and place a high priority on moral values, if we wilt under pressure, or are easily discouraged, we may not have the strength of character to take the action, follow it through, and deal with the challenges this could present.

Question 34

What is the stages of ethical decision-making?

Answer 34

Before we look at an actual example of a decision-making framework, let’s start by thinking about what questions we could ask ourselves to help us arrive at the right decision.

1. Interpreting the situation
2. Planning courses of actions
3. Considering the options
4. Arriving at the decision
5. Reflecting on the decision and action

Question 35

What is Kidder’s 9 point checklist?

Answer 35

1. Recognise that there is an ethical/moral issue
2. Determine the actor
3. Gather the relevant facts
4. Test for right and wrong issues
5. Test for right v right paradigms
6. Apply the resolution principles
7. Investigate the ‘trilemma’ option
8. Make the decision
9. Review and reflect on the decision

Question 36

What is whistleblowing?

Answer 36

Whistleblowing occurs when an employee or former employee (or someone connected to the organisation) conveys information about a significant moral problem to someone in a position to take action on the problem, and does so outside approved organisational channels”.

o The whistleblower does not need to be currently employed by the organisation. We could blow the whistle on a company, for example, with whom we have worked in partnership, or as an auditor or a consultant.
o The problem needs to be significant for the action to count as whistleblowing.
o The report is made to someone outside of the normal channels. Talking to our line manager, for example, does not count as whistleblowing.
o The report is made to someone in a position to take action.

Question 37

What is speaking out?

Answer 37

It is vital for banking professionals – and the wider industry – to have options to understand how to report wrongdoing in the workplace. We at the Chartered Banker Institute want to ensure that our members have somewhere they can go if they feel they want to discuss whether an issue that’s causing them a professional ethical dilemma should be reported, or to find out how to raise a concern. That’s why we have our own service for members called Speak Out.

Question 38

What is considered to be whistleblowing in financial services?

Answer 38

When someone blows the whistle they are raising a concern about danger or illegality that affects others (e.g. customers, members of the public, or their employer). The person blowing the whistle is usually not directly, personally affected by the danger or illegality.

Consequently, the whistleblower rarely has a personal interest in the outcome of any investigation into their concern — they are simply trying to alert others. For this reason, the whistleblower should not be expected to prove the malpractice. He or she is a messenger raising a concern so that others can address it.

This is very different from a complaint. When someone complains, they are saying that they have personally been poorly treated. This poor treatment could involve a breach of their individual employment rights and the complainant is seeking redress or justice for themselves. The person making the complaint therefore has a vested interest in the outcome of the complaint and, for this reason, is expected to be able to prove their case.

For these reasons, it is not in anyone’s interests if an organisation’s whistleblowing policy is used to pursue a personal grievance. Most organisations have a grievance or complaints procedure and this will be more appropriate for making a complaint.

Question 39

What is an algorithm?

Answer 39

An algorithm is a procedure or formula for solving a problem, based on conducting a sequence of specified actions. It can therefore be described as a process, based on rules, that is followed to solve a problem or produce a decision.

Traditionally, algorithms have been designed by software engineers and other programmers. More recently, machine learning algorithms have been developed. These are algorithms which ‘learn’ the best ways to process data independently of being explicitly programmed.

Question 40

WHat is machine learning algorithms and banking as a profession?

Answer 40

Machine learning algorithms are a specific kind of algorithm which ‘learn’ their own ways of analysing data and reaching decisions. These algorithms are prized because they alter their decision-making procedure based on the data they are given, and the goal assigned, with little to no pre-established rules placed on the system by the designers. As such, the machine independently develops its own way of classifying and analysing the data to produce the desired result and is able to analyse large amounts of data a great deal faster and more accurately than human calculators.

Thus, machine learning algorithms are best understood as a form of ‘weak artificial intelligence’. That is, although they make independent decisions, they do not have true intelligence or self-awareness. Machine learning algorithms are increasingly allowed to make decisions in the finance sector without oversight by any software engineer or banking professional.

Humans cannot built a relationship with a machine as they cannot trust it

Question 41

What is Banking and Big Data?

Answer 41

Big data comprises extremely large sets of data that can be analysed by computers to reveal patterns and trends, especially in relation to human behaviours, decisions and interactions. It plays an increasing part in the activities of many different industries. When dealing with personal data from which people can be identified, organisations must pay due regard to the provisions of the General Data Protection Regulation (GDPR) which came into effect in 2018. GDPR sets out the rights of data subjects and the obligations of organisations which collect, process, analyse and store personal data.

Key ethical concepts here are privacy and consent, both of which are vital for understanding the ethics of data analysis.

Question 42

What is the framework developed by Institute of Business Ethics (2018)?

Answer 42

The Institute of Business Ethics (2018) developed a framework of fundamental values and principles for the use of artificial intelligence in business:

A    Accuracy
R    Respect of privacy
T    Transparency
I    Interpretability
F    Fairness
I    Integrity
C    Control
I    Impact
A    Accountability
L    Learning

Question 43

What else does the framework involve?

Answer 43

Following an analysis of the social, technical and regulatory challenges posed by algorithmic systems, the study develops policy options for the governance of algorithmic transparency and accountability.

These involve:

1. awareness raising, through education for example
2. accountability for use of algorithmic decision-making
3. regulatory oversight and legal liability
4. global coordination for algorithmic governance.

Question 44

What is a Bank’s moral obligation towards the environment?

Answer 44

Environmental ethics is about the ethical relationship between human beings and the natural environment, including the non-human beings who share our planet, in an attempt for both to co-exist without compromising the futures of either.

One aspect of environmental ethics is sustainability. In Unit 1, we learned that sustainability is essentially about meeting the needs of the present without compromising the ability of future generations to meet their needs.

The concept of sustainability comprises three pillars:

• economic (profits)
• social (people)
• environmental (planet).