Finance + morality = uneasy bedfellows?
So, should we expect members of one particular service sector of the UK economy to take a new form of Hippocratic oath “..to behave in a manner that prioritises customers and recognises that the abuse of their position can have dramatic consequences for society.” (David Fagelman, ResPublica – ‘Bankers should take a Hippocratic oath to restore vritue to the financial sector’ The Guardian 28 July 2014)
ResPublica believes that such a swearing of an oath along these lines would be a symbolic turning point for the banking sector and go some way towards creating a culture for both bankers and their customers to flourish. Fagelman is surely right that “An oath can provide a sense of duty, responsibility and deep-rooted involvement from employees that rules and guidelines have so far failed to provide.” It ‘can’ achieve this – but it isn’t a given that just swearing an oath will achieve these desired outcomes.
The fact that this is a topic of public discussion perhaps shows the mountain which still needs to be climbed by the banking profession in the eyes of many in wider society; and the recent pronouncements from the Bank of England on the potential for bankers bonus clawbacks up to 7 years after those bonuses have been paid seems to back this up.
All of which sounds very worthy (because, of course, it is). But will it make any real difference whatsoever? If the driving measure of performance (and reward) in the financial services sector (and, yes, not only financial services) is profitability and thus increasing shareholder value, some might question whether all this talk of oaths and threats of possible future bonus clawbacks will really amount to much in practice.
But perhaps that is a little too harsh a judgement. The very fact that we are publicly talking about these things is surely better than not doing so. And the Bank of England under Mark Carney does seem to be showing that it has a greater appetite for (or has been given greater discretion to ) intervene and pronounce on a much broader range of financial matters than was the case under the previous governor.
Some commentators believe that whilst all of the above is to be welcomed, it does not go anywhere near far enough dealing with the problems and, so the argument goes, systemic weaknesses of our banking and financial services sector. The argument goes that we still seem to be left with banks which are ‘too big to fail’. And if that is the case then there remains the implicit guarantee of a public sector bailout of a future failed private sector business. This arguably creates something of a moral hazard; not to mention the financial costs of such bailouts. Which we have seen can be extremely high.
To many, the answer seems clear: there should be a complete split of the bank sector into the ‘boring’ business of lending and taking deposits and the rest. There may be explicit public sector guarantees for the lending/ savings side of the sector; but there must be none for the rest. Yes, there are those from the banking sector who do not like this – see press comment today from HSBC. But we are still dealing with the after effects of a poorly regulated and structured banking sector and we know that splitting its activities has worked in the past. Those in favour of such a split argue that this feels like an idea whose time has not come, but rather whose time never went away.