Banking on Ethics

David Mcllroy David Mcllroy

"[their] hearts are greedy for unjust gain" (Ezekiel 33:31, NIV)

"By justice a king gives a country stability, but those who are greedy for bribes tear it down." (Proverbs 29:4, NIV)

"Greed, for lack of a better word, is good" (Gordon Gekko, Wall Street)

Recent years have seen a string of financial scandals and failures with the result that banking is now perhaps the most maligned profession in the country (even ahead of lawyers, politicians and traffic wardens). This week, two bankers at HBOS were convicted of bribery and fraud for their part in forcing small business customers to use a corrupt firm of consultants who charged their victims huge fees and stripped them of their assets.

The case was an extreme, but sadly not unique, example of the worst kind of abuse of power by banks. There were also many other forms of harmful behaviour which caused widespread losses, including the selling of Payment Protection Insurance (PPI) to consumers who did not need it and of interest rate hedging products to small businesses without proper explanation. There were also areas of bank activity where dishonesty or taking advantage of clients had become normalised, such as the manipulation of LIBOR or the sale of complex financial products through a process known as securitisation.

How far things had fallen was brutally exposed when Bob Diamond, the CEO of Barclays, was unable to name any of the three principles of its Quaker founders, when asked to do so by John Mann MP in 2012. Honesty, integrity and plain dealing all seemed to have become wholly alien concepts (Isaiah 59:14-15).

In the passages above, Ezekiel 33:31 condemns those whose "hearts are greedy for unjust gain" and Proverbs 29:4 warns that those who are greedy for bribes tear down a country. We are living in an era which proved the truth of those words, in which the idea that "Greed … is good" led to decades of excess followed by a global financial crisis.

The slogan was famously coined by Gordon Gekko, a ruthless corporate raider played by Michael Douglas in the 1987 film Wall Street. Gekko was intended to be a warning but instead he became the poster boy for a generation of highly paid, mostly white males who grew up admiring Gekko's ruthlessness, his lack of hypocrisy about his motives, and, perhaps above all, the money he made. Australian Prime Minister Kevin Rudd in a speech on 8 October 2008, described these financiers as the "the 21st century children of Gordon Gekko".

Culture and character

The idea that "Greed is good" achieved cultural dominance through the power of education and example. The Chicago School of Economics argued that the invisible hand of the market will deliver outcomes that are good for most people most of the time even if some people are acting selfishly and disregarding the interests of others. Milton Friedman taught that managers' only social responsibility was to make as much money for their shareholders as possible. The generation of short-term profit, regardless of the interests of customers, became the key objective for banks and other big businesses.

Anthony Salz found that "the culture that emerged tended to favour transactions over relationships, the short term over sustainability, and financial over other business purposes."The change in culture was reflected in gleaming new corporate headquarters which deliberately looked very different from the old buildings where banks used to be based.

The new culture also gave rise to a narrative of the 'masculine autonomous self' – the self-interested, self-sustaining individual who had forgotten their social responsibilities and their social interdependence. Pay, promotion and prestige were all dependent on performance in making money, at all costs. The old-fashioned bank manager symbolised by Captain Mainwaring in Dad's Army served his community, whether behind his desk at the bank or when organising the Home Guard. Gordon Gekko lived for himself, both in the office and away from it.

Where were the law-makers while all of this was happening? As financial products and services became ever more complex, so the laws regulating them grew and grew. The result was that neither the bankers nor the regulators themselves could see the wood for the trees.

The last 30 years has been an experiment in attempting to control a business sector by focussing on laws and neglecting questions of character and culture. The experiment has been a comprehensive failure. The urgent question is how a culture of values can be rebuilt once it has been lost. I suggest that the antidote to the banking scandals we have witnessed lies in four "E"s: Education, Empathy, Example and Enforcement.

Education because virtues have to be taught (Exodus 18:20, 1 Samuel 12:23). The virtues required of bankers need to be taught in universities, in induction and training courses at banks and repeated following each promotion.

Empathy (Proverbs 29:7, Proverbs 12:10) because, as Adam Smith understood, to the extent that we allow our capacity for sympathy and our desire for friendship to inform our understanding of our self-interest, we grow in wisdom and learn to control our selfishness and greed. Finance should be understood as a service industry, one whose value, and profitability lies in the quality of the services it provides to companies, individuals, public institutions and ultimately society.

Example (Titus 2:8, Matthew 10:25) because, as Adam Smith also realised, our self-interest includes a strong desire for approbation or esteem. Bankers need to see that those who try to do the right thing are promoted and rewarded. The tone that is set at the top of a bank is a signal to the lower levels of the bank about what the bank really values, and how much of a price it is prepared to pay to live up to its rhetoric.

Enforcement because banks need to hold their staff accountable to high standards (Proverbs 5:23, Proverbs 13:18, Hebrews 12:11). Regulators cannot be expected to see everything or act on everything but if those who cheat their customers are dismissed, and those who build long-term relationships are promoted, then others will copy their example.


Laws alone will not prevent harmful behaviour in the financial sector – only hearts changed through the gospel will be truly transformative (Romans 8:1-8). But wrongful actions became endemic in banks because of dangerous ideas which led to irresponsibility, because of the pursuit of short-term profit regardless of the risks and costs, and because the heroes who were applauded were those who were greedy and selfish. If we love our neighbours (Luke 10:25-37), we will want as Christians to model a better way of living in God's world.

Re-building trust in banking will require education which places character at the heart of leadership and actions, a return to the idea that banks are there to serve their customers, structures of reward and promotion which do more than measure short-term profit-making, and institutions which are committed to policing their own values rather than focussing on ticking the boxes.

Our Response

Pray. That Christians working in financial services would model a godly approach to finance and wealth management. Ask God to raise up leaders in the financial services sector who will be an example of how to serve customers well, who will educate others, who will encourage empathy, and who will enforce good practices.

Learn more. David McIlroy explores these issues in more detail in 'From Captain Mainwaring to Gordon Gekko: Why bankers need to be a law unto themselves', to be published in Crucible magazine in January 2017.

Read the ResPublica report on "Virtuous Banking".

Write to your bank. Ask your bank to explain its values to you and to tell how it is putting those values into practice.

Think about changing bank. Find out about other banks which are doing things differently. If they are serving their customers and society better than yours, think about switching to them. You can now switch a bank account in just seven days.

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