Taking care of business ethically must be priority for new year
Banks have only themselves to blame for the burgeoning weight of regulation. It’s time to do some corporate spring cleaning.
The year 2003 was marked by a substantial increase in the attention paid to corporate social responsibility by financial institutions. Sustainability, commitment to the community and environmental impact became oft-heard phrases.
However, there is much more to do as we head into 2004. This has become obvious as a raft of banking scandals hit the headlines. Money laundering continued to be an issue, with Abbey National fined a record Ł2.3m for failings in its procedures and Citibank and Union Bancaire Privée in Switzerland named in investigations into the laundering of public money by General Sani Abacha, the former Nigerian dictator. Wall Street banks came to a $1.4bn settlement with the regulator on conflicts of interest but the story did not die down as an analyst at Bank of America Securities (not involved in the settlement) was fined in December and Bank of America itself promised to co-operate with authorities in the ongoing investigation of the $7,000bn mutual fund industry. Meanwhile, about half a million small investors from Japan, Germany, Italy and some smaller European countries found themselves holders of defaulted Argentine bonds which their banks had put them into. This was, in many cases, a clear breach of the fiduciary duty to pensioner clients and the like.
Banks persistently complain about regulation. A survey of bankers, regulators and analysts by City of London think tank, the Centre for the Study of Financial Innovation, underlined fears that the burden of regulation will continue to rise due to growing pressure on governments to crack down on financial crime and mismanagement.
This is probably true. But who can blame government and the regulators when banks are showing themselves to be irresponsible in some of their basic duties? Pointing the finger at a few bad apples is no longer credible; too many banks have been caught out. Financial institutions have no-one to blame but themselves as the burden of regulation worsens – but they can be proactive and face up to some of those conflicts. There is nothing simple about an ethical approach to business but taking care of the fundamentals is crucial.
