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In defence of Banks

It’s a popular pastime today to throw stones at banks and vilify bankers, which is quite understandable given their pivotal role in bringing down the lifestyles of the world population. We are all questioning financial services and how it can be so rotten and be run by such greedy and morally decadent people. Should we be so sanctimonious though? Should we question how such a global industry is allowed to employ people that can bring cataclysmic results in all walks of life before we start on the road back to creating a finance industry that performs to the expectations of society.

Bankers are us; they are not some alien being or a creation of a monstrous experiment. They are the same as the rest of us. They commit acts of fraud and bend if not break rules, looking for an edge, a chance to make money for themselves and their family and be recognised as successful. These are human traits that we can all relate to.

For example; the estate agent who plays one client off against another to inflate the price and thus increase their commission on the sale or the consultant who deliberately extends the time on the project to inflate the cost or the supplier that over markets and over sells the capability of the product, the store that sells produce nearly out of date or substandard, the plumber, electrician and builder that add more time or inflate the cost of materials to the bill. I could go on but you get my point.

Individually we are all fallible too. People fiddle time and expenses, throw sickies here and there wherever the opportunity presents itself and they need some extra time off. How many people buy goods that are cheap and clearly have a dodgy history and how many people when presented with an opportunity to make a fast buck, take it with no questions asked? Numerous timeshares and various online websites and countless scams, offering people easy money pay testament to this.

The fact is society has high expectations, but low values and this is exactly like bankers. Investment bankers work in an environment where in order to stand out from the crowd in the dealing room generally full of testosterone, they have to make big profits and that normally entails high risk. They are playing to the gallery and their bosses turn a blind eye as they see high profits, bonuses, dividends and media acclaim.

These are all human frailties that given the chance, who would say no?

This is why the main problem in financial services and banking in particular is the culture and the ethical and moral capability of people to work for the good of their clients. To do this more effectively the rewards have to be moderated. It’s no use having bankers earning premier footballer’s salaries but their performances not valued by the public and therefore jealously mocked.

Bankers are the same as all of us and before we write new rules and introduce new laws we need to tackle the greed and avarice in society that produces people that do what most people would do given the chance. It’s a society issue first and foremost and one each and every one of us should first look at ourselves, as after all you reap what you sow.      



Comments: (3)

A Finextra member
A Finextra member 06 July, 2012, 11:00Be the first to give this comment the thumbs up 0 likes


I absolutely agree, although I come at this from a slightly different direction. There was a great trailer for the BBC Question Time programme last night. Its said 'what should we do with banker who cheat?'. My instant response was 'the same thing you'd do with anyone else who cheats' - but you're right, at the moment it looks like the financial services industry is the whipping boy and easy target for the morally outraged and righteously indignant - otherwise known as the uninformed or deliberately blinkered.

These are incredibly dangerous combinations and, when you add in politicians, who appear to have rings through their noses to be pulled about by whichever sound bite that puts them on the 'high moral ground' and a media that is less interested in reporting than it is in the worst kind of journalism - you end up in 'knee jerk' territory.

That knee jerk is likely to be an acceleration of the the change from principles based regulation of financial services to rules based regulation. We're certainly seeing this already in FATCA from the US and there's a lot of positioning going on in Europe right now off the back of that to have FATCA type rules between members states here.

The problem with moral outrage and righteous indignation is that they often blind people to rational thought.  There is no doubt that if someone has done something illegal, they should be pursued and punished using the systems and processes we set out as the foundations of our society. But if, according to the rules of the day, they haven't done anything illegal, if its thought to be 'wrong' that just means you need to change the law, and have the rational debate that that change requires. Its an evolving animal anyway, but thats the way our western society works. Moral indignation of the type shown by David Cameron against Jimmy Carr for example always looks like an attempt to re-write history (notwithstanding that I gave Mr Cameron no mandate to preach to me about morals). Mr Carr was only doing what most of us would have done if we had been in the same position. It was not illegal, it was tax avoidance not evasion.  If it was immoral, thats between him and his conscience and we change people's views on morality through debate, not lynching them on the gibbet of media. The people taking the moral approach seem to be trying to make avoidance (legal) the same as evasion (illegal) in the eyes of the public. The public could easily be hoodwinked in this way, as they appear to be being with the banks in general today.

This is symptomatic. The same thing happened in 2008 in the sub-prime crisis which triggered the whole thing off.  The pubic conveniently forget that while the banks may have been offering 'too good to be true' mortgage deals by playing the markets in the background - for every one of those there was someone prepared to sign up to a debt knowing that they'd probably not be able to service that debt if the markets changed much. It takes two to tango. Not sure I've seen too many people holding their hands up and saying - we were partly to blame - maybe we should have taken a more thoughtful position on increasing our debt before signing the contract?

The banking industry is very complex its true, possibly the most complex system that we have today. But I've worked in many industries in my career to date. I can tell you that banking is no different in principle to any of the others. When you lift the hood, you find that, for most part the engine is working well. What surprises me about the financial services industry is not that has failings, its that it works at all.

Perhaps all those currently displaying morality and indignation should reflect that nothing is perfect and that throwing rocks rarely solved a problem.



A Finextra member
A Finextra member 06 July, 2012, 14:26Be the first to give this comment the thumbs up 0 likes

Well said sir!

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 09 July, 2012, 16:21Be the first to give this comment the thumbs up 0 likes

Although no one "would say no", only bankers seem to be "given the chance". Banking is the only industry I can think of where (a) the employer realizes returns from a deal over several years but the employee receives the bonus on the total deal size on the same year that the deal was struck (b) gains are personalized but losses are socialized. Greed / avarice are as much part of human fraily as the tendency to not say no given the chance, so I'm not sure if passing laws against greed / avarice would work. A more practical solution would be to pay out bonuses to bankers strictly in lockstep with the actual inflow of projected deal benefits.