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Gary Wright

Gary Wright

Gary Wright - BISS Research

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Ethical and moral decline in the City

03 July 2012  |  2988 views  |  2

I joined the City way back when and am now trying to come to terms with what we have today. Like most people the current malaise in financial markets is hard to take and sadly the stories seem to get worse and worse and the solutions becoming much harder to see. For this reason I believe that we can all look to history as a guide of what worked before and what might work again.

The history of the City is full of good and bad times. Good and bad times all have their own lessons to be learned and the City has always been able to adapt. The South Sea Island bubble was a financial disaster but the City learned and adapted. There have been numerous banking collapses and various financial institutions failing and like all industries there are reactions and new regulations or laws introduced to prevent reoccurrences. However, adapting to society’s needs and taking into account innovations in business and technology has always been a hallmark of City business.

Big Bang was a huge success in 1986 and spawned the current market, which has been copied all over the world, however now it has to be questioned if the market structure created in 1986 best serves society today and in the future. It’s not wrong to question and to learn and adapt.   

With all the changes that have impacted financial markets it’s the decline in ethical and moral performance that is most worrying and a cause for financial services to fight for.

When I joined the City in 1969 but there was a strict fundamental that was drummed into me and that I have never lost. Protect your client’s interest and protect your reputation and that of your firm. It’s more about the individual buying into an ethical and moral position that is handed down by industry leaders and old heads, rather than what you will find in any rulebook or law. For this reason it’s actually more powerful. The Chartered Institute for Securities and Investment has championed an ethical and moral stance for some years now and it’s a laudable attempt to get everyone on the same ethical page. However it requires far more buy in from a broader finance industry perspective.

For me my industry training was all about doing the right thing for the client, the industry, your family and yourself. Having a conscience helps enormously and I don’t know how people can sleep a night knowing they are doing incalculable damage to their neighbours and colleagues. If demonstrating ethical behaviour is a prerequisite in finance and is lauded by industry leaders and shown to be the prime requirement for success, we might finally be able to tackle the reputational problems the finance industry has today.

Comments: (3)

Melvin Haskins
Melvin Haskins - Haston International Limited - | 04 July, 2012, 09:10

You obviously joined in a different City to me. Whilst 'My word is my Bond' was prevalent in the late 60s and throughout the 70s, many of the bankers that I met were just as morally bankrupt and without conscience as those today. There was large scale stagging of new issues on the stock market (the Guiness affair was in the mid 80s and was a common event - the Guiness people just got caught). I was party to the discovery, in 1977, of a bet that had gone wrong by a foreign exchange dealer to the tune of £3,500,000, a huge sum then. All that happened was that he was sent packing. He was not prosecuted.

The same things are happening today as happened in the 60s and 70s. The difference is, once they are discovered, senior manangement find it much more difficult to sweep them under the carpet. The regulations in place and instant communication make it that much more difficult.

Mel Haskins

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A Finextra member
A Finextra member | 04 July, 2012, 09:16

None of the incidents you mention caused a ripple to the man in the street. I never said there were not frauds just that they were rare and limiting in effect. What we have today is morally corrupt organisations and their leaders. A far cry from the odd rogue deal

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A Finextra member
A Finextra member | 04 July, 2012, 14:00

For the first time today I heard Cameron (in PMQ) refer to the impact LIBOR rates had on the public borrowing via mortgage rates.  I recall when the economy tanked that the reason for the hike in mortgage rates, from 0.x% above base rate to 2.x% above was due to the increased cost of borrowing the funds from other banks - the LIBOR rate.

So is it the case that LIBOR was 'stepped up' in the interests of the banks themselves? And that in turn cost the mortgagees a pretty penny? i.e. it was not a free market supply and demand situation at all - it was a monopoly of banks colluding to better their lot in hard times.  A case of heads the banks wins, tails the bank wins.

I simply never appreciated the amount of leveraging that went on (lending money they didn't have and therefore borrowed instead, from a lender who in turn didn't have the money either so borrowed it themselves - like a reverse ponzi which the central banks are printing money to replace, now its all been paid out in transaction fees, commisions and bonuses).

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CEO of B.I.S.S. Research, founder of the BISS Independent Accreditation for all systems and services provided to financial services companies internationally. Guest Lecturer at Reading University and...

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