Bankers should swear an oath when joining the industry to try and prevent further banking scandals—and potential financial crises—according to a UK think tank.
ResPublica, a non-partisan research institution, has issued a study on what it thinks are the major problems with the banking and financial sector.
“Despite nearly five years of financial reform, the job of banking reform can best be described as half complete,” ResPublica. The body, which focuses on “developing practical solutions to enduring socio-economic and cultural problems in the UK,” produced the report, entitled “Virtuous Banking”, in association with the Financial Times.
“For ResPublica, the embarrassing merry-go-round of scandal and recrimination will only stop once bankers truly embrace professionalism and commit to clear ethical standards,” the group said today. “Despite nearly five years of financial reform, the job of banking reform can best be described as half complete.”
The report’s publication coincided with announcements by the UK’s Financial Conduct Authority and the Commodity Futures Trading Commission in the US that slammed actions by traders at Lloyds Bank and Bank of Scotland, who attempted to fix LIBOR before and during the financial crisis. The collapsing Bank of Scotland was eventually taken over by Lloyds.
Apart from attempting to rig the rate against which hundreds of thousands of investors measure their capital around the globe, bank employees even managed to reduce fees on the capital that was put at their disposal during the financial crisis by the Bank of England. By carrying out certain “repo” trades, fees—which were due to the UK taxpayer—were reduced by almost £8 million and termed “highly reprehensible and clearly unlawful” by the Bank of England Governor Mark Carney.
The combined Lloyds Banking Group has been fined a total of £225.8 million ($383 million) by authorities on either side of the Atlantic.
In its report, ResPublica claimed regulators had pursued the “wrong type of reform”.
“The government has wrongly focused purely on regulatory or prudential issues, but has ignored the crucial root cause of the banking crisis: an inherent lack of virtue amongst our banking institutions. Because of this, more of the same from government and the industry will not be enough to stem the tide of scandal.”
Instead, the group suggests a type of Hippocratic Oath that could provide a centre-piece for personal responsibility in the sector.
“As countless scandals demonstrate, virtue is distinctly absent from our banking institutions,” Phillip Blond, director, ResPublica said. “The Bankers’ Oath represents a remarkable opportunity to fulfil their proper moral and economic purpose, and finally place bankers on the road to absolution.”
The full document and proposal is available on ResPublica’s website.
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