Personal values seen as critical to banking ethics

In a robust critique of the causes of the banking and economanking and economic crisisic crisis, Lord Phillips of Sudbury, Chancellor of Essex University and the founder of Bates, Wells and Braithwaite law firm, London, spoke of an ‘overarching, rampant materialism that is undermining our society’. He was addressing the fourth in a series of round-table forums on banking ethics held by Caux Initiatives for Business in the London centre of Initiatives of Change on 23 March.

‘The balloon didn’t just go up, it very nearly burst,’ he said, referring to the banking crisis of 2007-2009 which included the collapse of Lehman Brothers on 15 September 2008, the largest bankruptcy in US corporate history. If it hadn’t been for unprecedented government bailouts the financial world would have been in total collapse, he said.

The collapse was part of a culture of corporatism, managerialism and a hyper-competition which are ‘potentially deathly’. Such materialism, and the belief that the economic crisis was caused by forces beyond anyone’s control, was ‘nonsense on stilts’, he said.

A web of factors led to the crisis, underpinned by ‘materialist fundamentalism’, plus insatiable acquisitiveness and widespread corruption ‘The collapse owes more to corruption than anyone has admitted to,’ including hedge fund managers conspiring to short-sell shares and then manipulate down the share price through spreading rumours, as well as insider trading. ‘The tom toms of reputation no longer beat in the City, so as to curtail anti-social behaviour,’ he said.

The regulatory response so far has been wholly ineffectual, Andrew Phillips said. The UK’s Serious Fraud Office, for instance, was seriously understaffed. However, the Financial Services Authority has since orchestrated dawn raids on a number of senior traders suspected of insider dealing, which has rocked the City of London. It is the UK’s biggest ever such investigation.

Society was suffering from a loss of personal relationships and a ‘loyalty-free rootlessness’, Lord Phillips, a life peer, continued. ‘We also need a completely new definition of wealth, success and poverty,’ he said, referring to the poverty of spirit amongst some of those who have gained immense wealth in the financial sector. There was a limit to the effectiveness of new laws and new regulations without an attendant ethical reformation. There would be no change in the situation ‘unless we revive the idea of the individual taking into work the morals and ideals of private life’. Individuals had a great responsibility but also the power ‘to turn around this great ship of state of ours.’ Personal example should not be underestimated, he said.

As an example, he cited Paul Moore, the former head of group regulatory risk at Halifax Bank of Scotland, publicly known as the HBOS whistleblower, who also attended the round-table forum. In response, Moore said that when he gathered with half a dozen top bankers at Schroder’s investment bank last October, there had been a great deal of soul-searching about the need for a new ethic for banking.

James Featherby, a partner at Slaughter and May law firm in the City of London and author of The White Swan Formula, said that the issue was ‘not so much greed as the idolatry of money’—an altar on which all other considerations were sacrificed in all sectors of society, including the City. His booklet, published by the London Institute for Contemporary Christianity, is a call for ethical values and common purpose in the corporate world.

Capitalism was still the best system around, he insisted, but he posed the question: ‘How do we reverse out of this moral cul-de-sac of every man for himself, and rebuild the social capital bedrock of true prosperity?’ He gave four pointers:

1. ‘We have to take personal responsibility—a consistency between our personal and public life.’ He referred to the ‘sin of compartmentalism’ which separated our office lives from our personal morals and behaviour.
2. We needed a new definition of what prosperity means, to include wellbeing and the common good. ‘People get inspired by visions, not regulations,’ he said.
3. We needed a cultural change in which everyone can play a part. Morality started in the family ‘at mother’s knee’; and governments needed to commit to truthfulness and to measurements other than economic growth. Faith groups, educators, the media and the arts all needed to play their part in rebuilding common and good values.
4. A determination that ‘we can do better than this. I believe we can.’

In the debate that followed, several referred to the need to restore the spirit of community. Dr Adel Ahmed, senior lecturer in Islamic finance at Liverpool Hope University, said: ‘We don’t just need a bank with a social mission; we need a social mission supported by a bank. We need to come back to locality: money invested in our communities.’

A former merchant banker emphasized the critical role of the ‘culture at the top’ of corporations. We needed to ‘discover what we should do deep within ourselves’, including personal values, he said. Professor John Carlisle of Sheffield Hallam University emphasized the humanizing role of ‘face to face’ encounters between service providers, such as banks, and customers. The evening’s round-table debate, concluded Jonathan Winter, founder and CEO of the Career Innovation research company, had focussed the important question of how to engage city traders in ‘discussing the un-discussable’—the vital issue of personal values.