Does the Financial Sector Need an Ethics Reboot?
By: Y.R.K. Reddy
A plethora of examples of ethical lapses in the financial sector around the world demonstrate that regulation is not enough. There is a need to bring ethics back into financial discourse, culture, and practice.
Europe’s largest bank, HSBC, was recently fined £ 10.5 million for mis-selling products to elderly customers and another £ 29.3 million in compensation to the particularly vulnerable among them. The bank’s subsidiary was trusted by these elderly customers but it sold them unsuitable products breaching that trust. In Bangladesh, amongst the poorest of countries, micro-finance was actively peddled among poor villagers with teaser rates that eventually led to indebtedness on multiple counts and usurious rates of interest. Weekly payment schedules, naming, shaming and other pressure tactics led to many suicides, in the South Asian region as micro-finance spread like an epidemic during the last decade. These apparently good social entities that make huge profits now (up to 125% per annum in some countries in Latin America) have come to be described as the “new loan sharks”. Nobel laureate Muhammad Yunus observed while addressing UN financial officials: “…we did not create micro credit to encourage new loan sharks”. It is estimated the majority of micro credit in the world is being operated by ruthless banks with eyes on “big profits from tiny loans”, as a title reads.
