WASHINGTON, DC – Banks and banking rely on trust. But while trust takes years to establish, it can be squandered abruptly if a particular bank’s ethics are weak, its values poor, and its behavior simply wrong.
The events that triggered the 2008 global financial crisis, together with the subsequent scandals that have emerged – from the rigging of the London Interbank Offered Rate (Libor) to sanctions-busting and money-laundering – amount to a catalog of cultural failures within our financial institutions. Yes, extensive measures have been taken since the crisis to strengthen the financial system. But a profound weakness remains: To be blunt, it concerns the risk-taking culture that still prevails within some departments of global banks and in the financial system itself.
Too often, bank bosses’ promises to change the “corporate culture” and ensure their employees’ good conduct have not been matched by fully effective implementation. In too many cases, banks are still failing to fulfill their obligations in serving their communities and the public at large.
It is true that the banking sector is paying a high price for its misdeeds: fines, litigation, and regulatory tightening have cost approximately $300 billion so far. But the tax-paying public – innocent of any wrongdoing – has also had to bear costs, both direct and indirect. And, while a handful of “rogue traders” (and, most recently, one Libor manipulator) have ended up in prison, it would be overly optimistic to conclude that the punishment has been sufficient to transform bank culture.