Swearing Bankers: Is That Going to Make any Difference?

Bankers want to make money. And that’s okay, right? Everyone wants to make money. But they should do so in an “ethical” way, right? They shouldn’t screw each and every customers just in order to gain some extra profit. No, they should be nice guys. They should respect the interests of their customers and not – for example – gamble with their savings and pensions. However, it is not always easy to respect the customers’ interests and make money at the same time. Sometimes it is just way easier to go straight for it; to take every (doubtful) opportunity to make money. And – as we have seen with the big crises that have occurred (or are still occurring) – “greed” can have negative effects on society. Governments need to step in with “their” tax money to save the day because, as they say, the banks are “too big too fail“. That is, it its much cheaper for the governments to pay “some” money to prevent the banks from collapsing, than to let the bank collapse.

It seems fair to say that banks keep us in an (economic) stranglehold; we can’t do anything but give into their wishes. They are like our big silly brother that holds the family fortune but likes to live the good life; buy drugs, drinks, smokes etc. So if you don’t watch him closely, the money will be gone (“Aaaaand it’s gone“, South Park, anyone?).

So what are we going to do? Just sit back and hope our silly brother won’t make any mistakes again? Or are we – somehow – trying to force him to act “wisely”, without violating the “rules of the free market”? Well, the first option seems kind of risky; so let’s try the second. What can we do? Well, as the Dutch government is trying, we can let the bankers swear to act nicely (link is in Dutch). Let the bankers put their hands on their hearts and say out loud: “we value our customers and we will do anything to prevent them from being hurt”. Well, isn’t that nice?

It it sure is. But will it work? Well, probably not. Because what will happen to the bankers if they don’t stick to “the oath”? Well, then the bank has to decide whether or not the banker is really capable of doing the “banking” job. Really….are we going to put the banks again in charge of what it means to do a good banking job? Then what has changed (again a Dutch link) compared to the situation before the bankers sworn to act nicely? Well, now the government has at least tried to make the bankers act nicely. Now, if they act evil again, it’s not the government fault anymore, right? They have done everything they could, right?

I think we all see that having bankers swear that they will act nicely will not make any difference. At least not without any legal consequences attached to not acting nicely. But the situation might be even worse than this. It might be that the situation after having the bankers sworn to act nicely is more “unethical” than the situation before. But why is that? Well, imagine a bank complying to the “bankers’ oath”. The bank is all acting “ethically” and respecting its customers. But then, suddenly, the bank goes bankrupt. Why is that? Well, the bank was theĀ only bank really complying to the oath; the bigger and “smarter” banks did what they should do: make money no matter what it takes. So, by stimulating banks to act “ethically“, the government itself is acting unethical: they are promoting “unethical banks” (read: banks not complying to the oath) in continuing their greedy actions by weakening the competition of the “sweet” banks. That’s not really nice, is it?

So what’s the lesson we should learn from this state of affairs? Well, two things: first of all, governments that want to promote ethical behavior have to set firm rules – not just oaths without any legal repercussions – if they want to promote ethical banking behavior. And secondly, how can can we ever except companies – and especially banks – in a capitalistic society to act nicely if this acting nicely goes against their profit making interests? There aren’t charity organizations, are they?

But what do you think?

Written by Rob Graumans

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