Ethics in Finance 2nd Edition Available Now

Ethics in Finance 2nd Edition Now Available

The 2nd edition of Ethics in Finance: Case Studies from a Woman’s Life on Wall Street, authored by SPI President Dr. Kara Tan Bhala, is available now in bookstores and directly from Palgrave Macmillan – at an affordable price!

Ethics in Finance earned five major awards: winner of the Business Book Awards (UK) 2022, and the Goody Business Book Awards 2022; silver medal winner, Global Book Awards 2022; bronze medal winner, Axiom Business Book Awards 2022; and finalist, International Book Awards (US) 2022. 

The book comprises multiple finance and ethics case studies. The purpose of the book is twofold. First, the case studies teach readers how to evaluate and determine resolutions to ethical issues in finance. Second, the reader enjoys a journey with the author, a woman, through her years working in finance.

Prefaced by the addition of video introductions, these studies focus on ethical issues in finance which the Dr. Tan Bhala encountered over nearly a 30-year career in the industry. There are 10 cases extracted from different sectors of finance. This broad range is a consequence of the Dr. Tan Bhala’s experience from almost all sides of the business: the buy side, the sell side, equity research in Asia, equity sales, mutual funds, hedge funds, the finance academy, and consulting.

Each case study has an engaging narrative describing the background, transactions, players, and ethical issues. The ethical issue is analyzed and resolved using appropriate theories of moral philosophy. Descriptions and analyses rigorous yet comprehensible, approachable, and entertaining.

Apart from ethics determinations, the material in the book describes and explains a variety of specific, and even complex, financial transactions. Each case explains the roles of various players involved. In this way, readers learn about the work involved in different finance positions, from investment bankers and equity traders, to portfolio managers and equity analysts. Readers also get an understanding of major financial transactions and activities such as IPOs, secondary offerings, equity trading, and equity valuations.

The book will appeal to the general reader, finance practitioners, college and high school students, and lecturers who can use it to supplement courses in finance or business ethics.

Read the Preface to 2nd Edition:

Perhaps now more than ever, the global financial system needs ethics. A mere 15 years after the 2008 Great Financial Crisis, the system confronts an(other) impending global banking crisis. As I write this Preface to the Second Edition of Ethics in Finance, UBS, urged on—no, forced— by the Swiss National Bank, regulator Finma, and the Ministry of Finance, has offered to buy Credit Suisse shares for CHF 0.76 per share, a nearly 60 percent discount to Credit Suisse’s last closing share price. Along with the international financial community, I watch live the hastily arranged, emergency Sunday press conference about the UBS rescue of Credit Suisse where regulators, government, and a somber UBS chairman try to calm slow churning fears. A wrong move, and global financial markets accel- erate into a death spiral. To me and no doubt many others, this drama seems like déjà vu.

During the entire discussion, presenters spoke the word “confidence” distinctly more often than either “capital adequacy”, or “liquidity”. They focused on, indeed, agonized about, the collapse in “confidence” that would lead to a panicked bank run on Credit Suisse. Capital adequacy ratios were fine. Liquidity to the tune of CHF 50 billion had been provided by the central bank. Central banks upped their swap lines. But confidence stood to be the problem.

But on what is “confidence” based? That question was neither asked nor answered in the press conference from Berne. Let’s be clear: confidence does not quantify into a convenient number inserted into financial models. Confidence in an individual, a company, a system, is grounded on trust. Who can we trust but those we consider trustworthy? And there’s the rub. Trustworthiness is a virtue, explained by brilliant Aristotle as far back as the fourth century BCE. Virtues fall squarely into the province of Ethics. Ergo, Ethics trumps Numbers.

And yet, as Chapter 10 of this book illustrates, business schools in large part avoid teaching financial ethics because for these schools, Numbers trump Ethics. Over and over again, reality suggests otherwise. It’s time (honestly, it was a long time ago) to re-evaluate the pitifully low priority given to teaching financial ethics in business schools. What about financial institutions? Have they blurred appearance and reality? Often, they pay lip service to ethics and engage in endless virtue signaling. Instead, they should demonstrate and practice ethics at the very top of their organizational hierarchy and hold their senior-most officials accountable when they fail ethically. And what about the regulators? Surely, they need to introspect about the extent to which they have been captured by financial institutions. All players need only survey the voyage toward destruction of a once-venerable symbol of Swiss identity, Credit Suisse, to grasp the value of ethics.

Credit Suisse, founded on July 5, 1856, fell because of repeated ethical failings. The bank, motivated by greed and seriously breaching its supervi- sory authority, invested in Greensill Capital, which collapsed in 2021. The cost: $10 billion. Just three weeks after the Greensill demise, Archegos Capital Management defaulted, resulting in a $5.5 billion write-down for Credit Suisse. Later the same year, Credit Suisse was fined $475 million by U.S. and British authorities for its role in a bribery scandal in Mozambique involving loans to state-owned enterprises (SOEs). This level of ethical failure invariably leads to confidence loss. Thus, it did not take much to topple the 167-year-old bank.

The immediate cause of the downfall of Switzerland’s second largest bank began with the first domino in the 2023 banking eruptions, Silicon Valley Bank (SVB) in the U.S. A midsized bank that concentrated far too much of its business on tech startups and the tech sector. Few suspected the fall of one midsized bank would have a disproportionate effect on confidence in financial markets. Apparently, since 2008, the public has lost more confidence in the financial system, and the Establishment than many (including me) had imagined.

This surprising loss of trust is not trivial. Confidence in the global financial system is brittle, and the consequences, as demonstrated, can be catastrophic. Restoring a robust confidence in a shaken financial system requires heavy ethics work.

I wrote this book to contribute to the effort (dare I say struggle?). I am pleased those held in high regard have appreciated the contribution. The book has won five awards since the publication of the first edition:

  • Winner in the International Book category of the Business Book Awards 2022 (U.K.).
  • Bronze Medal in the Business Ethics category of The Axiom Busi- ness Book Awards 2022 (U.S.).
  • Finalist in the Nonfiction Narrative category of the International Book Awards 2022 (U.S.).
  • Silver Medal in the Business Ethics category of the Global Book Awards 2022 (U.S.)
  • Winner in the Business Education category of the Goody Business Book Awards 2022 (U.S.).

I hope readers find this book as useful and engaging as the judges of the book awards.

Kara Tan Bhala
Kansas City, USA
March 2023