Global Financial Leaders Insist on the Necessity of Financial Ethics


bank regulation

Banking and financial regulators around the world are now speaking about ethics and promoting an ethical culture in finance openly. Leaders among the world’s major bank supervisory bodies, and top-level executives in international banks, are doing the same. This is a change from the pre-GFC (Global Financial Crisis) era. In the past, regulators, bankers and the financial academy spoke of efficiency, market determined guidance and consequently, ‘light-touch’ supervision. Perhaps in some small measure the increasing willingness to include ethics in the dialogue about finance is due to the work and research of leading religious and independent non-governmental organizations. The Seven Pillars Institute has always stressed that the separation of finance theory from ethics is artificial. This division is imposed because of our habitual use of one finance paradigm (modern finance theory) that has subsequently hardened into orthodox ideology.

Ethics is relativistic and discursive. Finance is empirical and scientific. Never the two shall meet, or so it was thought. Over a half century, that thought has been drilled into generations of theoreticians, practitioners, and a broad swathe of society. But now, the theories are no longer unassailable. The practice is questionable. Perhaps we are witnessing a change in perspective about the place of ethics in finance theory and practice. Amidst the overwhelming volume and complexity of legal rules, global financial leaders insist on the necessity of financial ethics.

A recent presentation by Sir William (Bill) Blair, “Promoting standards of conduct in the financial sector – an international perspective” highlights how bank supervisors around the world are turning to ethics to change conduct in finance. Among the other high level positions he holds, Sir William is a High Court Judge in England and Wales and President of the Board of Appeal of European Supervisory Authorities (please see biographical note below.) He gave the presentation at the Asian Business Lawyer Symposium held on September 21, 2015 at Korea University in Seoul, Korea.[1] The following are excerpts from his presentation.


The GFC has caused concern about standards of conduct within the financial services sector. These standards of conduct are sometimes described as values, professionalism, culture and ethics – but the idea is the same, and has to do with strengthening finance by means other than regulation.

A key policy response to the GFC has been the substantive reform of financial regulation. Through the law in the form of financial regulation, regulators have sought to address problems as diverse as – systemic risk, capital requirements, “too big to fail”, credit rating agencies, excessive remuneration and risk generated by OTC derivatives.

Through this process much has been achieved. The banking system internationally is better capitalized, the euro has strengthened its architecture, the calculation of benchmarks such as LIBOR and TIBOR has been overhauled, and in many countries a more serious view is taken of market abuse.

However, there are some well-understood drawbacks in the resulting increase in regulation. These include increasing complexity, overlapping regulation, and a much increased cost of compliance. These costs must ultimately be passed on to users. The increased cost may also make it harder for new entrants to come into the market.

Is regulation enough? The more fundamental question is whether the law in the form of financial regulation will in itself be sufficient to restore the financial sector to health, and rebuild the perceived loss of trust – and if not, what more may be needed.

Regulation alone cannot solve the problem.

From Singapore:

“What accounts for the repeated cases of misconduct in the global financial industry? Weaknesses in governance, risk management, and operational controls have allowed unbridled risk-taking and encouraged some individuals to push, and in several cases, break the bounds of what is permissible. Since the financial crisis, the international regulatory community has issued directions and guidance to tighten financial institutions’ governance standards and curb excessive risk-taking.

But weaknesses in governance and control, grave as they were in some financial institutions, cannot fully account for the spate of misconduct. There are deeper issues of trust, ethics and culture in the financial industry that we need to confront.”

Mr. Ravi Menon, Managing Director, Monetary Authority of Singapore, January 2015.

From the International Monetary Fund:

“Yet, regulation alone cannot solve the problem. Whether something is right or wrong cannot be simply reduced to whether or not it is permissible under the law. What is needed is a culture that induces bankers to do the right thing even if nobody is watching.

Ultimately, we need more individual accountability. Good governance is forged by the ethics of its individuals. That involves moving beyond corporate “rules-based” behavior to “values-based” behavior. We need a greater focus on promoting individual integrity. In the Aristotelian tradition, virtues are molded from habit – developing and nurturing good behavior over time.”

Christine Lagarde, Managing Director, IMF, May 6, 2015.

From BNP Paribas:

In an interview given on February 15, 2015, Jean Lemierre, the chairman of BNP Paribas is reported to have said that banks can no longer afford a “too narrow, legalistic approach” to complying with rules because “the world has changed” and they need to clean up their underlying culture and ethics. Changes were needed across the industry to embed “normal ethical standards” as well as ensuring compliance with the letter of the law.

From Malaysia:

At the end of 2014, Malaysia set up a Financial Services Professional Board to, “…promote, advocate and facilitate the identification, development and the adoption of professional and ethical standards across all sectors of the financial services industry. The primary purpose of such standards will be to clearly define the expected level of performance and ethical conduct that financial services professionals are required to achieve in the service of the public.”

Dr. Zeti Aziz, Governor, Bank Negara Malaysia, September 24, 2014.

From the UK:

The Governor of the Bank of England has spoken of “ethical drift” in his speech on “Building real markets for the good of the people” at Mansion House, London in June 10, 2015.

Mark Carney, Governor, Bank of England


From Australia:

“…codes of ethics seek to bring about the desired behavior for the right, self-motivated reasons (as opposed to behavior motivated by fear of sanction).”

The committee considered that the adoption and implementation of codes of ethics would help to move the industry towards a resilient professional culture that would lead to consistent ethical behavior.

Australian Parliamentary Joint Committee on Corporations and Financial Services, December 2014.


As globalization continues apace, the implications of finance become hard to ignore. A stock market crash in China affects car workers in Europe, and the examples can be multiplied.

It is entirely appropriate to look at finance optimistically and appreciatively, and at the same time to engage with the values that can help it function both effectively and in accord with the needs of wider society.



Sir William (Bill) Blair graduated from Oxford University, and practised at the English Bar where he specialized in the law of banking and finance, appearing and advising in many domestic and international disputes and matters. He became Queen’s Counsel in 1994, and was Chairman of the Commercial Bar Association between 2003 and 2005. He is a member of London’s Financial Markets Law Committee. He chairs the Monetary Law Committee of the International Law Association which brings together leading people in the financial law field. He served as Chairman of the Qatar Financial Centre Regulatory Tribunal until March 2011. He was appointed High Court Judge in England and Wales in 2008, and is one of the nominated judges who sit in the Commercial Court. He became President of the Board of Appeal of European Supervisory Authorities in 2012. He is a Visiting Professor at the London School of Economics. He chairs the Law and Ethics in Finance Project, an informal group concerned with standards in the financial sector.



[1] To be published in a forthcoming issue of Asian Business Lawyer.

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