In advance of our event at the Bank of England on 21 March 2017, we asked interested parties to write on the theme: Worthy of trust? Law, ethics and culture in banking…
I’ll admit it: I’m a sceptic. I have doubts about whether a focus on ‘ethics’ and ‘culture’ will generate trust in banking – not, at least, based on the way those words are often used. They certainly sound reassuring, and if we were to chart growing discussion of ethics and culture in the financial services sector over the past decade we would probably see that only the proliferation of new rules has been faster. But is this evidence of lasting change or do we, perhaps, find ourselves in need of that reassurance?
What do we really mean when we talk about ethics and culture? Is there a consensus, or do the words simply draw a veil over difficult questions about ourselves, our institutions and the way we structure our common life? Grapple with the substance and it can put us on the path to greater trust in banking and beyond (since problems that have afflicted the sector are not confined to it). Default to using ‘ethics and culture’ as a talismanic incantation and we flunk it.
When we approach ethics and culture thoughtfully, what we are really asking is, what is ‘good’ – what sort of people we want to be and what sort of community we want to live in. Things that are consistently good inspire trust. This may seem like an enormous leap from the day-to-day business of financial institutions, but only because we are operating under a series of misapprehensions.
Let’s take a couple that need challenging.
First, that there are areas of life – financial transactions among them – that are in some sense morally neutral; a bizarre notion but one that is surprisingly deeply embedded. I remember a discussion with a leading European regulator who claimed he had no ‘moral’ mandate for his work in regulating financial markets. How can that possibly be? If morality is to do with a conception of what is good, and he was pursuing what society had defined via legislation as good outcomes, how could this not involve some form of moral mandate?
We need not stop there. Even a simple financial transaction involves a sophisticated web of moral assumptions that relate to the essence of the transaction, what is a good outcome and the right treatment of the parties to it. Yet talk to many and you might get the impression that the only relevant values are financial, and that these somehow exist outside a moral sphere. An equally facile approach is sometimes encountered in legal processes, when the critical objective of impartiality is confused with being somehow morally neutral (as if being ‘morally neutral’ did not itself imply a moral stance). Enough said.
Secondly, we should challenge the idea that the way we engage with our world – in the financial sector or otherwise – is consciously referenced to ethical or legal and regulatory standards, and that our behaviour is generally the result of mental deliberation that takes account of these things. Largely, it isn’t. Quite the opposite. Think of your breakfast routine or your journey into work this morning. Much of it runs on autopilot, reduced to effort-saving habit so as to free your conscious to deal with the issues that apparently really demand its attention. But how were those embedded patterns of behaviour laid down? In part, through conditioning by reference to some form of desired good – be it in terms of money, power, value, respect or otherwise. If much of our behaviour is driven by our previously formed non-conscious, that has important implications for what might need to happen if aspects of it turn out to be ‘sub-optimal’. It might, for example, affect the way we use law and regulation to direct more clearly towards ends we agree are good, to habituate behaviour by reference to those ends and to raise practices to consciousness where they can be more readily addressed.
Put these two misapprehensions together, and a huge chunk of our behaviour – our existence – is largely excluded from all our talk of culture and ethics. Challenge them, and individual and corporate life becomes a much richer and potentially fulfilling environment – one in which greater attentiveness to the nature of our desires and their formative influence can take us on a journey not so much of regulatory reform (with ethics and culture being apparently instrumentalised to that end), but of re-formation by reference to the good. That way trustworthiness lies.
David Rouch, Partner, Freshfields Bruckhaus Deringer LLP