By Edward Hadas
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
Competition is fierce for the Bankers’ Bad Behaviour Award. Rate-rigging, client-fleecing, dishonest documentation, reckless trading and exorbitant pay were all widespread before the 2008 financial crisis, and faulty practices have proven remarkably persistent. It sounds like there is something wrong with all banks. The ethical problem, though, is not universal.
Many of today’s lenders do have deep and disconcerting similarities. Their culture has been shaped by a faulty ideology, the cult of the market. They believe that society gains from fierce competition among firms which aim only at maximising returns for shareholders. Leaders of such enterprises only pretend to care about the future for marketing purposes and think they have no ethical responsibilities beyond obeying the letter of the law.
Business people often profess belief in this creed, but in practice they typically rely far more on cooperation than on competition. They work in organisations which are mostly meritocratic bureaucracies that aim to minimise internal strife. Regulations and common standards limit the scope and intensity of fights for business with other organisations.
Banking used to be much like other industries; competition played a relatively minor role. Most banks’ prime goal was the provision of mutual financial aid for a fairly narrow group of people: local businessmen or farmers, church members, labour unions or residents of a neighbourhood or region.