Banking integrity has become an oxymoron. Top bankers need to change this and take responsibility for tackling ethical issues. For this to happen, every part of the organization – from senior management to human resources managers to those on the trading floor and beyond – should be assessed according to the contribution it makes to promoting ethical values, not just the bottom line.
The investigations into the LIBOR rate-rigging scandal showed how commonplace bribery among dealers had become. For example, between September 2008 and August 2009 a single trader at the Royal Bank of Scotland had made corrupt payments to interbank brokers on 30 occasions, by means of risk-free transactions known as “wash trades.”
While the likes of Barclays and RBS have acknowledged wrongdoings and vowed to change course, it’s no longer enough to mollify critics with soothing words, apologies and empty gestures.
That is why we at Transparency International are challenging banks to immediately initiate sustained industry-wide reforms. These reforms should have the clear commitment and buy-in of the most senior bank executives. A new generation of banking management is needed, one that is prepared to devote as much time and money to developing ethical standards as they once spent on circumventing them.
Top regulators have also woken up to the need for change. The European Union made a strong start[PC3] when it committed to cap banker bonuses at 100% of their base salary, with shareholders able to double them. This goes a long way toward tackling the wrong incentives that helped drive banking behavior to the brink in 2008, precipitating the crisis.