ResPublica's event Virtuous Banking held at the FT might have been better named. On 29 July The Banker's Oath was launched there and Sir Richard Lambert of Banking Standards Review Council delivered the keynote speech . See also this short video interview: Richard Lambert on the Oath.
A better title for the event might have been Trying to produce Virtuous Bankers. More regulation might merely produce more 'gaming' of the more complex rules, and laws remove responsibility so the outcome might be worse. The core of the problem, mentioned by Philip Blond is the puzzle of how to get people to act in the spirit of the law? As a Christian theologian he probably could have gone a bit deeper but what we had from the panel and the floor were, variously: how rules are being made clearer (rather than 'why are we doing this?'); retail banking is being sorted out a bit (rather than wholesale banking which is the real problem); why has no banker been jailed? (when, since the banking crisis thousands of citizens have gone behind bars for stealing goods to the value of £20 or so from Tesco); et al.
Roger Steare who was one of the Virtuous Banking report's authors suggested that the failure of rules-based regimes stems from the fact that they treat people as moral infants. Our society is democratic and based in social justice but the modern corporation is rooted in neither, being a development from medieval times. The behaviour of bankers is perverted by performance management targets and 'other fear inducing systems' which bring the dysfunctional results we see. The people who broke the rules did not necessarily gain personally but maybe had a fear of losing their jobs as a reason. He appealed for a debate of how human character might run from social behaviours within families and friendships and be better nurtured to affect all business relationships, including banking. Evidence shows that the behaviour of 'good people' shifts when they come to work. He called for a fundamental examination of the dissonances between our political system's philosophy and the social architecture of the businesses within it. Philip Blond in a similar vein said that morality is not natural but is taught.
The report has Virtue Thoery as a foundation which involves people being of good character and living out moral teaching in daily habits. If we fail to understand that the crash was partly caused by lack of this 'virtue' and if we neglect to address this, we are unlikely to avoid further crashes.
Concerning issues of ownership and governance the report asks for diversity of: ownership, scale and access in banking. The shareholder model is gamed by those who can set up share price targets to benefit from - usually short term gains for senior staff - which the mutually owned Nationwide Building Society is not troubled by ('no share price we are watching' Alison Robb).
As a promoter of local banks (declared interest: director of Local First CIC) for me not enough emphasis was placed on the benign, structural advantage of smallness of bank size. The report's solution offered, of Local Enterprise Partnerships running local branches of the British Business Bank (Conclusion 9 page 4 & 30) could help with capital funding but if it is about state-management, that, surely is not what we need?
If the UK had many small, local, independent banks as per the German Sparkassen model -and others worldwide - the crash would have been far less traumatic. The UK recovery is likely to have been more rapid. In Germany lending from local banks increased to small business during the worst of the crisis. With many small banks, 'too big to fail' does not arise, should local problems arise they can be more readily contained and sorted and not spread to the whole system. Small, local, not-for-profit banks suit local businesses and also guard against the possibilities of dangerous, self-interested employee activity through handling huge funds unsupervised. The outcome of setting up carefully designed, local banks will more certainly expedite widespread virtuous banking than much complex attention given to the giant banks of the UK today. Local employees running local banks for local customers will have an awareness of what their actions are likely to result in locally, and thus behave themselves.
A better title for the event might have been Trying to produce Virtuous Bankers. More regulation might merely produce more 'gaming' of the more complex rules, and laws remove responsibility so the outcome might be worse. The core of the problem, mentioned by Philip Blond is the puzzle of how to get people to act in the spirit of the law? As a Christian theologian he probably could have gone a bit deeper but what we had from the panel and the floor were, variously: how rules are being made clearer (rather than 'why are we doing this?'); retail banking is being sorted out a bit (rather than wholesale banking which is the real problem); why has no banker been jailed? (when, since the banking crisis thousands of citizens have gone behind bars for stealing goods to the value of £20 or so from Tesco); et al.
Roger Steare who was one of the Virtuous Banking report's authors suggested that the failure of rules-based regimes stems from the fact that they treat people as moral infants. Our society is democratic and based in social justice but the modern corporation is rooted in neither, being a development from medieval times. The behaviour of bankers is perverted by performance management targets and 'other fear inducing systems' which bring the dysfunctional results we see. The people who broke the rules did not necessarily gain personally but maybe had a fear of losing their jobs as a reason. He appealed for a debate of how human character might run from social behaviours within families and friendships and be better nurtured to affect all business relationships, including banking. Evidence shows that the behaviour of 'good people' shifts when they come to work. He called for a fundamental examination of the dissonances between our political system's philosophy and the social architecture of the businesses within it. Philip Blond in a similar vein said that morality is not natural but is taught.
The report has Virtue Thoery as a foundation which involves people being of good character and living out moral teaching in daily habits. If we fail to understand that the crash was partly caused by lack of this 'virtue' and if we neglect to address this, we are unlikely to avoid further crashes.
Concerning issues of ownership and governance the report asks for diversity of: ownership, scale and access in banking. The shareholder model is gamed by those who can set up share price targets to benefit from - usually short term gains for senior staff - which the mutually owned Nationwide Building Society is not troubled by ('no share price we are watching' Alison Robb).
As a promoter of local banks (declared interest: director of Local First CIC) for me not enough emphasis was placed on the benign, structural advantage of smallness of bank size. The report's solution offered, of Local Enterprise Partnerships running local branches of the British Business Bank (Conclusion 9 page 4 & 30) could help with capital funding but if it is about state-management, that, surely is not what we need?
If the UK had many small, local, independent banks as per the German Sparkassen model -and others worldwide - the crash would have been far less traumatic. The UK recovery is likely to have been more rapid. In Germany lending from local banks increased to small business during the worst of the crisis. With many small banks, 'too big to fail' does not arise, should local problems arise they can be more readily contained and sorted and not spread to the whole system. Small, local, not-for-profit banks suit local businesses and also guard against the possibilities of dangerous, self-interested employee activity through handling huge funds unsupervised. The outcome of setting up carefully designed, local banks will more certainly expedite widespread virtuous banking than much complex attention given to the giant banks of the UK today. Local employees running local banks for local customers will have an awareness of what their actions are likely to result in locally, and thus behave themselves.
posted by Charles Bazlinton. Author The Free Lunch - Fairness with Freedom
No comments:
Post a Comment