- “Remember that failure is an event, not a person.” – Zig Ziglar
This is what one expert says which proves my firm belief that working with ethics is the true pillar of banking success:
The four pillars of ethics in banking
It is evident that ethics in banking is of supreme importance for the economy and the society. According to Mirza Azizul Aslam, in his article ‘Ethics in Banking’ in the Daily Star in January, 2012, ethics in banking must be firmly anchored on four pillars. He says: “First, banks must comply with all laws, rules and regulations which are usually framed in any country to ensure soundness of operations and to enhance confidence of the society.
These laws, rules and regulations may relate to, among others, capital adequacy, maximum shareholding by members of a family, qualifications and tenure of members of the Board of Directors and Managing Directors, representation of depositors on the Boards, credit rating requirements, maximum limits on single party exposure, liquidity and credit/deposit ratios etc. Banks are additionally subject to provisions of company law, tax laws and securities laws. Any attempt to circumvent any legal provisions must be considered unethical. The universe of law and the universe of ethics are not necessarily coterminous, but violation of law is rarely, if ever, ethical.
Second, banks must ensure fair and equitable treatment of all stakeholders. The interests of various stakeholders such as shareholders, depositors, borrowers and employees do not necessarily coincide. For example, banks may be inclined toward offering low returns to depositors and charging high interest rates from the borrowers in order to maximise profits and dividend for the shareholders. Such conflict of interest must be ethically balanced, keeping in view the greatest good of the greatest number.
Third, the banks must ensure full, truthful and transparent disclosure of their financial health. Many of the assets of collapsed banks which turned out to be toxic were treated as off-balance sheet items. The concerned stakeholders were thus deprived of the right to get a transparent picture of the true financial health and the risks that were being assumed.
Fourth, banks must behave as socially responsible corporate citizens.”
The self-audit approach – everything matters
No one is perfect in this world. However, we should regularly assess ourselves to get a dashboard of our ethical standing at any point in time. This self-audit approach may seem far-fetched and may even seem offensive to some readers, who may even take it with a pinch of salt. As human as we are, some of these self-audit questions point at certain things that we may do consciously or inadvertently, but which have ethical implications. I will start with some pertinent questions that we should all ask ourselves. The examples may be irritating but these are the practical issues on the ground. Dear Supervisors, please shine your eyes.
Mr. Security Guard: How alert are you on the job? Are you mostly on your phone chatting away divulging bank and customer transactions unknowingly to the public, giving indirect information and access to fraudsters? Do you turn a blind eye when some properties are being moved out of the premises without documents?
Miss Teller: Are you working with integrity? Do you suppress customers’ credit and divert to other accounts and repay only when you have made a cut? Do you grant ‘soft loans’ to your friends? One day for the master. Do you short-pay customers or insert lower denomination into the packets? Please stop! Because these small beginnings become big losses to the bank eventually.
Mr. Front-Desk: Do you ensure proper KYC as you process account opening documentation? Do you cut corners and allow free entry into the banking system? Do you turn a blind eye to fake documents without alerting your supervisors? Don’t you know that free entry without visas and permits provide free access to both local and international fraudsters? Are you crediting your friends’ momo accounts without funds?
Miss Loan Officer: How conversant are you in credit analysis? Do you forward loan applications which are faulty and not feasible? Do you pretend you have visited customers’ business premises and houses and forge stock positions while manipulating customers’ cash flows and budgets? How strong-willed are you in avoiding bribes?
Mr. Human Resource Director: Do you recruit people with the required skills and competencies or only from friends, families and loved ones? You cannot punish them when they deviate. How fair is your reward and sanctions policy? Are you leading by example or by divide and rule tactics?
Mr. Auditor: Are you assertive enough to make proactive recommendations for the bank’s processes and policies? Do you just audit to catch a thief or is it the risk-based approach to get to the root causes of events? Please don’t smoothen the rough edges and create an impression that all is well, because it is not.
Mrs. Finance: Do you watch the figures close enough to identify any income leakages and expenditure over-runs. Please don’t be tempted to manipulate figures for management as well as the regulator. Are your general ledger accounts properly reconciled or you have many accounts in suspense for long periods? How are you treating your ‘toxic assets’ and off- balance sheet items. Are they being disclosed to your management and board? Please investigate.
Mr. Technology: how robust is your IT system? Was it purchased out of duress? You know Ghana has many allegations of cases involving purchases of computer software which are not appropriate. I hope it is scalable and can be integrated with other systems easily with minimum cost. Is your system strong enough to withstand hackers and denial of service attacks? Are your users able to access many applications easily? I hope so.
Ms. Sales and Marketing: Do you accept any Tom, Dick and Harry into your bank just to meet the targets given to you? Do you follow up on your customers to confirm the information given to you during the account opening process? Do you understand the products you are selling? Are you selling a product or a relationship? Please know your customers well so that they will stand by you even when you face problems.
Mr. Legal: The bank relies on you for protection, and as a counsel in cases of legal suites. Are you abreast with the new banking laws? How fast and efficient are you in following up legal documentation on securities? I hope you scrutinise all the guarantees and documents, and ensure the bank’s interest is paramount. How well do you understand the banking procedures which should feed your decision-making?
The Banking Executives: Are you upgrading your knowledge? How do you assess your bank with your peers in the industry? How well do you appreciate the numerous reports sent to you? Do you investigate and call for details of strange items in the report? How well do you appreciate the workings of the Assets and Liabilities Committee? How symmetrical is the information that you have, with the ones that you prepare for the board? Do you have policies and procedures covering all departments of the bank? How strong are you in withstanding the political and economic influences and shocks around you? What is your leadership style? How transparent is your leadership? Do you have a listening ear? Remember when disaster strikes, it is your assets that will be frozen.
Board of Directors: How well-informed are you about the state of affairs in the bank? Do you ask the relevant questions when reports are sent to you? Do you critically understand the exposures being made to customers in relation to the capital position of the bank? Do you know the top five risks in the bank? Do you make the executives accountable for their actions?
Customers: What are your intentions for banking? Is it for easy payment systems for your business, for loans to expand it, for business advice, for a personal relationship with that beautiful lady or handsome bachelor? What are your intentions for your loan proposal? To divert funds to repay your other loan in the other bank or to buy that posh apartment to show off to your friends and chicks? Are you repaying your loans? Are you using your political influence in the bank to obtain more funds for your political agenda? Are you using the bank to channel the proceeds of your ill-gotten wealth into the country? Do you know your rights and responsibilities as customers?
Let me pause here.
To be continued.
About the author
Alberta Quarcoopome is a Fellow of the Institute of Bankers, and CEO of ALKAN Business Consult Ltd. She is the Author of Three books: ‘The 21st Century Bank Teller: A Strategic Partner’ and ‘My Front Desk Experience: A Young Banker’s Story’ and ‘The Modern Branch Manager’s Companion’. She uses her experience and practical case studies, training young bankers in operational risk management, sales, customer service, banking operations and fraud.