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Blog series – Alison Cottrell

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…


‘It is not’, as Richard Breeden, a former SEC Chairman, once observed, ‘an adequate ethical standard to aspire to get through the day without being indicted’.

Compliance with regulation and legislation is, of course, a core responsibility of every bank and building society. Possession of a banking licence implies, however, a wider set of ethical and professional responsibilities and duties than those associated just with compliance (or indeed with avoiding indictment). A culture in which anything not explicitly prohibited or mandated is regarded as fair game, is not one that many would wish to see in the bank or building society they deal with (or indeed work for). And regulation itself, however prescriptive and wide-ranging, cannot determine ex ante every judgement an employee has to make or keep up with every social or technological change, or with human inventiveness.

If being worthy of trust requires more than compliance, it is also not to be confused with being trusted. Trust, whether of customers or clients in individual firms or of the public in the banking sector as a whole, may vary over time and with the way in which the question is asked, and be influenced by factors unrelated to the firm itself. It may also prove, in retrospect, to have been justified, insufficient or entirely misplaced. This is not to say that the level of trust does not matter. Trust in the banking system is fundamental to its operation, and a loss of trust in an individual firm can have wide-ranging consequences. But while trust is given, sometimes only after a considerable period of time, trustworthiness is a state or quality that is entirely in the hands of the firm itself.

Being worthy of trust requires, as a firm, each person to take responsibility not only for complying with regulation but also for serving their customers or clients honestly, reliably and competently1.

This is an environment in which minimum standards are the floor rather than the ceiling, with the latter determined by what ‘good’ looks like. It demands, of course, clear accountabilities, skilled risk management and consequences for wrong-doing; but it also needs employees who are able and ready to exercise professional judgement, processes that align recognition and reward with the firm’s espoused values, and a culture in which mistakes are remedied and learned from rather than ignored or associated with blame.

If the legal and regulatory structure, and a firm’s ethics and culture, are not consistent – if, in other words, motives are not aligned with actions – regulation will be gamed; and whenever this happens, policy makers and regulators will be called on to act in order to prevent a reoccurrence. Sector-level regulation will fill space that is perceived to have been vacated by ethics and culture, and each time this happens there will be more talented potential employees or non-executive directors who will decide to work in a sector other than banking. For banks and building societies, trustworthiness has both an individual and a collective dimension; a failure at the firm level has sectoral ramifications, and each firm shares responsibility for the sector of which it is a part.

Issues around demonstrating trustworthiness are not, of course, confined to banking, or indeed to the UK or the 21st century. The consequences of a poor ethical climate and culture in banking are, however, extraordinarily far-reaching, affecting the economy and society as a whole. For the UK banking sector, raising standards of behaviour and competence is not simply a challenge. It is a responsibility, and one that needs to be owned by every bank and building society today.

1. The three elements of trustworthiness as identified by Onora O’Neill

Alison Cottrell, Chief Executive, BSB