Blog series – Clare Woodman

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…

Over the past several years, regulators and the banking industry have worked extensively to restore financial stability through a series of mechanisms and rules which establish appropriate levels of capital, liquidity and leverage. These actions have been immensely effective in improving the safety, soundness and resiliency of firms. However, post-crisis episodes have presented challenges to cultural behaviours and demanded a second wave of reform – addressing less tangible and less easily identifiable structures of trust.

Risk, credit, duty and trust have always formed central pillars to commercial progress. Understanding how an organisation may earn and manage trust is an important business imperative both to operate and to succeed. Absent trust, business slows and becomes more costly. Heightened trust can drive the economy, and an individual firm’s performance. Trust underpins relationships, attitudes and behaviours. It allows a company to attract the best and the brightest people, to foster multi-decade growth and to retain a loyal client base.

Trust in banking is especially important. Financial organisations must not only safeguard the interests of their clients, shareholders and employers, but also share a higher responsibility to support and enrich societal growth. Banks are vital to the functioning of the broader economy. Greater trust in the banking industry brings greater commerce, culture and community.

Trust cannot be bought. It is hard won, easily lost and must be earned by demonstrating trustworthiness. Echoing my fellow Board Member Onora O’Neill’s recent remarks, simply to lobby for greater trust in banking is not sufficient. We must instead ‘aim to have more trust in the trustworthy’.

How do we become more trustworthy? Like anything, behaviour is an imprint of repeated patterns of practice. If we are prescriptive in our organisational design, we can manage cultures of trust and, in turn, become more trustworthy.

  • Leadership: Leaders must be transparent and articulate a strategy clearly anchored to values. There must be alignment between visions espoused and those enacted. Values should be both deep-set and easily explained. Role models should authentically set the tone from the top, celebrate success, amplify best practice, and champion reform.
  • Governance: Architecture of policies, practices and procedures can either stifle or encourage behaviours. Prudent governance should define operational parameters, set minimum standards and be tested periodically.
  • Accountability: To engender trust, you must demonstrate accountability. Intellectual rigour, challenge and diversity of thought form the core foundation to any successful business. Operating within increasing realms of change and complexity, it has never been more important for individuals to be tooled to make informed and ethical decisions. All employees are equal standard bearers and guardians of a company’s brand.

Warren Buffett famously explained, ‘In looking for people to hire, look for three qualities: integrity, intelligence, and energy. And if they don’t have the first, the other two will kill you’. Integrity is everything. Do the right thing and all else will fall into place.

Clare Woodman, Global Chief Operating Office, Institutional Securities, Morgan Stanley International