Banking and Ethics

By Miller, Seumas | IPA Review, January 1, 1993 | Go to article overview

Banking and Ethics


Miller, Seumas, IPA Review


It has been widely reported that the collapse of the Tricontinental Group of Companies is the biggest financial disaster in the history of Victoria and has involved losses of $2.7 billion. And there have been a number of other major banking disasters in Australia and overseas. These recent disasters raise the general issue of sound practice in banking, and emphasize once more the need to bring an ethical perspective to bear upon the conduct of banking. I propose to consider some of the ethical issues centred on the profession of banker.

The ethical dimension of any given professional practice --in this case banking--has what might be called an internal and an external aspect. Two things need to be noted about the external ethical aspect. Firstly, it consists of moral principles that ought to be adhered to by the occupant of the professional role. But secondly, these moral principles are typically not necessary--and certainly not sufficient--for the professional to undertake that practice competently.

These external moral principles--and their associated character traits (virtues)--have such a high degree of generality that they exist more or less independently of any particular professional practice. Such principles and virtues govern behaviour and attitudes in most professional behaviour; for example, the principle not to take human life, or the virtue of honesty. Many such moral principles are enshrined in the law. Thus it is against the law to commit murder, to steal or to engage in fraud.

The internal ethical aspect consists of principles and virtues which are necessary for a professional to undertake his or her particular professional practice competently. Thus, manual dexterity is a virtue which is internal to the profession of surgery but by no means to most professions.

There is no sharp line dividing the internal from the external ethical aspects in any particular profession but the distinction is nevertheless an important one for us to make here, for discussions concerning professional ethics are sometimes conducted as if the ethical dimension to business consisted wholly of its external aspect. Of course--it is sometimes argued--business people ought not to endanger life or commit fraud, just as teachers ought not to endanger life or commit fraud, but there is no further set of moral considerations which ought to constrain business people but not teachers. Naturally--the argument continues--there are standards of professional practice that are particular to a given profession; but professional practice is one thing and morality another. The existence of the internal ethical aspect undermines this argument. Morality is internal to professional practice.

This is not to say that all aspects of professional practice are matters of morality. That would be absurd. It might be unprofessional for lawyers to wear shabby clothing when appearing in court or for doctors to be unsympathetic to their patients, but it is not necessarily immoral.

On the other hand, some practices that are internal to a given profession are matters of morality and not because they violate some externally determined moral principle. For example, if a policeman fails to intervene in an attempted burglary, the policeman has not only failed in his professional duty, he is also morally culpable. Similarly, a doctor is morallly culpable if he or she fails to attend to a patient who is very ill.

In undertaking a particular profession individuals accept professional obligations, but some of these professional obligations are also moral obligations. These moral obligations are additional to the moral obligations that they had prior to entering the profession; they are internal to the profession.

OBLIGATIONS INTERNAL TO A PROFESSION

There are a number of questions concerning the internal ethical aspect of the profession of banker. One of these ethical issues concerns the preconditions for undertaking the professional role of banker. …

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