Banking as an Ethical Dilemma - Coursework Example

Banks in the modern world performs a variety of role which helps to ensure that the financial system of an economy is sound. Banks perform multifarious roles like acting as an intermediary between the supplier of funds and people demanding funds. They help to bridge the gap that exist and looks towards ensuring that money laundering doesn’t take place. The role played and displayed by banks makes them very responsible and they need to be ethical while pursuing different objectives. Banks need to be ethical by ensuring “integrity, reliability, transparency, social responsibility and money laundering” (Dogarawa, 2006) in the economy so that the major function of an economy passes without any hurdles. This will ensure that a spirit of harmony and believe is developed which will help the customers to ensure that their funds are safe and will help the economic system to develop and face the challenges ahead. It has been identified that the Nigerian banking system has some unethical behaviour which varies from one bank to another thereby creating a dilemma for the banking institutions to determine the correct path (Dogarawa, 2006). This makes it important that the different stakeholders like the authorities, stakeholders, management and government take concrete steps to ensure that the banks are ethical in their dealing. Any mistrust on their part will result in the customers loosing faith from the banking institutions thereby leading to widespread chaos and failure of the banking system. Different culture creates different ethical dilemmas for the banking industry. This brings a change in human pattern. It makes them do different things. Culture gets ingrained by the group he has. “People belong to different caste, country, creed, colour, and region which affect the manner in which they carry out their duties”. (Innah, 2009) This brings a change in the pattern of working as different countries believe different things to be right. This creates ethical dilemmas for the banking industry as to understand the different factors which can be used in a culture might be unethical in another culture. A research shows that people from different countries have different culture as a result of which their pattern of influencing other is also different there by suggesting that culture brings about a change in the way person behaves and this gets moulded by the group he belongs to. (Ralston, Hallinger, Egri & Naothinsuhk, 2005) This creates ethical dilemmas for the banking system as seen in the Middle East countries where banks have different norms in comparison to other western countries. This creates ethical dilemmas as a notion which is acceptable in a certain country might not be accepted in another country (Kowske, 2007). An instance of an ethical dilemma witnessed in the banking sector was in regard to the ATM machines. People were drawing money and the notes issued by the machines were fake. This creates an ethical dilemma for the banks whether to change those by believing the client and accepting him to be true of not believing him. This is an instance of an ethical dilemma where accepting any side is a difficult proposition. The magnitude of the dilemma magnifies when due to malfunctioning of some ATM’s people got more money and they didn’t return it back to the bank (Geoghegan, 2011). This creates a situation when banks fall in an ethical dilemma if banks replace the fake currencies but people getting extra money doesn’t return it. Thus a situation of an ethical dilemma arises for the bank and dealing with such a situation gives rise to various confrontations. A research shows “the importance of manpower management for banks being ethical”. (Wong, 1985) Here it highlights the fact that banks were caught in ethical dilemma in Hong Kong due to shortage of people willing to work and garner information which helps them to be ethical. (Wong, 1985) This calls for an urgent measure for more people to treat this field as a profession and utilize their knowledge for the well being of people all around the world. (Wong, 1985) This calls for more people to treat this field seriously. This will ensure that banks are able to take steps and ensure transparency in their dealings and being ethical by carrying out the moral responsibility entrusted to them. Handling customer complaints have become a part and parcel of every banking organization as they promise something and deliver something else to the cutomers. It is important that banks take complaints seriously as it would adversely affect their future business. Not handling the complaints efficiently would make the banks lose vital customers as the customers have a variety of option to choose from so they would swap their bank and they may lose on some important revenues. This is an ethical dilemma for banks as accepting to certain whims dilute certain qualities resulting in a dilemma. A situation highlighting an ethical dilemma is when a customer is not charged for certain function but others are charged highlights the differences in ethical responsibility towards different customers. This is an area that banks need to watch out for as doing so dilutes the image of the bank and makes customer move to other bank. This is a situation which is very trick for banks and they need to use their skills and expertise to ensure that it doesn’t falls them into an ethical trap. Banks continuously witness different situations which creates an ethical dilemma. One such dilemma witnessed is in the Middle East where a customer who takes a loan or mortgages a property has to pay interest. This is against the custom on Quran thereby making banks fall in an ethical dilemma. Banks have ensured to come out of this situation by developing a mechanism which ensures that even interest is charged and it doesn’t affect the custom of the place (Mortgage Notes, 2010). Banks to reduce the ethical dilemma looks forward to ensure that they provide complete and reliable information to their customers. The financial reports contain both the financial and non financial information to improve their strategy. (Robert & Michael, 2010) The non financial information provides valuable information to the society like the organisations efforts to curb pollution, their contribution towards the society and other areas where the company is working to improve the condition of the society. (Robert & Michael, 2010) This is a mechanism adopted by banks to ensure that their ethical dilemmas reduce to a large extent as using this mechanism they provide complete information to the customers and the changes that have taken place so that they are aware of the surroundings. The highlights of the ethical dilemma still persist in banks as bribe and corruption still forms a part of the working culture. This was evident from the Bali Scandal where banks to pass loan took bribes. (Carse, 1999) This is an instance highlighting unethical behaviour which creates doubt about the integrity and social responsibility of the banking system. The ethical dilemma for bank increases when they cross their origin country and enter into other country. Those countries have a different culture and a different ethical standard which makes banks doubt the standard they should follow. In addition to it moving form a country to another which provides an opportunity to earn makes bank take those course thereby resulting in a dilemma. This has resulted in banks focussing more on “Know Your Customers” to ensure that they are able to identify the ethical standards they need to adhere while rendering services to their clients (Carse, 1999). An ethical dilemma for banks is to whether use the funds which have been deposited by the public as the source of the money is unknown. This is a situation where banks face a trap as looking towards the source would mean vital loss to the business otherwise it would mean sacrificing the ethical standards as the money could have been sourced through illegal activities (Carse, 1999). Banks everydays are caught in similar ethical dilemmas and to determine the best course for a bank is difficult as every stance would reckon certain errors and diluting of ethical standards. Another way of looking at an ethical dilemma situation is that the person depositing money is not well known and uses his power and influence to mould the manner in which a bank conducts is regular affairs. The person is one of the biggest depositor and preferred customers. So a question arises whether it is ethical to accept the terms of that people? This is a situation where banks are caught in an ethical dilemma as not dealing with the customer would affect their business and dealing will be against the ethical situation. This is a complicated situation for banks and makes them fall in an ethical trap. Another situation highlighting an ethical dilemma is whether the extra cost banks incur on the society has to be passed to the customer or not. Banks will have to consider whether “the increase in cost is passed on to the customers partially or fully and the mechanism through which this will be encountered will have to make the management think upon”. (CPA, 2008) This mechanism for pricing will have a bearing on the decision taken by banks. It will make the banks to bring about a change in the financial decision. This is an ethical situation and finding a solution for it is difficult for banks. Banks as a result to ensure transparency, consistency, integrity, social responsibility and ethical standards are looking towards improved supervision. The importance of supervision for banking has grown but at the same time it has created emotional pressures and practical dilemmas. (Omand, 2009) This makes it important that while supervision is done in the field of banking it is important to understand the conflicts and possibilities that can arise. Dealing with different patterns and backed by experience the supervisory process can create a situation when the mental and emotional education helps to reap better benefits. Supervision in banks means that the work of the banking sector will always be supervised whether it be when the banks takes the help of another banks to ensure funding or reviews the accounts of his clients or development on the personal or professional front (Mulhauser, 2010) making it difficult for the person to handle thereby creating conflicts. This increases the risk on the part of the supervisor as he has to act according to the legal & ethical requirements which gets burdened due to the clerical & administrative tasks also been undertaken (Herlihy, Gray & McCollum, 2002) especially in the field of banking. This causes stress and burnouts. Supervision helps at this point as based on past experiences and with the practical education being imparted due to monitoring better decisions can be arrived at thereby helping to take care of the ethical dilemmas which arise in banks. Supervision in the field of banking raises some alarms because of the following reasons. Firstly, banks are professionals so supervising them is a difficult task. Secondly, banks are of the view that they must recover from their clients which creates complication. Lastly, banks are influenced by personal whims. (Culberth & Juhnke, 2001) This tends to create confusion and makes it difficult for the supervisor as professionals have certain traits thereby increasing the ethcial dilemmas and multiplying the effects of the ethical dilemmas. Supervision in the field of banking provides various benefits and helps to reduce the ethical dilemmas banks continuously face. They are as follows Firstly, supervision provides a sense of emotional and mental education which allows the bank to act freely and based on past experiences and beliefs practical decisions can be arrived at. (Malcolm, Crocket & Lammers, 2007) Secondly, supervision helps to shape the cultural awareness for banks and integrates the multicultural issues into the existing models of supervision. This has thus helped banks to include the cultural perspective and reduce the ethical dilemmas which arise due to difference in culture. Thirdly, supervision helps banks to develop professional confidence and to act freely. (Rawson, 2003) Banks knows that their work is being observed and any mistakes on his part will be notified to them makes them act in a manner which is free from the fixed pattern of past experiences. Fourthly, supervision helps banks to act freely as it helps to explore alternative means of understanding the clients’ needs. (Rawson, 2003) Banks as a result acquires new techniques and tools to evaluate the clients’ problems through different angle. This helps to act freely and in a manner most suitable keeping in mind the fact that there is supervision which will take care of the ethical dilemmas they face. Fifthly, supervision ensures that banks acts according to the legal & ethical requirements (Herlihy, Gray & McCollum, 2002) which make it easy for the client. To ensure transparency and being ethical client can ask banks about the different ways and mechanism adopted by him to safeguard the information. This is totally ethical and doing so creates pressure on the banks that also abides by it and ensures that all mechanism is in place which will help to safeguard the information about the client. Thus supervision helps to provide confidentiality. Sixthly, supervision reduces the risk on the clients by ensuring that the banks will commit few mistakes. (McMahon & Patton, 2001) Supervision will always bind the bank and his change in behavior and pattern due to the freedom to act freely will help to ensure that practical decision are arrived which is free from any ambiguity. The effectiveness of supervision to reduce the ethical dilemmas in banks is also highlighted from the fact that different supervision programs have been designed which works “either in the front end or back end through electronic monitoring” (Markley, Cochran & Buck, 2006) to ensure that supervision is sound. Development in this sphere shows the underlying importance being laid to supervision and the growth and development it can impart to banks. Banks continuously face ethical dilemmas in their daily dealings and need to look towards encountering those by developing a mechanism which helps to ensure that the steps taken by them are ethical. While basing their decision on being ethical banks need to look various factors and ensure that integrity, transparency, social responsibility and ethical standards are maintained. Banks need to ensure faith and confidence of the public by taking an ethical stand and ensuring that all their working and manner of conducting business reflects a high standard which is true for all culture. Banks need to ensure that they identify the different ethical requirements and take the necessary steps to ensure that they are ethical in their working and the ethical dilemma reduces for banks. Supervision plays a key role in the field of banking industry as it reduces the ethical dilemmas. The growth and development of new models of supervision has further ensured that supervision helps to act freely based on past experience patterns which will help to arrive at decision which are practical. Banks thus need to integrate the changes and should be open to changes so that they are able to ensure high ethical standards and being true and correct in their dealings. References Culberth J & Juhnke G, “Supervision in Banking: Special Challenges & Solutions”, Reading for child & youth care worker, Volume 34, University of North Carolina, 2001 CPA, “Carbon Pollution Reduction Scheme: What will be the business impact on banks”, CPA Australia Ltd, 2008 Carse, D. Banking Conference of Business Ethics, Hong Kong, 1999, retrieved on April 5, 2011 from http://www.info.gov.hk/hkma/eng/speeches/speechs/david/speech_150999b.htm Dogarawa, A. An examination of the Ethical Dilemmas in the Nigerian Banking Sector, Department of Accounting, 2006, retrieved on April 5, 2011 from http://ssrn.com/abstract=1621054 Geoghegan, T. Ethical Dilemma and an errant ATM machine, Philosophy of Science Portal, 2011, retrieved on April 5, 2011 from http://philosophyofscienceportal.blogspot.com/2011/03/ethical-dilemma-and-errant-atm-machine.html Herlihy B, Gray N & McCollum V, “Legal & ethical issues in banking supervision”, Health Care Industry, CBS Interactive, 2002 Innah A, “the effect of cultural factors in banks working environment”, The New York Times Company, 2009 Kowske, B. Ethical Dilemmas across culture, Arabian Business, 2007, retrieved on April 5, 2011 from http://www.arabianbusiness.com/ethical-dilemmas-across-cultures-56865.html Mortgage Notes. Mortage & Loans: Islamic Finance Avoids Interest. 2010, retrieved on April 5, 2011 from http://www.buymortgagesnotes.com/%20/tag/ethical-dilemma/ Mulhauser, G. “Improve your supervisor relationship and reduce stress in the banking sector”, Mayo Foundation, 2010 McMahon M & Patton W, “Conversation on supervision: benefits perceived by banks”, British Journal of Guidance & counseling, Volume 28, Issue 3, page 339-351, 2001 Markley G, Cochran D & Buck G, “The effectiveness of new intensive supervision programs for banking institutions”, National Institute of Corrections, 2006 Ralston D, Hallinger P, Egri C & Naothinsuhk S, “The effects of culture on work place strategy of upward influence”, University of Bangkok, Elsevier Inc, 2005 Robert G & Michael P, “One Report: Better strategy through Integrated Reporting”, Harvard Business Standard Working Knowledge, 2010, retrieved on April 5, 2011 from www.One Report: Integrated Reporting for a Sustainable Strategy Rawson D, “Banks Supervision”, Chartered Counseling Psychologist, Open University Press, 2003 Wong, M. “Social work manpower in Hong Kong”, Asian Journal of Public Administration, Hong Kong, 1985 Read More