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Banking Industry Meltdown: The Ethical and Financial Risks of Derivatives - Research Paper Example

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Fundamental to the theory’s applicability to understanding the banking crisis is its establishment of people’s rights such as “freedom of conscience, freedom of consent, freedom of privacy, freedom of speech, and due process” (Berry, 2013, p. 154). …
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Banking Industry Meltdown: The Ethical and Financial Risks of Derivatives
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Download file to see previous pages These rights define morality through people’s conformity and can be explored from two deontological perspectives, rule deontology, and act deontology. Developed moral principles inform rule deontology while actions inform act deontology but both perspectives makes judgment on the relationship between an act and the principles (Berry, 2013).
Existence of legal and moral rules that ought to have governed practices among banks explains suitability of the deontology philosophy as the best for understanding the problem. Numerous legal cases that faced CEOs after collapse of their banks shoe that the officers and their banks were accused of illegal practices. This further supports existence of legal frameworks that should have regulated decisions in the banking industry but the banks and their managements ignored. Misrepresentation and fraud are examples of acts that the cases report in the crisis and that identify legal misconduct because the financial institutions did not represent fair values of involved risks, in the securities, to their investors. Another significant basis for understanding the case is through a review of balance sheet misrepresentations that the banks used to influence value in their securities. The dishonesty through misrepresentation is also evident from other rules such as accounting standards and practices that require fair value representation of asset values. Self-interest that overlooked involved risks in lending is another basis for understanding the crisis because of deontology’s due process perspective. ...
The dishonesty through misrepresentation is also evident from other rules such as accounting standards and practices that require fair value representation of asset values. Self-interest that overlooked involved risks in lending is another basis for understanding the crisis because of deontology’s due process perspective. Based on the principle, activities should follow established processes but the prime lending breached the implementation of results of risk evaluation and offered loans to people with credit worthiness (Shafer-Landu, 2012). The philosophy therefore identifies unethical conduct among banks and their employees towards the banking crisis. Analyze the case study and discern if the “white collar” crimes committed differ in any substantive manner from other more “blue collar” crimes.  White-collar crimes are crimes committed by people who command authority in an area. The accused are often people with academic knowledge and technical expertise, and they commit the crimes within their scopes of duty. The crimes are further non-violent and are associated with financial gain. Blue-collar crimes are however associated with violence, and people from lower social classes do the crimes. The case identifies the features of white-collar crimes and absence of features of blue-collar crimes shows significant difference between the crimes committed in the case and other blue-collar crimes (Justice Committee, 2013). Crimes in the case relate to accounting, assessment and reporting of credit worthiness, risk assessment, professional careers that only learned people do. The case of Barings Bank demonstrate risk assessment and concealment of losses that occurred from risky venture while USB case demonstrates accounting malpractices and ...Download file to see next pagesRead More
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