The Ethics of Banking: Conclusions from the Financial Crisis (Issues ...

100 7 Interdependences Between Financial Markets
it is necessary for those on whom power is conferred to have an intention to behave
ethically, i.e. to possess the right intention, intentio recta, as well as the foresight to
do justice to the material nature of their business and justice also to those who are
affected by their decision-making power. Managing directors, especially of banks,
must have regard to all aspects of their decision-making situation in its entirety.
The requirements of ethics and foresight are even higher for banks than for other
industrial firms, because one single bank must monitor several industrial firms at
the same time, whereas an industrial firm does not have to monitor the actions of
several banks, and nor can it inspect their business policy.
Owing to the bank’s nature as the institution that gathers savings and intermediates
between savings and investments, it engages with many industrial firms and has
access to detailed information about their activity. However, its customer, the industrial
firm, has no right to be kept informed about its bank’s internal operations, let
alone any right to be kept informed about the internal activities of many banks. One
possible way of overcoming this asymmetry between banking firms and industrial
firms might be for the industries to elect representatives so that each industry was
represented with a seat on the supervisory boards of the major banks. Industry representatives
on the supervisory boards of the banks would give industries a means of
monitoring the conduct of the banks they work with. Their presence would convey
to the industries concerned a sense that while the banks are monitoring them, they
in turn can monitor how their banks do business.
The asymmetry between banks and industrial firms is unavoidable, yet at the
same time it is the basis of the complaints commonly voiced by industrial firms
about banks. In the end, banks can only deal appropriately with this very sensitive
asymmetry by treating their industrial customers fairly and staying true to
the material function of the credit market, by making financial resources available
for rational investments in order to support capital creation and prevent capital
destruction.
The Intangibility of the Merchandise Traded in Financial
Markets as an Ethical Problem
The financial markets pose a substantial ethical challenge for market participants,
particularly for financial intermediaries like bankers and stockbrokers. This
challenge is caused by three characteristic features of these markets: (1) by the intangible,
abstract, impersonal character, and the substitutability or fungibility of the
traded objects, namely financial instruments and securities; (2) by the centrality of
the fiduciary relationship to banking and brokerage; (3) by the inscrutable character
of the finance sector, which makes the general public fearful of falling victim to
conspiracies in the financial markets.
On the first point, personal control between the supplier and the consumer and a
judgment about the quality of the delivered goods is much more difficult in financial
markets than in markets with tangible and physically palpable material products,
because what is traded is money: the most fungible, abstract and impersonal of