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

Duties of Banks Arising from the Nature of Their Tasks 29
environmental effects or the impacts on public welfare, are not sufficiently considered,
the accusation goes. Banks usually reply that the profit expectation from the
loan given to private or industrial customers coincides with the profit expectation
for the bank and hence the maximization of shareholder value of the bank’s shares,
and constitutes the control principle of banking, which should not be weakened by
introducing other principles into the objective function of the bank.
Two objections can be raised against this argument. First, an increasing number
of shareholders and customers prefer banks to pursue a broader objective function
than that pursued by banks oriented purely to shareholder value, although these
banks need not lose sight of the necessity of making a profit. Many bank deposit
customers expect their bank to take certain ethical criteria into account in its decisions
regarding the extension of loans to others. The emergence of “ethical funds”
or “environmental funds” as well as alternative banks confirm this development. It
is possible that it will be more profitable for the commercial banks to broaden and
deepen the criteria for lending, in order to attract more discerning customers, than
to cling to the narrow principle of maximizing shareholder value or profit.
The second objection to the “only profit counts” criterion is a logical one: if
positive profit is the necessary condition for the continuation of a firm or a bank in
business, it does not follow that positive profit is also the sufficient condition for
its business. Nothing prevents a bank from supplementing the control principle of
profit with additional principles. These principles should not reduce profits in the
long term, however, because any such decline in profit would indicate shortcomings
in the efficiency of the bank’s activity.