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"Do you want fancy dressing or a bank you can trust?"

by Simon Longstaff

... So reads part of an advertisement that caught my eye as I was browsing through a recent issue of The Economist.

Appealing to notions of trust is a clever way of advertising banking services. Instead of attempting to 'manufacture' an issue of relevance to banking, in this case the copy writers have identified a fundamental aspect of popular engagement with the world of banking. At the bottom line is an issue of trust.

This should not be surprising to anyone who has thought about the fundamentals of the finance industry. As David Murray noted in an earlier issue of Management:

The overall process rests fundamentally on confidence since we cannot have all the payments in the economy being exchanged unless there is mutual trust among the parties. (my highlighting)

Because banks sit right at the centre of the web of intermediation that is the financial system, it is essential that they be trustworthy. But how does one achieve this condition? And how does one convince an increasingly cynical community that a claim to be trustworthy is something more than a convenient line in a glib marketing campaign? The answer to both questions lies in a proper understanding of how the ethical dimension touches all aspects of our lives.

Many people think that a discussion about ethics is bound to be full of abstract theorising or unwanted sermonising. Such misgivings are based on a fundamental misunderstanding of what ethics is all about. Ethical reflection hinges on trying to answer the question, "What ought one to do?". It is therefore a matter of practical concern where people are asked to try to give some account of why they do the things they do.

Thinking about ethics reveals three things of importance:

• It is rarely good enough to justify a form of behaviour by saying, "Well, that's just the way we do things around here". That is, custom and practice need to be open to constructive criticism.
• There are many occasions when people will be confronted by a genuine ethical dilemma; times when there is more than one right answer, when it may only be possible to pick the least bad alternative.
• After all is said and done, ethics is about relationships.

The first two points are important in themselves for they draw attention to the need to be fully attentive to the ethical dimension of all that we do while making it clear that there is no quick way to calculate the correct answers to perplexing ethical questions. We sometimes have to 'muddle through' as best we can. All that can be asked of us is that we act in accordance with a well informed conscience.

It is, however, the third point that provides a clue to the foundation for an ethos of trustworthiness. Consider this; social researcher Hugh Mackay has found that members of the community tend to think that people in business regard ethics as an ‘optional extra’. He has found that the level of scepticism about the ethics of business is so high that people automatically 'discount' public claims made about the importance of values to a corporation.

Instead of being swayed by images dreamed up by advertising executives, or by glossy codes of conduct, people apply a simple two-part test when trying to assess the ethics of an organisation.

• The first question to be asked is by a person is: How do members of this organisation treat me?
  Am I treated as if I really matter? Is trouble taken to assess my individual needs and preferences? Or, am I treated according to some sort of stereotype? Am I looked upon as nothing more than an account number or a convenient source of fees?
• The second question to be asked is by a person is: How do members of this organisation treat each other?
  Do they treat each other with courtesy? Is there an air of mutual respect? Do people seem to be happy in their place of work? Or, is there evidence of low morale, of strained relationships and so on?

Hugh Mackay has shown that the quality of relationships lies at the heart of perceptions about the ethics of organisations. Because we live at a time when there is increasing emphasis on the importance of customer service, the first, fairly obvious test is being addressed. Surprisingly, few managers understand the importance of the second test. Beyond being a foundation for sound management practice and harmonious relationship in the workplace, a climate of respect for one's colleagues will be noted by one's customers and help to reassure them that the bank is really serious about its commitment to an ethical approach.

Underlying these findings is a fundamental ethical principle that still seems to inform majority opinion. It might not be expressed in these terms, but I believe that Australians are still in tune with the notion of respect for persons. More specifically, Australians have a history of identifying with two important virtues; namely those of benevolence and justice. In Australia, these virtues achieve a distinctive expression as the ideas of 'mateship' and giving the other person ‘a fair go’.

While I would be the first to admit that these concepts are frequently abused and that they have lost some of their force, I would argue that the residue of their original meaning still has an effect. What is more, I believe that these concepts offer Australians a distinctive 'handle' on which to hang an indigenous response to the problem of navigating across a difficult and uncertain ethical landscape.

If one combines the various threads outlined above, then it is possible to see the outline of an answer to the question about how bankers can engender a vital sense of their trustworthiness.

• Bankers will need to treat all of the people with whom they have dealings as if they really matter in themselves and not just as means to a profitable end. There is nothing wrong with wanting to be profitable - providing only that it is not at the cost of reducing people to the status of cogs in a financial machine. This will invariably mean that bankers will have to show that they actually care about the projects and problems of their customers. In this respect, it was just the other day that someone recalled in conversation how the bank manager had been a respected member of the community, and even someone who was connected to the fortunes of one's family.

This might all seem to be far too nostalgic - especially in times when the personal presence of the bank is disappearing from communities. However, the idea of the bank as being an institution that helps to build a community resonates with the idea of mateship, at least as it was once understood.

• Bankers will also need to find a way to convince the community that they are interested in giving people ‘a fair go’. It's admittedly difficult to know what this phrase is supposed to mean. But most people have a sense that relationships ought to be fair. And by this they mean (at a minimal level) that where people are unequal, then the more powerful party should not take advantage of the weaker.

For example, my guess is that most people would render grudging acceptance of the 'user pays' principle, providing only that it is applied across the board. They feel a little uneasy when they hear stories of how large corporate clients manage to strike a bargain where their bank fees are waived - despite their making particularly heavy use of the bank's services.

In a similar vein, there is suspicion that the spread between the actual costs of borrowing and lending to small retail customers (where most loans are secured) are greater than the margins allowed in dealings with the powerful corporate sector.

These two issues combine in the minds of many who question having to pay an occasional fee in order to gain access to their own funds - especially when the bank has enjoyed the use of these funds while acting as a 'custodian". It may be that these popular perceptions are unfounded. Bankers will certainly be well rehearsed in the arguments that answer popular criticism and concern. Yet such concerns persist and need to be addressed if trust is to be restored.

These are but a few of the issues that banks might take into account when considering the nature of the ethical landscape in which they operate. There are other controversial questions that might be explored at a later date. For example, should banks develop lending policies that are designed actively to promote the welfare of the community. That is, should banks be prepared to refuse finance on grounds other than risk, profit and legality?

I began with a line taken from an advertisement in The Economist, so I will conclude with a further quotation from a piece that appeared in the Christmas edition of that publication. In an article entitled "Usury' The Economist writes:

It would be too crude to suggest that bankers have been hated for centuries simply because they do something which makes people uncomfortable, and wrong to argue that the hatred has been either uniform or unwavering. Yet loan-sharks who today charge excessive rates of interest are not fundamentally different from banks. Money-lending is the banks' central function and the critique of it seems protean - witness the way it runs across the political spectrum. Except in bad times, the risks and costs that interest charges defray are intangible, so bankers seem to get something for nothing. Until they can show society otherwise, they will go on wondering, in their very own Purgatory, why they are so unloved.

My own view is that banks have a great capacity to do good while making a legitimate profit. They hold the keys to a bridge across which so many of us must pass if our dreams and aspirations are to become a reality. But as David Murray has noted, few of us will cross a structure in which trust is wanting. In such circumstances banks and society suffer alike. That is one good reason for taking seriously the need to eschew fancy dressing in favour of the simple habit of trust.

The Commonwealth Bank is one of the Founding Sponsors of St James Ethics Centre

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