Banking: an Ethical Dilemma? Essay

IntroductionIn this report, I plan to discuss the question blasphemeing An Ethical Dilemma? inside this is I pass on discuss honourable dilemmas in association with swearing. I will firstly start by giving definitions of what is meant by the cost Banking, morals, and Dilemma. From here, I will go on to identify what cashboxs ar and what the roles and importance be for the economy. Next, I will go on to explain patoising trading operations and with this identification, I plan to indeed discuss the ethical dilemmas and denominate my imprint on the question Banking An Ethical Dilemma? I will wherefore(prenominal) discuss any separate issues unrelated to ethical dilemmas inside the intrusting welkin and with this I plan to use references and f dresss to support my argument on the subject. Finally, I will identify my chance uponing regarding the dilemma and try to conclude on whether situateing is ethical.Main BodyFirstly, Banking drive bug bring expose be def ined as whiz of the key drivers of the economy. Banking provides a untroubled place to save excess cash, know as specifys. It also supplies liquidity to the economy by loaning this property out to help lineagees beat and to let consumers to purchase homes, cars and consumer products. Banks in the first place bring on out money by charging laster interest rates on their loans than they net income for deposits. (http//useconomy.about.com/od/glossary/g/Banking.htm) Ethics comes in many bring abouts still can primarily be defined as the code or rules of chaste principles that are make up standards of good or bad, or effective or wrong terminations, in own(prenominal) conduct and thitherfore is a guide to the doings that is morally accept equal to(p) from a person or within a group or an cheek. Ethics effect moral decision made by throng, and its briny concern is what is good and though to be outdo for society. Siddiqui (2010) With this definition of ethics, ethi cal demeanor is very lotstimes as it seems. The behaviour is utilise surrounding ethics. It is behaviour, which is seen to be accepted as good or bad, or right or wrong, within organisation rules and obligations and brass laws.It is about being responsibly and acting in an dear and fair way winning into consideration whether the actions taken are touch people in a way that would not be seen as ethical. Business Ethics is the same aspects and contains the same issues of ethics and ethical behaviour how incessantly is put into a business context. This is deal with on a daily bases throughout every organisation in the human beings. Within this subject, business ethics is not just based on the organisation or employees but also to any customer that they whitethorn pull in. Many organisations have had their reputation tarnished with bad usuality due to the business ethics. This can be down to employment or how the organisation is ran, this can include pathetic working condi tions, exploiting people or level off down to low wages. Organisations that do not follow in business ethics can vector sum in breaking the law that can lead to them being sued the trouble with this is that multi-million businesses can often afford to take a hit but never the less that is no excuse to disregard their ethical behaviour.Finally, the status Dilemma can be defined as a piazza that requires a choice between options that are or seem every bit unfavourable or mutually exclusive. (http//www.thefreedictionary.com/dilemma) Banks are seen in many forms, they primarily come in the following forms, which are Retail, Central, Investment, and Building Societies. The master(prenominal) train of a avow is to provide a safe place where people have confidence to deposit money. It is seen that cants are produced and ran by honest people. As considerably as entrepot of money, there are many other purposes to bank, but they are separated into individual banks and depends are o n what form of bank they represent. Retail banks are otherwise cognize has commercial/high street banks, which customers use every day for goods and good links with their usual tasks. They main roles are to provide a wait on to corporate, personal, and private banking to customers. This can include bank accounts for money storage, loans, credit cards, mortgages, and parsimony as well as many much. Examples of these banks would be HSBC, Lloyds TSB & NatWest.Central banks are the main bank within a national, and have many roles, which are vital in the economy. Central banks such as The Bank of England unlike retails banks are motive to keep the economy financial stable. The Bank of Englands roles are to set interest rates, make up money supply, lender of last resort, they are the bankers bank and the place of settlement and they have to regulate these to provide paramount service for the economy. Investment banks are otherwise known as merchant banks. The main purposes of thes e banks are raising capital for customers, businesses or for the government. This can be achieved by providing services for mergers and acquisitions as well as propriety trading, foreign exchange. unalike retail banks, investment banks do not take deposits, these banks graze from taking equity.Building Societies are financial institutions, which mainly provide saving accounts and mortgages. unalike other banks, building societies are mutual which means that their customer are members and can therefore receive information and attending meeting regarding the further or alterations in operations and have a right to pick out on the actions taken. Building societies are run by shareholders and have directors whose decision it is on the strategies taken. Banks have great importance within the economy, and without them, we would see a different world from the one we see today. Although banks create no natural wealth but their borrowing, lending and related activities facilitate the su ffice of production, distribution, exchange, and breathing in of wealth. In this way they become very effective partners in the process of economic development. (http//www.blurtit.com/q197532.html) What do banks do?This is a question, which many people whitethorn be confused by. People deposit their money into a bank for feeling that it will be kept safe for them to collect at any time, when in humans when someones deposits money is to their account, the banks chop-chop lend the money out to another customer and in resolvent creates a cycle. In fact, when a customer makes a deposit at a bank only an initial 8% is kept in banking funds, 90% of the deposit and lent out to another customer creating much receipts for the bank. As well as accepting deposits banks also refund a summationst written order, create account, lend money, render account, reasonable notice closer, bear on secrecy (Tourniers exception), interest and fees, set off, re rhythm cheques and pay against monies h eld. Although these are the main roles this is not an indication of the products and service which are provided by individual banks and whitethorn differ between them.thitherfore, when looking into banking, where can we draw the line to introduce whether a bank is being ethical or not? I think the first factor, which needs to be pointed out, is that banks are businesses and therefore are out to make a profit, but how far will they go in succeeding this main objective and with this jeopardise their ethical set? So as previously stated the main purpose of the bank is to make a profit and to do this they have to provide service and sell products as such. The bank is required to make a profit to provide to the shareholders, and with this will amplification the business and allow the business to grow and progress. Banks as businesses are not charities and therefore need to make a profit without making a profit banks would fail without input into pay and would therefore have to relate on government funding, which in bend would change banks from private businesses into national banks. With doing this then the government would have to move the funding from somewhere to provide to the bank so this would most possible required an increase in taxes which would then cost people to a greater extent money in do this.The problem with this is that without the private funding from customers then it would be possible for banks to fail which would create havoc with the economy. This would put more of the publics money at chance, and could affect the circulation of money and without circulation the money, as we know it will lose value and will basically disclose out. If it were put into place that banks were made national this, this would mean that they would have to be more cautious and would take no risks in the services, which they provide. This would mean that people would not get the high interest returns on their account and saving which they believe that they sho uld be entitled to but do not deprivation any of the risk which is associated with this. For a bank to make a profit, they are required to use customers deposits and lend the money out to other investments. The percentage of the deposit, which is loaned out, can be seen to be risky and if customers were to find out this then they may be less inclined to deposit their monies. Is it wrong that a) Customers are not informed of this? Alternatively b) the percentage that is loaned out?This could be altered by giving the customer more information. Is 8% of a deposit a reasonable amount to keep or should it be higher. I think that if banks start reducing the percentage, which in turn would allow them to make more profit that this would be wrong and it is creating more risk to customers money and without guarantee that there is sacking to be 100% return rate. I think that if banks did lower the percentage, and did increase the money that could lend then this would influence bankers deci sion on the ethical value if it were allowing them to make more profit for the bank and in turn increase any rewardes, which they would receive because of the extra profit. With this extra money, spillage back into circulation then this would create an increase in interest growth. Although this may be seen to be unethical, I think the main problem is the development of the public on this subject. Banker bonus is always high-level news in media, as people hear about these vast bonuses and cannot understand where these amounts are coming from.It is my perception that why people hear about theses bonus that they believe that it is their money that is being used to fund the bonus that that everyone within the bank or the average banker is going to receive these bonuses when in reality it is actually very few who do. I believe that banker should be allow bonuses as without the work that they put into the banks then this would depart is a dusk within the economy, so in result I do no t believe that these bonuses to be unethical. The Financial Services Authority otherwise known as the FSA is the regulatory of the UKs financial services industry. This was set up by the government with the purpose to regulate the activities of financial services markets, exchanges, and businesses. exclusively financial service must follow the standards, which have been put in place by the FSA this has consequences if not followed. This can be used to show that a bank is being ethical as the FSA would be able to notice any unethical activities within a bank and would then take action to correct this. The make act of unethical behaviour is using customers money to achieve personal ambition.This is using the money in a scene of greed and in result to boost ego. A good example of this would be Fred Goodwin. Fred Goodwin was the former chief executive of the magnificent Bank of Scotland (RBS). His personal ambition was to build RBS to become one of the world largest banks. With the au thority in his post, he created a bank that was more cogitate on selling the products and service than the fundamental service of banking and with the temptation to create more profit was building then this was just the beginning of the unethical behaviour. As a result of this RBS grew and quickly became one of the largest banks but within this growth it was not long before questions were raised regarding the ethical values of the banks. Following investigation, which was launched after whistle blowing if, was seen how unethical Fred Goodwin had been in running operations within the bank and promptly resigned from his post after RBS disoriented somewhat 25 Billion, which would be able to fund the NHS for two age. To date this is the biggest ever commercial lose in history.This is a key example of when the temptation of personal gain overrides ethical value. So is it ethical for a bank to fail? Banks are formed on trust, if it is seen that a bank has failed and has lost its money and funding would create mass panic. This was seen in previous years with Northern Rock. When as many banks in the past, Northern Rock went to the rally Bank of England to ask for lender of last resort, but made public awareness and suddenly people started to panic that they money was not safe and wanted to withdraw the funds from the account. This soon resulted in the banks running out of money as the 8% per cent of deposits that was kept in storage soon ran out. Banks are now introducing ethic policies, this would allow the customer to gain a greater knowledge and insight into the bank on how they run ethical, and from here, and customers can evaluate them and from here make a decision on which bank to choose.The first bank to introduce they ethical policy was the co-operative bank back in 1992. From these policies, it allows a more transparent view into the bank and how it is ran. This can show information such as where customers deposits are steady onto for example this money could be loaned onto a business that has poor environmental records, which you may feel strongly about and would rather not create funding for them. Is it possible for any bank to act ethically, as a principle they may all try to portray a absolute image of the ethical values but with the key goal to make profit, how far is too far for ethicality before they can be criticised. There are banks with exception in which they actions may be seen to be unethical but in retrospect the are somewhat ethical. Rationalisation for unethical behaviour comes in four common forms these are seen to be used to justify misconduct and other ethical dilemmas. They are* convince yourself that the behaviour is not really illegal. *Convincing yourself that the behaviour is in everyones best interests. * Convincing yourself that nobody will ever find out what youve done. * Convincing yourself that the organisation will protect you. Schermerhon (2005)Ethical investment is another problem, which is often brought to the public eye. It has been said that investment bank should invest into smaller companies sooner of mass-market organisation to create more business with the economy. As much as this can be seen to be ethical, the problem with this is that there is higher risk investing in smaller companies as there are not necessarily going to be successful and as a result create more risk of no return on initial investment. This could then result in the bank having to act more unethically to compensate for their actions.ConclusionOverall, within this assignment I have presumptuousness definitions of banking, ethics, and what is a dilemma. From here, I went on to explain what is a bank, and the different types of banks and what they roles where and how they differed from separately other. I then discussed banking operation and when onto discuss the ethical dilemmas within banking sector. afterward doing research I believe that in banking, it is very difficult to eternally stay ethi cal and it is so easy to fall for temptation to act unethically in either time of need or for personal gain.This can be done with minimal effort and sometimes without even notice. Ethics is incorporated in everyday life and is going to be constantly changing therefore I believe what is seen to be ethical could at some point be seen as unethical depending on the state of law. I have discovered that within all organisations there are constant uses of ethical behaviour both good and bad. Therefore, I believe that each organisation at some point will encounter a combination of the alternative ethical views. From analysing the ethical actions, I have concluded that even though some decisions and behaviours are seen to be unethical this does not necessarily mean that they are illegal. It is dependant of organisational procedures and government laws.Bibliography* About.com (2010) Banking. online Available at http//useconomy.about.com/od/glossary/g/Banking.htm Accessed 1st April 2011 * Sidd iqui, K. (2010) lash Hand-outs 6 8.* The Free Dictionary (2010) Dilemma. online Available at http//www.thefreedictionary.com/dilemma Accessed seventeenth contact 2011 * Blurtit (2010) What is the importance of the banks. online Available at http//www.blurtit.com/q197532.html Accessed 18th March 2011 * Schermerhon, J.R. (2005) watchfulness 8th ed. New York. John Wiley and Sons Inc. * Boatright, J.R (2008) Ethics in Finance. 2nd ed. Oxford. Blackwell Publishing. * Boartright. J.R (2000) Ethics and the conduct of business. 3rd ed. New Jersey. Prentice Hall, Inc. * Parkin, M., Powell, M., & Matthews, K. (2005) Economics 6th ed. London. Pearson command Limited. * Co-operative (2011) Why we have ethical polices online Available at http//www.goodwithmoney.co.uk/why-do-we-need-ethical-policies/ Accessed 6th April 2011 * Bank of England (2011) About the Bank online Available at http//www.bankofengland.co.uk/about/index.htm Accessed 23rd March 2011