Lessons from LIBOR: moving beyond compliance to explore the dynamics of ethics in banks

Read the beginning of the text

Once more the subject of ethics in finance has been swept into the limelight. The culprit on this occasion is the LIBOR rate-rigging scandal – an episode of fraud and manipulation of the benchmark interbank lending rate, LIBOR, which is controlled by the British Bankers’ Association (BBA). In the aftermath of the scandal and the resulting penalties, this paper aims to examine why cultural practices came to prevail over ethical decision-making, resulting in one of the biggest financial scandals in recent times. My analysis suggests that structural regulatory reforms are only part of the remedy in such cases. In exploring the dynamics of how firm, team, and individual ethical values are developed in major banks, I propose that the main focus in future should be to instil ethical standards at all levels of financial institutions by encouraging individuals to develop their own personal vision of ethical integrity.

Many will see ethics as synonymous with a sense of morality, or ‘right’ and ‘wrong’. Others would strongly divorce it from this notion and claim that it is actually an intention to strive for order, and so add value (Casimiro & Pellerin, 2009). A third school of thought may define it in more practical terms as a degree of concern for society as a whole.

Download the essay