The basic data used to determine the effectiveness of commercial banks are included in the banks' financial statements. these data relate to the bank's involvement in specific active transactions, necessary to determine the quality of the loan portfolio, to determine the quality of credit, operational, liquidity, debt, operational risk management processes, etc. An IT risk analysis should be added to this. In addition, financial statements also include data to calculate the deposit security ratio, profitability of individual categories of assets and use of available financial resources. This type of data should be combined with individual categories of estimated risk levels measured in correlation to the involvement in individual active operations. However, in the case of the analysis of the investment bank's effectiveness, it should additionally include an analysis based on risk assessment models for investment in derivatives and other capital market instruments. In this regard, many banking procedures were previously unreliably carried out which generated very high levels of credit risks and caused huge financial losses, eg in the Lehman Brothers investment bank, bankruptcy of this bank and the beginning of the global financial crisis in mid-September 2008.
I researched this problem and in my publications I confirmed that it is possible to combine the question of the reliability of banking procedures implemented in the area of risk management with sources of financial crises.
However, I would like to hear your opinion on this matter.
In view of the above, I am asking you the following question: Is it possible to combine the ethics of banking procedures in the field of banking operations with the sources of financial crises?
Please, answer, comments. I invite you to the discussion.
Dr. Dariusz Prokopowicz … Thank you so much for your nice answers.
I believe it is possible to combine the ethics of banking procedures in the field of banking operations. It is not only possible, but it is necessary.
Several answers are possible:
- if by banking operations you mean all the daily operations made by a bank officer with his customers, I think that it will be really difficult to find information. First, some behaviour could be just opportunist, a bank officer could adopt bad habits ethically speaking but useful for him to reach the commercial objectives. Second, those behaviours could be a part of a strategic dimension and, as a part of a competitive advantage, really difficult to find.
- if your target is the investment banks, just have a look if the ethics procedures are strong enough (or not and may be made to promote financial performance with or without ethic)) to avoid individual bad behaviour.
In view of the above, I encourage you to continue the discussion on the issues of pro-social banking for sustainable development. To this end, I formulated the following thesis as inspiration for discussion: In my opinion, the first step to creating sustainable development banking operating in accordance with the principles of business ethics and corporate social responsibility was to prevent banks from setting interest rates at the level of high usury. The next pro-social step is the gradual reduction of information asymmetry in relation to clients and improvement of credit risk management processes, IT systems, etc. and the sponsorship of pro-social and cultural ventures, etc. On the other hand, the step towards green finance banking will be the banks' participation in financing large, pro-ecological business ventures. In these few words, I tried to include in the shortest possible formula conclusions from the research on key determinants of the development of modern banking in the context of various economic, social, technological processes, etc.
What is your opinion on the above issue?
Please reply,
I invite you to discuss
Thank you so much for participating in the discussion,
Regards,
Dariusz Prokopowicz
In recent years, the importance of sustainable development banking has grown. As the classic source of credit and deposit banking, the main source of revenues and profits of banks is lending and possibly also financial transactions carried out with the participation of securities, so the purpose of implementing the principles of sustainable development, including the principles of business ethics and corporate social responsibility is, among others, granting loans and banking operations carried out on capital markets should be conducted in accordance with these principles. Economic, housing, consumer and other loans granted on the basis of a thoroughly conducted risk management process, on the basis of corporate social responsibility, business ethics, underestimated credit costs and the bank not using information asymmetry. Currently, opinions appear that the ideal in this respect is sustainable development banking, in which reliable and constantly improved banking procedures, developed credit risk management systems, IT systems, operational systems, cybercrime in online banking, etc. and loans granted on the basis of corporate social responsibility , business ethics, i.e. the excessive cost of credit and the lack of information asymmetry by the bank, mean that banks play an important pro-development role in the growing economy. In this situation, banks are prosocial institutions and the risk of a financial crisis is very small. For the banking system to operate in such a formula, it is necessary to improve the control system and institutions supervising banks, which continually and permanently verifies whether banks operate according to the above principles, or adapt their product offers, procedures and IT systems to developing information, internet and industry 4.0 technologies . This is important because in the current era of the growing importance of the Internet, it is not enough to offer loans via the Internet as part of electronic online and mobile banking. Banks should do it securely, i.e. so that they and themselves do not expose themselves to the high risk of cybercrime and not to generate unnecessary costs and offer credit and other products on partner terms, taking into account not only their business goals but also the financial security of clients. The issue of the role of business ethics in banking as an important factor in counteracting the potential occurrence of subsequent banking crises also gives high priority to this issue. Well, the analysis of sources of the emergence of the global financial crisis in the autumn of 2008 shows that these sources include failure to comply with the principles of corporate social responsibility and business ethics in investment banking, where, before the crisis of 2008, banks sold customers poor quality financial products based on unpaid mortgage loans and junk derivatives unreliably informing clients that they are high quality financial products. After the financial crisis of 2008, some banking procedures and credit risk management systems were improved, but only partially. Considering the developing trends in the implementation of the principles of sustainable development, sometimes also pro-ecological sustainable development in various branches and sectors of developed economies, the importance of sustainable development banking should also increase in the coming years.
In connection with the above, I ask the following questions:
- Do you conduct research in the field of sustainable development banking?
- Is sustainable development banking being developed in your country?
- What banks do you know that operate in accordance with the concept of sustainable development banking?
- What do you think about this topic?
- What is your opinion on this topic?
Please reply,
I invite you to discuss
Thank you so much for participating in the discussion,
Greetings,
Dariusz Prokopowicz
Dr. Dariusz Prokopowicz … Thank you so much for your nice answers.
Dear All, Dear Colleagues and Friends from RG, Hello everyone, thank you very much for participating in this discussion and providing inspiring and informative answers to the above question: Is it possible to combine the ethics of banking procedures in the field of banking operations with the sources of financial crises? I am glad that the answers to the above question in this discussion are dominated by an affirmative answer.
Thank you very much and best regards,
Dariusz Prokopowicz
Dear Ahmed Hamdan Lafta,
Thank you for your kind words and I am glad that you share my view on this issue.
Best regards,
Dariusz Prokopowicz
Dear Isam Alkhalifawi, John Saka,
Thank you very much for your answer and confirmation of my theses regarding the importance of improving and maintaining high standards of business ethics in banking operations.
Best wishes,
Dariusz Prokopowicz
Yes, it's possible, Both internal and external ethics of banking should govern banking operations.
Dear Riaqa Mubeen,
Thank you for your response. I think the same. I also believe that both internal and external banking ethics should be an important factor in carrying out banking operations, providing banking products and reliable customer service.
Best regards, Have a nice day, Stay healthy!
Dariusz Prokopowicz
Dear Joseph Stroud,
Increased competition on the interbank market, increased competition between commercial banks may force banks to improve customer service standards, improve the application of the principles of business ethics and corporate social responsibility. Banks are institutions of public trust. It is an important factor affecting the level of security in the financial system.
Best regards,
Dariusz Prokopowicz
The issue of low standards of business ethics and corporate social responsibility in relation to investment banks' customer relations is one of the important factors in generating high investment and credit risk in the years preceding the global financial crisis of 2008.
Best regards,
Dariusz Prokopowicz
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