ETHICS IN FINANCE

ETHICS IN  FINANCE

Ethics in finance consists of the moral norms that apply to financial activity broadly conceived. norms reflect the conduct in financial activity that follows from fundamental ethical principles. (made in contracts)!” interferes with their ability to serve others, they are said to have a conflict of interest.

ETHICAL ISSUE IN FINANCIAL SECTOR

Transactions by financial institutions ideally rely on trust, and consistent cum non-discriminatory relationships strengthen this trust. However, intense competitions in the sector often force employees to focus on the bottom-line instead of business ethics leading to unethical transactions. Besides, evaluating employee performance based on end-results instead of the means of achieving those results also encourage unethical acts. For example, a large number of banks in Bangladesh made big profits from the share market, especially in 2010, by investing beyond their ceiling stipulated by the Bank Company Act 1991. The banks' overexposure came under severe criticism later as the Act had limited a bank's investment in the capital market to 10 per cent of its total liabilities (deposits plus borrowings). Investing the depositors' money in the capital market was quite unfair, as a more appropriate mode of investment was in the productive sector. We should remember that excessive investment in the stock market by the money market players like banks does not solidify the stock market, and a major cause of market crashes all over the world has been the excessive participation of commercial banks in merchant banking activities.

It is also very important to frame human resource policies by reflecting ethical values in financial institutions and execute a reward-cum-incentive programme for ethical acts instead of concentrating merely on legal behaviour, as legality does not always ensure adherence to ethics. One of the most effective means of flourishing ethical principles in financial institutions can be by implementing a professional code of ethics and setting rules and norms that are to be strictly followed.

As is well-known, the major challenges facing assimilation of ethical practices in the financial market of Bangladesh include lowering the non-performing loans (NPLs) in the banking sector, curbing fraud and forgery in both money and capital markets, increasing investments in productive and social sectors like agriculture, industries, small enterprises, health and education, sustainable financing activities and the achievement of cost efficiency in service delivery.