Ethical Dilemma in Financial Institutions: Way Forward


Good evening distinguished ladies and gentlemen. It is my pleasure to deliver the keynote address on the occasion of the Extraordinary Fellowship Investiture of The Chartered Institute of Bankers.

Today I will be sharing my thoughts on the topic: ‘Ethical Dilemma in Financial Institutions: The Way Forward,’ a topic for discussion which is timely and important for the continued growth and development of Nigeria’s banking sector. In the interest of time, I will focus on the subject matter as it pertains to the banking profession, to which I belong. Indeed, as I thought through the direction and structure for this paper, I found myself facing a dilemma regarding whether or not I should use my personal life experiences to give practical expression to the concept of ethical dilemmas. I elected to stand on the side of learning at the expense of whatever discomfort comes with putting myself in issue. Given the seriousness of the subject matter and as a Fellow of the Chartered Institute of Bankers, I am duty bound to make whatever sacrifices are required for its growth and progress.

Let us at this juncture adopt a common understanding of what an Ethical Dilemma is before we attempt to resolve them. Wikipedia describes an Ethical Dilemma as “a decision making problem between two possible moral imperatives, neither of which is unambiguously acceptable or preferable”. All of us should be clear at the outset that Ethical Dilemmas are not easily resolved; they are situations that are best described by the refrain “between a rock and a hard place”. Every human being will face Ethical Dilemmas at one time or the other and bankers are no exemption. They tend to put us in uncomfortable positions.

A useful approach to take in resolving dilemmas is to establish two opposite positions at either extreme of the issue at hand; between these positions lies the terrain, which must be navigated by the individual to reach their point of comfort.
By way of illustration, let us examine an ethical dilemma in the legal profession. The Dilemma in this case lies in the moral, or ethical basis for a lawyer to defend a client who they know is guilty of the offence.

The Dilemma is that on one side a lawyer is expected to represent their client to the very best of their ability, thus affording the client the right to fair hearing. On the other hand, should a guilty person be given the opportunity to avoid justice? One extreme position is represented by the British writer and barrister, John Mortimer whose famous character Rumpole stated. ‘The most common question I am asked; is how you can defend a client when you know he is guilty. Well the answer is, of course, that you do not. Once he tells you that he did the deed, you have to advise him to plead guilty, admit all and accept the consequences. If he refused to agree then you must leave him to his own devices’.

While clearly an extreme representation of the position, it clearly illustrates the school of thought that says ‘it is immoral to try and secure the acquittal of someone that you know to be guilty’. This contradicts the legal principle that all accused persons are guaranteed the right to a defence, and puts the onus on the prosecution to prove an allegation, rather than the accused to admit it. The philosophical position is that you must seek to “err on the side of good.”

A contrary position comes from a philosopher we all know well, Niccolò Machiavelli, who says that ‘it is the result that renders the verdict’ which we can interpret simply as ‘if you win you are right, and if you lose, you are wrong’. Niccolò Machiavelli is taking the position that the ethics of the situation are driven by the outcome, not the morality. In between these two positions lies a range of possible positions between the two extremes. The central conclusion that I draw from this is that each individual navigates ethical dilemmas based on their personal moral compass. The strength of your beliefs and your values determine how you handle matters within your orbit. It is why ethical dilemmas create such debate, because your response to them is a function of the ethical stream that you drink from.

Ordinarily, human beings face ethical dilemmas in all aspects of life. The roles they play and societal expectations influence to a great extent the nature and context of their dilemmas. A father faces different dilemmas from a mother; just as “a medical doctor faces different dilemmas from a banker”. Unfortunately, in our country the role of banker has grown beyond its traditional function of paying due regard to the interest of customer and managing their finances to include a number of other functions such as media celebrity, politician, patriarch, philanthropist, religious leader etc. This complex mosaic of functions that is added to the “Cloak of Banking” sometimes pits the Nigerian banker against their professional ethics in ways that require the wisdom of Aristotle and leadership qualities of Winston Churchill to be well resolved.

The Nigerian banker whether Branch Manager or Managing Director is elevated to this special composite role in society carrying privileges and responsibilities that go way beyond what is par for the course of the banking professional. As a result, the Nigerian banker finds it difficult to resolve ethical dilemmas within the context of the principles and ethics of their profession. Flowing from the pressure and expectations of their elevated role of celebrity, patriarch, politician, etc. how does the banker resolve dilemmas where the imperatives of their core function is pitied against the interest of political friends, religious doctrine, family interests or societal beliefs.

A banking professional shared this anecdote with me, she stated that there are moments when she receives a phone call from her office reception that there are certain visitors from a Law Enforcement Agency at the reception who wish to see her and although she knows that neither she nor her institution has committed a crime, her stomach climbs up to her chest at the thought of the many dilemmas she may face as a result of the visit of these law officers. It had nothing to do with being guilty; it has everything to do with how to cope with the discomfort of knowing that your role as a banker is going to put you on a head-on collision with societal expectations.

A well-researched example of ethical dilemmas in finance is President Lyndon Johnson’s ‘War against Poverty’. In the 1960’s the United States “war on poverty” was launched by President Lyndon Johnson. A grand plan which, both politically expedient, and well intentioned, sought to re-distribute wealth in a way that would make society fairer and more equitable. One of its many initiatives involved giving away money to the poorest Americans by way of cash handouts. The challenge was the moral hazard associated with cash handouts, which became a disincentive for people to work and exercise their entrepreneurial talents with negative consequences for the US economy. As a Banker, what do you do? As a banker, you cannot always agree with the policies and actions taken by politicians; that is just common sense. But can the Nigerian banker handle dilemmas like other Banking professionals all over the world given the multiple roles they play?

You have to develop a strong moral compass to deal with ethical dilemmas. I recall when Nigeria’s Power Sector Privatisation Programme commenced in 2013; I was then a member of the National Economic Team and Chairman of the Bankers Committee Sub-Committee on Economic Planning. The federal government expected the Banking sector to support this program by financing the acquisition of privatised assets. Whilst I agreed with the move towards market liberalisation and that government should exit from the business of power supply, I disagreed with the approach to privatisation. I was of the opinion that the approach adopted would expose the Nigerian banking industry to large scale loan delinquencies putting depositors and shareholders at risk. I made my position known to the federal government, the Bankers’ Committee and other stakeholders and ensured that Access Bank did not provide financing for the privatisation transactions. Clearly, this position put me at odds with policy makers, asset acquirers and the political class. This is where the strength of your moral compass becomes essential. I remain convinced that anything less than a fully functional electricity power sector run by technically and financially strong operators will result in a bankrupt and unsustainable electricity power value chain which will ultimately destabilise the Banking sector. As a banker, consideration must always be given to your depositors and shareholders before consideration is given to political expediency.

To my distinguished colleagues who are being conferred with fellowships and indeed all of us present today, I am sure that we have found ourselves in similar situations at one time or the other. I am equally sure that when we look back, there are those of us who are happy with some of the decisions that we took and those who are not happy with the paths they followed. Choosing the right path when faced with an ethical dilemma is not easy and history can be harsh and unforgiving when you get it wrong.

Lest I forget that in this hall are not only today’s leaders of the banking profession, we also have the leaders of tomorrow, some of whom may just be starting their careers as bank teller and entry level officer. So I turn to you leaders of tomorrow and ask you. A fellow bank teller tells you that his daughter is dying and needs N100,000.00 to fund her treatment or she will die.

He has no insurance and is desperate. A month later, you see him again and ask how his daughter is, he tells you she is fine now and confides in you that he took N100,000.00 from a dormant account in the bank to pay for it. He assures you he is paying it back and will complete the payments, but what do you do?
Legality aside, what is the ethical decision that should be made? As a banker, you are obligated to protect depositor’s funds; in a country, whose level of political, social and economic deterioration gives excuse for everything. As a friend, should you simply look the other way? If he does pay all the money back, has any harm been done?

The Way Forward

The key to ensuring that members of the Nigerian banking profession resolve ethical dilemmas in a way that contributes positively to building a great nation is to strengthen the personal moral compass of our banking professionals. This requires us to equip them with skills and knowledge that builds up their character, enlightens their thinking and strengthens their decision-making. We must build banking professionals who will act rightly and wisely at the critical moments of truth.
The essential elements of the conduct of banking that will reinforce the Banker’s capacity to think and act primarily in the interest of customers particularly depositors and shareholders are as follows:

• Minimum qualifications and training
Members of the profession must be taught their duties as bankers and understand the ethical, legal and professional obligations they must adhere to. Our universities and professional institutions such as the Chartered Institute of Bankers must produce well-rounded graduates who have both a strong understanding of banking and its professional tenets.

•Commitment to protecting our customers
Just as doctors sign on to their Hippocratic Oath, we must be sure that our colleagues understand and accept their primary fiduciary responsibility to protect the interests and assets of their customers. The profit motive cannot override this.

•Honesty and confidentiality
No matter what happens in other aspects of the Nigerian political economy the banking sector and banking profession must be an oasis of sanity, truth and honesty.
This extends to the need to maintain customer’s confidentiality, which translates into trust, which is the most important currency a banker can collect.

•Accurate accounting and record keeping
If systems can be manipulated, then the basis of our profession is threatened, manual systems make bankers vulnerable and technology is the key to eliminating these weaknesses.

•Nepotism and self-dealing
Conflicts of interest exist across our industry and have to be managed very carefully. Meritocracy and transparency are key to resolving potential conflicts.

I firmly believe that if we are able to establish high minimum standards in these 5 areas and enforce their practise, the scales will be tilted more towards sound thinking and good decision making.

Because business ethics are fundamentally, a reflection of the society in which we exist today, this paper will not be complete, without a brief comment on the Nigerian environment within which we as bankers operate. Our current Hobbesian state of existence in which our nation is caught in an existential battle between good and evil, right and wrong, is not fertile ground for producing good leaders of sound thought and good decisions. Our political economy supports the notion that corners can be cut, that fortunes can be made not because of hard work or value created but through the control of power and access to national assets.

Ours is not a society that respects principles of finance, law and or science, the very basis upon which the banking profession is founded. So I ask, are the controls and systems that underpin banking ethics in other parts of the world sufficient for us here in Nigeria, or do we need an even higher level of control? Do we need to take the view that the nature of the environment we are operating in, makes it even more important than we empower our bankers with greater wisdom and understanding to navigate it? What kind of values and enlightened thinking does our situation require? How can we ensure that the ethical dilemmas we face at every level of the banking system are managed appropriately, by people empowered and capable of doing so?

I believe that the Chartered Institute of Bankers must lead the way to find the right answers.

Thank you for listening.

•Being a keynote address delivered by Aig-Imoukhuede at the extraordinary fellowship investiture of the Chartered Institute of Bankers of Nigeria in Lagos recently

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