How Ethics can be Institutionalized in Banks and Non-bank Financial Institutions?

Ethics is an inevitable part of an organization. Without ethics, an organization may perform well in the short run but will suffer in the long run. So, to hold a sustainable position in the industry, a bank or a non-banking financial institution should institutionalize ethics in itself. Institutionalization of ethics in banks and non-bank financial institutions means incorporating ethical values into every task, system, employee, and culture. Once ethics is successfully institutionalized, employees will act ethically even without direct supervision.

Strong Ethical Leadership: Ethical leadership should be set by the top management. If a leader acts honestly and fairly, his subordinates will also be honest. So, in a bank or non-banking financial institution, ethical leadership should start from the board and senior executives.

Written Code of Conduct: A bank or a financial institution must have a written code of conduct. The code of conduct should be made available to all employees. The code of conduct should explain what is right and wrong, fair and unfair, favorable and unfavorable, rewarding and punishing. The code of conduct should depict clear consequences for corruption, adopting unfair means, and acting against the organization’s interests.

Training and Development: Training changes and develops the mindset of employees. In a bank, the employees need regular training on ethical standards, anti-money laundering, compliance, rules and regulations, and handling unethical pressure. This type of training helps the employees understand how to avoid any type of unethical thinking, offer, transaction, or behavior.

Strong Internal Monitoring System: A bank or non-banking financial institution should have a strong internal monitoring department. The department will incorporate a strong internal monitoring system in the organization. A strong internal monitoring system helps to reduce corruption, fraud, and forgery in the organization. The internal monitoring system should include a strong internal audit team, surprise visits of top officials to branches, and proper supervision of transactions.

Confidential Way of Reporting: There may be some unethical practices by the supervisor or peer in a bank. There should be a safe and confidential system for the employee to report unethical practices to top management without fear of punishment.

Transparent Policies and Procedures: Every task of the bank should be transparent and clear. For example, transparency in lending, deposit collection, and customer service reduces the chances of unethical practices.

Compliance with Rules and Regulations: Banks and non-banking financial institutions must follow the policies and guidelines of Bangladesh Bank. Special attention should be given to BFIU’s Anti-Money Laundering Policies. Large cash transactions should be tracked. Customer onboarding should be done with existing guidelines. Reports should be prepared accurately and provided on time.

Incorporating Ethical Culture: In the bank, an ethical culture should be strongly established. Ethics should be made a part of the organizational culture. Employees should feel that morality is valued higher than short-term profit.

Honesty in dealing with customers: The bank must create a culture of honesty in dealing with customers. Customers should be provided with accurate information. No false and exaggerated offer should be given to the customer. The bank’s code of conduct must contain action against unethical offers to and acceptances from customers.

Strong Action Against Ethical Violations: Any type of ethical violations should be taken seriously. The person who violates ethics must be punished fairly. At the same time, ethical behavior should be rewarded.