Conduct and Ethics in the Financial Industry Topic21

Conduct & Ethics in Finance

An Infographic on Key Principles and Regulations

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The Role of Conduct & Ethics

trending_upPost-Crisis Importance

The 2007-09 global financial crisis dramatically increased the focus on conduct and ethics in banking due to a widespread loss of public trust.

Primary Cause: Failures in corporate governance and business models that heavily rewarded profit generation.

Result: A push for more ethical practices and greater accountability for senior management.

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Codes of Conduct

corporate_fareOrganizational Commitment

Financial institutions now define and document their commitment to ethical behavior for customers and regulators.

Content: These codes outline values, practices, and ethical obligations, often including policies on whistle-blowing, anti-corruption, and responsible lending.

Global Standards: Banks operating in multiple jurisdictions often use a single global code to ensure consistent high standards.

flagUS FDIC Guidance

The US Federal Deposit Insurance Corporation (FDIC) provides guidance for effective ethics programs.

Key Areas: Safeguarding confidential info, ensuring data integrity, strong internal controls, and avoiding conflicts of interest.

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Regulatory Reform in the UK

shieldFCA & PRA Formation

The Financial Services Act 2012 created the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) to create a robust regulatory environment.

checklistFCA's 11 Principles for Businesses

Firms must comply with principles covering integrity, skill, care, diligence, risk management, and treating customers fairly.

Key Principles: Integrity, skill & care, fair customer treatment, and open relations with regulators.

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Accountability

assignment_indSenior Managers & Certification Regime (UK)

Post-crisis reforms in the UK were designed to hold individuals at all levels accountable for misconduct.

Senior Managers Regime: Top management is legally required to document their responsibilities and prevent regulatory breaches.

Certification Regime: Applies to individuals who could cause significant harm to a firm or its customers.

Conduct Rules: Basic standards of behavior for almost all staff in financial services firms.

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Treating Customers Fairly

favoriteCore Principle

A global push for financial services firms to embed the fair treatment of customers into their business models.

verifiedFCA's 6 Customer Outcomes (UK)

The UK's FCA outlines six outcomes to guide firms in demonstrating fair treatment.

Outcome 1: Fair treatment is central to the corporate culture.

Outcome 3: Consumers receive clear information before, during, and after a sale.

Outcome 6: Consumers face no unreasonable barriers when changing products or making complaints.

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Ethical Banking

balanceProfit with a Purpose

A growing movement where banks prioritize social and environmental impact alongside profitability.

Focus: Sustainable practices, community involvement, and responsible lending.

Practices: Can range from forgoing investments in certain industries to actively funding green projects.

Infographic based on "Topic 21: Conduct and ethics".