CBI Exam Notes: Chapter 6 - Professionalism and Ethics in Banking, Exams of Banking and Finance

Download CBI Exam Notes: Chapter 6 - Professionalism and Ethics in Banking and more Exams Banking and Finance in PDF only on Docsity! CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What damage can be caused by widespread unprofessional and unethical behaviour in the finance sector? - The Answer Is It can cause considerable damage to the organisation, individual employees, customers, the environment and other stakeholders. Unprofessional and unethical behaviour undermines trust in financial organisations and markets, and can trigger severe instability in the economy. A weak economy then has an impact on society, loss of jobs for example What did the Federal Reserve Bank of New York (2017) say about employee misconduct? - The Answer Is 'The impact of employee misconduct extends beyond the individual and can impact the firm as a whole and the economy and financial markets more broadly. Employee misconduct can make a firm less resilient, for example, by diverting management attention, harming a firm's reputation in a way that impedes its business, driving change in the composition of the workforce, and depleting its capital. For the broader economy and financial markets, misconduct can inflict harm directly on consumers and employees. Over time, market participants may lose confidence in the financial sector as a whole and adversely impact its critical role in financial intermediation' CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What are examples of past employee misconduct? - The Answer Is - manipulating interbank lending rates - mis-selling insurance - failing to stop their banks being used for money laundering What was the estimated value of fines and legal costs in the 10 years post financial crisis? - The Answer Is > $320 billion Had the fines paid post financial crisis been held as capital, what value could they have supported in lending according to Mark Carney, Governor of the Bank of England and former Chair of the Financial Stability Board? - The Answer Is Up to $5 trillion What is the strategic purpose of the chartered banker institute? - The Answer Is To lead the re-professionalisation of UK banking, and to play a significant role in professionalising banking internationally, with a view to rebuilding confidence and trust in banks and bankers, and restoring pride in the banking profession CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers The Answer Is - specialised skills and knowledge developed and maintained overtime - asymmetry of information between the professional and their client - expertise is relied on by the public - has a fiduciary relationship with clients - belongs to a professional body What does it mean to act in the public interest? - The Answer Is Acting in the public interest is usually about the professional's duties and responsibilities to make decisions and act in a way that promotes the collective well-being of the community served by the profession. The community may include customers, employers, employees, investors, the business and financial community, and other key stakeholders who rely on the work of the profession What is a code of practice/ethics/conduct? - The Answer Is A set of written rules or standards which CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers explains how people working in a particular profession or organisation should behave. If an individual breaches a code they have committed to, they could be subject to disciplinary action. What are the 2 types of code? - The Answer Is - Rules based - Principles based What is a rules-based code? - The Answer Is A rules-based code clearly defines the rules that are expected to be followed and sets out details of what members of a professional body or employees of a company can and cannot do What is principles-based code? - The Answer Is A principles-based code sets out broad, high-level principles or values that guides behaviours and decisions. They are more flexible and have a wider scope, focusing on the 'spirit' of the law or rule instead of specific rules What are the 7 core principles that codes are based on according to Ragatz and Duska (2010)? - The Answer Is - integrity CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers - objectivity - competence - fairness - confidentiality - professionalism - diligence What are the 7 principles outlined in the Chartered Banker Code of Professional Conduct? - The Answer Is . treating all customers, colleagues and counterparties with respect and acting with integrity 2. developing and maintaining my professional knowledge and acting with due skill, care and diligence; considering the risks and implications of my actions and advice, and holding myself accountable for them and their impact 3. being open and cooperative with the regulators; complying with all current regulatory and legal requirements 4. paying due regard to the interests of customers and treating them fairly CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers you will be competent. Competence is also necessary if you are to treat customers fairly What are the key underlying values in principle 3? (Being open and cooperative with the regulators; complying with all current regulatory and legal requirements) - The Answer Is The key values here are openness and compliance. The requirement of openness goes beyond that of honesty. Not only must a professional banker never mislead the regulators, they must cooperate in a genuine spirit of openness, making their organisation's work transparent to the regulator's scrutiny Compliance involves promptly providing regulators with any information they require. This includes regular reporting to the regulators in line with the organisation's internal procedures and responding promptly and openly to specific requests for information which a regulator might make What are the key underlying values in principle 4? CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers (Paying due regard to the interests of customers and treating them fairly) - The Answer Is The key values here are regard and fairness. This principle requires you to consider what is in the interests of customers and then to pay those interests due regard: 1. identify the customers interests 2. apply judgement 3. pay due regard 4. be impartial and fair What are the key underlying values in principle 5? (Observing and demonstrating proper standards of market conduct at all times) - The Answer Is The key values here are compliance and integrity. This principle asks you to ensure that your behaviour does not get in the way of the good and fair operation of markets CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What are the key underlying values in principle 6? (Acting in an honest and trustworthy manner, being alert to and managing potential conflicts of interest) - The Answer Is The key values here are honesty, trustworthiness and impartiality. Dishonest behaviour includes intentionally deceiving or misleading people or knowingly allowing people to be deceived or misled by others. It is crucial to the success of banking as a profession that bankers earn the trust of customers by acting in a trustworthy manner - so that customers are right to trust bankers. Conflicts of interest threaten your impartiality, and your ability to fulfil the duties of your role. You should be alert to sources of possible conflicts. If you do have a conflict, you will need to decide how to manage it. At the very least, this will involve declaring your conflict, ideally making it known to anyone who has a stake in the work which may be affected What are the key underlying values in principle 7? CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What does a professional banker do according to CBI? - The Answer Is - Understands how banks and banking work - creates value for customers, communities and shareholders through their work - leads the transition to a low carbon world According to the Merriam-Webster dictionary (2019) what is a banker? - The Answer Is A banker is "...one that engages in the business of banking" According the Nagel (2006) what is ethics? - The Answer Is 'The branch of philosophy that tries to understand a familiar type of evaluation: the moral evaluation of people's character traits, their conduct, and their institutions. We speak of good and bad people, the morally right and wrong thing to do, just or unjust regimes, and how we should live' What does ethics encourage us to think about? - The Answer Is - how to live a good life - our rights and responsibilities - moral decisions- what is right and wrong, or good and bad CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What is banking ethics? - The Answer Is Ethics is about how things ought to be i.e. banking ethics is about how banking as an activity ought to be carried out and how those working in banking ought to behave in the course of their work What is moral absolutism? - The Answer Is The view that some things are always right and some things are always wrong. They are fixed for all time, places and people Why might people support moral absolutism? - The Answer Is Those who support this view might say that it is fair because everyone is treated the same. Also, if a moral rule is 'good' and 'right', then there would be no need to have different rules for different people Why might people object to moral absolutism? - The Answer Is An objection to moral absolutism is the view that it's not always right to apply the same moral rules to everyone because it doesn't take into account the circumstances of the situation, the potential consequences, or the respect for different cultures and their traditions CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What is moral relativism? - The Answer Is Moral relativism says that what is right or wrong is what the majority of people in a particular culture or society would agree was right or wrong, and is related to a particular place and time Why might people support moral relativism? - The Answer Is Those who support this view might say that relativism shows respect for different cultures who may have different values, beliefs and ways of life from other cultures. It also takes circumstances into account i.e. the reasons for acting in a certain way Why might people object to moral relativism? - The Answer Is An objection to moral relativism is that it reduces the meaning of what is 'good' and 'right' to what is socially acceptable i.e. just because something is socially acceptable, doesn't necessarily mean it is morally acceptable What is consequentialism? - The Answer Is We should do whatever we think will have the best outcomes or consequences. Consequences are the only things that matter CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers - It can be hard to reconcile conflicting duties e.g. when short-term consequences conflict with potential long-term consequences What is virtue ethics? - The Answer Is A virtue is a trait or quality that is considered to be morally good. A virtuous person is someone who has or demonstrates high moral standards What is a virtue according to Aristotle? - The Answer Is For Aristotle, a virtue is part of our character, which usually means that we tend to behave in a certain way in certain circumstances, e.g., behaving courageously in circumstances that require courage What are examples of virtue? - The Answer Is - Compassion - Courage - Fairness - Honesty - Wisdom CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers How might taking a virtues-based approach affect the decisions you make at work? - The Answer Is Taking a virtues-based approach to making decisions could involve asking ourselves questions like: - What is the most compassionate thing to do here? - What is the most courageous thing to do? - What is the fairest thing to do? - What is the most honest thing to do? - What is the wisest thing to do? What is an ethical dilemma according to The Institute of Business Ethics (2019)? - The Answer Is 'A situation that makes a person question what the 'right' thing to do is. Ethical dilemmas make individuals think about their obligations, duties or responsibilities. It is through a dilemma that most employees experience business ethics' CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What are the 4 different types of conflict that ethical dilemmas fall into outlined by Kidder (2005)? - The Answer Is - Truth vs loyalty i.e. honesty and integrity vs commitment, responsibility, or promise-keeping - Individual vs community i.e. us vs them - Short term vs long term i.e. differences arising when immediate needs conflict with future goals or prospects - Justice vs mercy i.e. where fairness, equity and impartial application of the law can conflict with empathy and compassion Why are ethical dilemmas difficult to handle? - The Answer Is By their very nature, there is often no clear-cut response to an ethical dilemma. It is a dilemma because we're not choosing between right and wrong, we are choosing between right and right. CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers - Moral character What does the moral sensitivity component of Rest's (1994) theory of what determines moral behaviour? - The Answer Is Moral sensitivity is being aware of how our actions affect other people. It involves being aware of the different courses of action we could take and how each of these options could affect the people concerned What does the moral judgement component of Rest's (1994) theory of what determines moral behaviour? - The Answer Is Moral judgement is about thinking about the possible actions we could take and how they might affect others then judging which option is the most morally justifiable after What does the moral motivation component of Rest's (1994) theory of what determines moral behaviour? - The Answer Is Moral motivation is about the importance we place on moral values compared to other values. There could be a problem here if we are not sufficiently motivated to put moral values higher up our priority list What does the moral character component of Rest's (1994) theory of what determines moral behaviour? - The Answer Is Moral character is about having courage, CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers conviction and confidence. It's about being resilient and persistent. Although we may be morally sensitive, make good moral judgements and place a high priority on moral values, if we wilt under pressure, or are easily discouraged, we may not have the strength of character to take the action, follow it through, and deal with the challenges this could present What are the stages of ethical decision making? - The Answer Is - interpreting the situation - planning courses of action - considering the options - arriving at the decision - reflecting on the decision and action What is the 9 point checklist for making an ethical decision suggested by Kidder (2009)? - The Answer Is Step 1: Recognise that there is an ethical/moral issue Step 2: Determine the actor Step 3: Gather the relevant facts CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers Step 4: Test for right and wrong issues Step 5: Test for right vs right paradigms Step 6: Apply the resolution principles Step 7: investigate the 'trilemma' option Step 8: Make the decision Step 9: Review and reflect on the decision In step 4 of Kidder's checklist, how can you test for wrongdoing? - The Answer Is - the legal test if any law breaking is involved - the regulation test if any codes are being breached - the stench test CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers dilemma? This may be the result of a compromise between two 'rights', or perhaps as a result of thinking outside the box What is whistleblowing according to Schinzinger and Martin (2000)? - The Answer Is "whistleblowing occurs when an employee or former employee (or someone connected to the organisation) conveys information about a significant moral problem to someone in a position to take action on the problem, and does so outside approved organisational channels" What are the 4 key features of whistleblowing? - The Answer Is 1. The whistleblower does not need to be currently employed by the organisation 2. The problem needs to be significant for the action to count as whistleblowing 3. The report is made to someone outside the normal channels 4. The report is made to someone in a position to take action CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What is internal whistleblowing? - The Answer Is This is when information is kept within the organisation, but is passed on outside normal channels. We could report, say, to the head of compliance, or to HR. What is external whistleblowing? - The Answer Is This is when information is passed outside the organisation. This could be to a professional body, a regulator, an independent agency such as the UK's Public Concern at Work, or to the press. What are some examples of things people would 'blow the whistle' on? - The Answer Is 1. a criminal offence e.g. fraud 2. a breach of legal obligations 3. a miscarriage of justice 4. danger to the health and safety of employees 5. damage to the environment CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers 6. the deliberate covering up of wrongdoing in the above categories What are the key points of the EU Directive on whistleblowing? - The Answer Is - all organisations with more than 50 employees need to introduce internal channels and procedures for whistleblowing - new standards for regulators - new provisions to protect whistleblowers from liability What is the difference between whistleblowing and a complaint? - The Answer Is When someone blows the whistle, they are raising a concern about danger or illegality that affects others. This means they rarely have personal interest in the outcome of the investigation. A complaint is different as when someone complains they are saying that they personally have been poorly treated. CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers What are some ethical concerns regarding decision making algorithms? - The Answer Is - the output from the process tends to be objective, but limited data or skewed processes can mean decisions are far from objective - the decision the system reaches is rarely transparent to the user, which is becoming an increasing issue with machine learning - it is difficult to pinpoint who is responsible for issues regarding autonomous systems - customers may feel alienated and insulted due to their financial well-being not being worthy of the attention from another human being What is the framework developed by the Institute of Business Ethics (2018) regarding values and principles for the use of artificial intelligence in business? - The Answer Is ARTIFICIAL: - Accuracy - Respect of privacy CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers - Transparency - Interpretability - Fairness - Integrity - Control - impact - Accountability - Learning What is environmental ethics? - The Answer Is Environmental ethics is about the ethical relationship between human beings and the natural environment, including the non-human beings who share our planet, in an attempt for both to co-exist without compromising the futures of either Practice Question 1: If you are listening carefully to a customer's description of their needs and circumstances, applying your expertise in relation to the products or services they may be considering, and being ethical, compliant, and impartial, which of the principles of Chartered Banker Institute's Code of Professional Conduct are you most observing? - CBI Exam Notes: Chapter 6- Professionalism and Ethics in Banking Questions And Answers The Answer Is Principle 4: paying due regard to the interests of customers and treating them fairly Practice Question 2: Consider the following two statements within the context of the ethics of technology: 1. When a machine makes a decision based on an algorithm, and the decision has adverse consequences for a customer, the machine cannot be held responsible. 2. When a machine makes a decision based on an algorithm, the decision can contain bias. Which one of the following statements is true? - The Answer Is Both Practice Question 3: The view of ethics that says what is right or wrong is what the majority of people in a particular culture or society would agree was right or wrong, and is related to a particular place and time, is called... - The Answer Is moral relativism Practice Question 4: A principles-based code of conduct... - The Answer Is sets out high level values that guide the behaviours of members of a professional body or company employees