Adam Smith Institute Fellow Mikko Arevuo takes part in the City AM debate, arguing against the notion that making bankers take an oath is the best way to restore trust in the financial system.
The idea that we can restore consumer trust and confidence, or prevent the next crisis, by requiring bankers to swear an oath is excessively naive.
Such a pledge trivialises the ethical issues that banks and their employees face in the real world. It gives a false sense of confidence that implies that expressing a few lines of moral platitudes will equip bankers to resist the temptations of short-term gain that can exist in financial services.
Moreover, changing organisational culture is a long and ambiguous process.
Bankers operate within tight regulatory frameworks; the quickest way to drive behavioural change is through regulatory interventions.
Alternatively, banks should change compensation policies to focus on sustainable shareholder value creation rather than short-term gain, as well as enforce bonus claw-back clauses to limit reckless risk taking.
Read both sides of the debate here.