IIBF Ethics in Banking cheat sheet

Ethics concerns duties and right conduct judged by principles; law sets the minimum enforceable standard, so conduct can be legal yet unethical.

Core banking values: integrity, objectivity, confidentiality, competence, transparency, fairness and accountability; conflicts among them are resolved by disclosing and escalating.

Four ethical lenses used in bank dilemmas: consequence-based (outcomes), duty-based (rules and obligations), virtue-based (character of the decision-maker) and justice-based (fair distribution of harm and benefit).

Fiduciary duty means the bank must place the customer's interest ahead of its own gain when advising or acting as agent; it is stricter than a plain contractual duty.

Utilitarian test: choose the option producing the greatest net benefit, but reject any option that violates a fundamental right even if the net benefit is positive.

Reversal (Kantian) test: a practice is unethical if it cannot be universalised - e.g. mis-selling works only because most staff do not mis-sell.

Publicity test: if the decision and its reasoning could be published with the bank's name attached, it is likely ethical; secrecy from regulators or auditors is a red flag.

Trust is the bank's core asset: deposits are unsecured liabilities, so depositor confidence depends on perceived honesty rather than on collateral.

A code of conduct is a documented set of mandatory behavioural rules with defined consequences; a code of ethics states broader principles and values.

Typical code clauses cover integrity and honesty, conflicts of interest, gifts and hospitality, confidentiality, market abuse, anti-bribery, fair treatment of customers, data privacy and use of bank assets.

Conflict-of-interest rule: disclose to the line manager or compliance in writing, then abstain from the decision or recuse from the committee; disclosure alone does not cure the conflict.

Gift thresholds work as hard limits: anything above the stated value must be declined or recorded in the gift register; cash and cash-equivalents are refused at any value.

Insider information must not be used or passed on (tipping); the code usually imposes a personal-account dealing pre-clearance and a holding-period rule.

Confidentiality survives the end of employment; exceptions are limited to legal compulsion, regulatory request and authorised internal disclosure on a need-to-know basis.

Breach consequences are graduated: counselling, warning, withholding of increment or promotion, dismissal, and referral to regulators or police for serious or repeat breaches.

Attestation is the control: staff certify annually that they have read the code and declare outside interests, directorships and related-party relationships.

Fair treatment duties: transparency in pricing, suitability of the product sold, no mis-selling, prompt complaint redressal and no unfair exclusion of vulnerable customers.

Key facts statement logic: total cost of credit = interest + fees + insurance + taxes; quoting a low nominal rate while hiding fees is a misleading representation.

Suitability rule: a product may be sold only if the customer's risk appetite, income, age and repayment capacity support it; commission-driven selling conflicts with suitability.

Vulnerability indicators include bereavement, cognitive decline, language barriers, disability and financial distress; staff must adapt communication and may involve a trusted third party.

Complaint handling standard: acknowledge promptly, resolve within the stated turnaround, give reasons in writing, and escalate to the internal ombudsman or regulator if unresolved.

Cross-selling becomes unethical when it is tied to service access (bundling), targets staff on volume alone, or pushes products the customer does not need.

Fee transparency rule: all charges must be disclosed before the contract, in plain language, and any change requires advance notice and a right to exit without penalty.

Data ethics: collect only what is necessary, use it only for the stated purpose, protect it, and never exploit customer data or distress for a commercial advantage.

Credit assessment must rest on verified repayment capacity, not on collateral value alone; collateral mitigates loss but does not create the ability to repay.

Redlining and exclusion: refusing credit to a whole group or locality on grounds unrelated to individual risk is discriminatory and unethical even where not explicitly illegal.

Loan-pricing ethics: risk-based pricing is defensible when the risk factors are objective and disclosed; predatory pricing relies on borrower ignorance or distress.

Misrepresentation in marketing: any claim must be capable of substantiation; omitting a material exclusion or risk is as misleading as a false statement.

Comparative advertising must compare like with like, be verifiable, and must not denigrate a competitor or ride on its brand.

Third-party distribution risk: the bank remains responsible for conduct of agents, brokers and outsourced call centres, so commission structures must not reward mis-selling.

Evergreening and window dressing: renewing a non-performing loan to avoid classification, or selling it just before reporting date, misstates asset quality and is a fraud risk.

Business-practice rule: no facilitation of tax evasion, bribery or money laundering through products; enhanced due diligence applies to politically exposed persons and high-risk jurisdictions.

Three lines of defence: business owns and manages risk (first), compliance and risk set frameworks and monitor (second), internal audit gives independent assurance (third).

Tone at the top is a control: boards set risk appetite and ethical culture; remuneration that rewards volume without risk adjustment undermines it.

Whistle-blower protection requires a confidential and anonymous channel, a prohibition on retaliation, and escalation to the audit committee where management is implicated.

Protected disclosure test: a disclosure of wrongdoing in good faith through an authorised channel qualifies for protection; knowingly false allegations do not.

Fraud triangle: opportunity, pressure (motive) and rationalisation; controls target opportunity, while culture, rotation and monitoring address the other two.

Segregation of duties, maker-checker authorisation, mandatory leave and job rotation are the standard mitigations for internal fraud by staff.

Red flags: lifestyle inconsistent with salary, reluctance to take leave, override of controls, unusual journal entries, and pressure to bypass KYC or sanctions screening.

Non-retaliation and reporting duties: staff must report suspected fraud or bribery promptly; wilful silence or concealment is itself a disciplinary breach.