Ethics & Financial Acumen

Financial companies don’t need acumen to run, they need ethics

After all had been said and done about speculation, need for better risk management frameworks, improved control measures, too big to fail ideas, more conservative banking style, tightened regulatory measures, it had proved just one thing: Financial institution do not just require laws, regulation or financial acumen to run their businesses. They need ethics.

Why do I say so?

Well for one, taxpayers have been bailing out banks for greedy and imprudent decisions. Family’s turn to road from being proud home owners and major banks have been profiting from these bailouts. On July 21st 2012 President Obama said “The American people will never again be asked to foot the bill for Wall Street's mistakes," Mr. Obama said "There will be no more taxpayer-funded bailouts. Period” as he signed probably the biggest financial overhaul of US financial market.

May be the law will prevent some of the wrong doings, however the law can propose a punishment, a course of action, and a deterrent. It will not bring the intent.

Let’s see what has been happening under the noses of the prominent and others no so prominent financial institutions in 2012 (as reported in various media).

Act	Institution Reported	Read More
Bribing	Morgan Stanley	Here
Money laundering (Classic)	J P Morgan & Others	Here
Money laundering (Terrorist)	HSBC	Here
Irresponsible Behavior	J P Morgan	Here
Extractor	Capital One	Here
Luxury Expense	Citibank	Here
Rigging Systems	Barclay's & Others	Here
False Accounting	MG Financial Services	Here
Leaking Information	Goldman Sachs	Here
Ponzi Scheme	Toronto Dominion Bank	Here

 This list is by no means exhaustive. 

Given the above, the question is… Is it really the lack of financial acumen to have resulted in bailouts, losses or the crisis? Or is it really greed, law evasion and unethical behavior, by those in power. This is a simple failure of control measures within the organizations of which the organization is directly responsible, even if not directly guilty.

It is time to go back to old school fundamental of “cautious principles” or the “conservative accounting philosophy”. Apart from these, please, someone out there (read regulators and boards), make sure the person heading a financial organization, or an office of trust and responsibility (no matter how small the office), is indeed trustworthy and adheres to the guidelines for making the right decision and not just a profitable one. (Read my other post on need of Guideline Decision System)