Ethics in Banking sector 

 Ethical Issues with reference to the Banking sector:

Adam Smith (2003, 372) in Book II of The Wealth of Nations identified three
essential conditions for confidence in banks. They are, in his words, ” the fortune,
probity and prudence of a particular banker” The fortune of a bank today
corresponds to its capital and prudence may be equated to its efficiency. Both these
qualities are essential for management not only of banks but also of any corporate
enterprise. What makes a bank unique in the corporate world is the requirement of
what Adam Smith calls “probity”. Webster’s Third New International Dictionary
defines the term probity as “uncompromising adherence to highest principles and
ideals” Business Dictionary. Com characterizes probity as “adherence to a code of
ethics based on undeviating honesty, especially in commercial (monetary matters)
and beyond legal requirements”.

Banking business is based absolutely on trust. Sir John Hicks (1969, 78) in his
 Theory of Economic History used the term trust twice in the same sentence to
explain the emergence of banking: “Here the loan is given to an intermediary (one
of those who is trusted by prime lender) in order that he should relend to those
whom he trusts”. Trust is a relationship of mutual reliance. Usually, trust is placed
on those who are expected to be ethical in their activities and thoughts. Trust
creates a social environment of mutual cooperation. The unbroken honoring of trust
generates more mutual dependence and confidence in each other while breach of
trust creates an environment of uncertainty and suspicion. As a result, the shocks
resulting from loss of confidence in a financial institution are not usually confined to
that particular institution only.  By triggering panic, the contagion effects of such
incidents may pose a threat to entire financial system. Banks, the citadels of material
wealth, are, therefore, highly fragile without solid ethical foundation.
Normative Ethical Theories
Ethics is usually defined as “the branch of philosophy that is concerned with what is
morally good and bad, right and wrong, a synonym for it is moral philosophy”
(Encyclopedia  Britannica,            6,976). However, there is no unanimity on how to
define and operationalize moral principles like good or bad and right or wrong.
Broadly speaking there are three approaches to normative ethical .There are:

1. Virtue ethics
2. Deontology or deontological ethics
3. Consequentialism

The roots of Virtue ethics lie in the ancient Greek Philosophy, particularly in the
works of plato and Aristotle. According to this View, goodness or righteousness is an
attribute of the individual .The acts are not judged by rules or consequences for
example, lying is always wrong even. If lying in a particular case may be
beneficial.Vitue is not therefore, relevant to artificial person like banks, which are
joint stock companies with limited liabilities of owners. Though in reality natural
persons like the members of  Board of directors and top managers run banks, legally
a corporate veil shields them. Of late, the courts have pierced in significant ways the
corporate veil that treats corporations as totally separate from shareholders. These
decisions of the courts in industrial counties treat the rights or duties of a
corporation as the rights or liabilities of its shareholders and directors.
Ethics in Banking sector 
The second normative ethical approach is known as deontology or deontological
ethics. The term deontology is derived from the Greek word deon, which implies
‘obligation’ or ‘duty’. Deontology is described as ‘duty’, ‘obligation’ and ‘rule’ based
ethics. It is concerned with the goodness and rightness of an act. The act is right if it
is prescribed by rules as duty or obligation, even if it produces a bad consequence
Because of its several limitations, deontology cannot serve as a satisfactory ethical
foundation of the banking system. First, deontology believes in the unconditional
and absolute primacy of moral laws and rules out any choice between two wrongs.
In real life, there may be a choice between lesser and greater wrongs.
The third normative approach in ethics is known as a Consequential ism. It
postulates that the only way to assess the morality of a particular action is to judge
its consequences. In other words, it suggests that ends justify the means. An act per
se is not right or wrong; consequences of a particular action make it right or wrong.
 From the operational point of view, there are several advantages of this approach.
First, it gives us an opportunity to choose the best course of action by comparing
possible outcomes. The best course of action is the one that produces greatest
happiness to maximum number of people. Secondly, consequences could be used as
yardsticks of rightness not only for personal decisions but also for public actions.
The Fundamentals of Realizable Ethics in Banking
None of the conventional normative approaches can provide an adequate basis for
ethics in banking though each one of them furnishes useful guidance. Ethics in
banking should be eclectic, broad and realizable. From the operational point of view,
it is essential to specify four fundamentals of ethics in banking:
(1) Why (2) Who (3) What, and (4) How?
Why?
Broadly speaking:  there are three justifications for emphasis on ethics in banking
operations:

 Ethics as a means of good business

 Ethics as an end in itself
 Ethics as the business itself

Ethics as a means of good business

This view draws its inspiration from the doctrine of Corporate Social Responsibility
(CSR). The CSR is a built-in self-regulating mechanism whereby a business would
monitor and ensure its adherence to ethical standards and local as well as
international law. It is based on bottom lines of three P’s People, Planet and Profit.
Its purpose is to keep its stakeholders (People)  happy, to undertake
environmentally sustainable activities (Planet) without sacrificing profit. It provides a
win-win situation where the business and its stakeholders benefit.
Ethics as an end in itself
Ideally, ethics is non-negotiable. As Ferdinand I, the Holy Roman Emperor, said, “Let
justice be done though the world perishes”. One might wonder what will be the
benefit of justice if the world itself ceases to exist.
Ethical banks like Islamic banks believe that ethics is not a means to an end but an
end in itself. There are several weaknesses of this approach. First, for ethical banks,
no deviation from ethical principles is permissible. In real life uncompromising ethics
is not realizable
Ethics as the business itself:
The typical ends and means views of ethics provide a distorted notion of role of
ethics in banking. The third view underlines the fact that banks cannot exist without
ethics. Nowhere in the corporate world ethics is so important as in banking. Banks
not only act as the custodian of other people’s money but also create money in the
expectation that much of funds withdrawn by its depositors will be ploughed back as
new deposits. Their capacity to attract deposit and create money depends on the
confidence they enjoy in the market. Banking business is based absolutely on the
trust of its depositors. With a view to ensuring the safety of its depositors, a bank is
required to screen out unreliable creditors and non-viable projects. By dealing with
trustworthy clients, banks expand the circle of trust. The sustained trust in a bank
creates a virtuous circle that facilitates transactions in the economy as a whole. On
 the other hand, breach of trust generates a vicious cycle that may lead to panics and
runs in banks and consequential contagion effects.
Who?
Broadly speaking, the major actors in banks function in three capacities:

 Corporate
 Collective
 Personal

Corporate ethics
Though a bank is an artificial entity, it cannot be absolved from ethical
responsibilities. A bank interacts with natural persons. But the ethical responsibilities
of banks are not confined to their corporate entities only. Persons who run banks
also share them to a large extent. They are individually and jointly responsible.
Collective ethics
The doctrine of collective ethics highlights the joint responsibility of the members of
the Board of Directors and the top management that runs the banks. However,
banks are highly regulated institutions. In many cases, the commissions and
omissions of regulators of banks may contribute to unethical acts. In that case, the
regulators should also be held liable for breach of ethics.
Personal ethics
Ideally, personal ethics involves adherence to ethical principles and norms by all
stakeholders in a bank. Such stakeholders may be divided into two categories: direct
and indirect. The direct stakeholders include all employees, from a director to
doorman. The indirect stakeholders comprise the depositors, creditors and others
having any transaction with the bank. The indirect stakeholders may not always be
ethical. It is the responsibility of direct stakeholders to screen out unethical indirect
stakeholders. It is, therefore, sufficient to ensure compliance of ethical
responsibilities by direct stakeholders.
What?
Broadly speaking, there are two ways of defining the content of ethics: holistic or
totalist and minimalist. Holistic ethics has two important features. First, holistic
ethics assumes the unity and integral wholeness of all people and all nature. All
people include present and all future generations and the term nature is used in the
widest sense. Secondly, according to holistic ethics, acts are not performed merely
for compliance with law, precedence and social norms but with a sense of doing
good freely. There are two extreme views on the ethical duties of a bank. According
to the conventional view, a bank is a profit-making institution, which is subject to
certain extra-responsibilities prescribed by law. The intellectual foundation of this
view is rooted in Milton Friedman’s exposition of corporate social responsibility. “I
have said ” argued Milton Friedman, “that there is one and only one social
responsibility of business, – to use its resources and engage in activities designed to
increase its profits, so long as it stays within the rules of the game, which is to say,
engages in open and free competition without deception or fraud”. The rules of the
game in the market economy are embodied in laws. Banking laws are designed
mainly to protect depositors; they are indifferent to considerations of equity,
fairness, and justice. C J. Cowton (2002) made an attempt to combine the ethical
 obligations of conventional and ethical  banks under three categories: (1) banking on
integrity, (2) lending with responsibility, and (3) affinity. Integrity is needed in
banking to generate the trust that is essential for financial system to survive and
thrive. The banks should lend their funds responsibly so that risks to banks are
minimized. Banking on integrity and lending with responsibility are not only moral
obligations of banks but also their legal duties .From the ethical point of view, the
duties of banks can be divided into two categories: primary and secondary. The
primary ethical compulsion of a bank is to ensure safe financial intermediation by
protecting deposits and lending with due caution The secondary ethical obligation of
a bank may be defined in terms of Amartya Sen’s theory of justice. Sen argues that
it is not possible to define justice. However, inability to define justice cannot be the
excuse for the continuance of “manifest injustice” Following Sen, the secondary
ethical responsibility of banks may be defined as the “reduction of manifest
injustice.Nonetheless, it is possible to identify ethical deficiencies that may be
reasonably defined as “manifest injustice”. The following is an illustrative list:

 Lending too much to too few. It is risky because if large borrowers fail, the
bank itself will be threatened. This also contributes to make the rich richer and the
poor poorer. Often, such lending results in ‘relational capitalism’ where business
conglomerates with the help of financial institutions monopolize the market and
dominate the entire economy.
 Lending too little to the poor. This denies the basic rights of the poor and is,
therefore, morally unacceptable.
 Taking too much risk. The higher the risk, the higher the return. On the other
hand, higher risk is a threat to depositors.
 Participating in business, which knowingly causes environmental degradation
 Lack of affirmative policies for the weak, deprived and disabled. This involves
a change in mind-set. It is not correct to assume that the poor and disadvantaged
persons are less responsible than others.
 Ensuring highest ethical standards by owners and employees in the banks.
This is at the same time an individual as well as a collective responsibility.

How?
Ethical duties can be enforced in three ways. First, in many cases, ethical obligations
are imposed by the society in the form of laws, rules, regulations and moral suasion
of central banks. The advantage of legislation is that the responsibility of enforcing
ethical duties is taken over by the State and its organs. As legal restrictions are
imposed from outside, many banks may try to evade the law by finding loopholes or
cheating the regulators. Too much legislation numbs the individual sense of
responsibility.
Secondly, ethical guidelines may be prescribed by Codes of Conduct adopted by a
bank individually or by an association of banks collectively. Such codes of conduct
are useful in specifying the ethical issues, which are not covered by laws. However,
the enforcement of such codes of conduct lies with banks.
Finally, laws and codes are not enough; they must be supplemented by the voice of
conscience. Individuals in banks enforce laws and codes. The ultimate ethical
responsibility lies, therefore, with the persons who run the banks.No single
 instrument is sufficient for the enforcement of ethics in banks.
Internal Ethical Culture:
Internal ethical challenges in banks are no less formidable than external threats.
Internal ethical challenges in banks arise at two levels:

 Collective ethical responsibility

 The personal ethical responsibility of bank employees 

Collective Ethical Responsibility

  The collective ethical responsibility primarily lies with the Board of Directors and top
management. Some restrictions regarding the qualifications of bank directors have
been laid down in the Banking Companies Act and the regulations framed under
them. They are not, however, adequate to ensure the vesting of stewardship of
banks in the hands of adequately qualified and honest persons. Similarly, top
management of banks should be carefully scrutinized. The following measures
should be considered in this connection:
1.The qualification of directors in banks should be made more stringent (regarding
length,  level, and area of experience and educational qualification).

2. More caution must be exercised in selecting the directors of state-owned

banks, which are very large and in severe distress.
3. A law should be enacted disqualifying the members of political parties and
their affiliates from the directorship in banks and non-bank financial institutions. The
dominance of the bank board’s by political directors may promote unholy nexus
between money and politics. Finally, such directors may exert undue pressure on
bank regulators and supervisors.
4. Bangladesh Bank must punish promptly the top managers for both their
omissions and commissions.
5. CAMELS Ratings of Banks by Bangladesh Bank should be published at regular
intervals. This will exert moral pressure on banks to improve their performance.

Personal Ethical Responsibility

The bank employees represent the human faces of their corporate entity to their
clients. All employees from directors to doormen should scrupulously comply with
ethical practices. The following measures should be undertaken to improve the
internal ethical climate in Bangladeshi Banks:

1. Each bank should lay a comprehensive code of conduct. An ethics office

should be established in each bank to enforce the code of conduct.
2. There should be a complaint desk in each branch. Complaints of fraud and
harassment against bank employees by customers must be attended promptly and
banks should compensate the customers for fraud, and negligence of their
employees.

Recommendation on the code of Banking Ethics:

In view of the above we may be recommended the following codes of
Banking Ethics:
 Ethics is an entire body of principles and measures, which investigates the values,
norms and rules that govern the individual and social relations of the humans, from
a moral viewpoint which is essentially based on the parameters of right-and-wrong,
good-and-bad, etc. Professional ethics regulates the relations between the individual
members of a profession and the relations of these members with the rest of the
society, while corporate ethics identifies a corporate behavior culture by introducing
certain rules in dealing with the problems stemming from inside or outside the
organization.
The fact that banks, as organizations which fulfill investment and saving functions by
playing an integrating and intermediary role between the fund-supplying and fund-
demanding parties of the society, have also adopted profitability and productivity
Principles, obliges them to stick to ethical principles during their operations in both
professional and corporate domains.
If we want to realize our general objectives of growing our banking system, raising
the banks’ service quality, using the resources most appropriately, and preventing
unfair competition between banks; we have to formulate and regulate the relations
of the banks with each other and with other organizations as well as their relations
with their customers, Shareholders and employees in line with ethical principles.
 
 General Provisions 
Objective and Scope  
The fundamental motive behind the banking ethics to apply to the procedures and
transactions of the banks with each other and with their customers and
shareholders, and as well as with other organizations is to ensure that the existing
respect for the banking profession in the society is set on a permanent footing, to
maintain and improve this social respect, called also as professional honor, and to
maintain and protect the stability and trust in the banking sector.
General Principles
Banks are required to stick to the below-specified general principles in their
operations for the purposes of ensuring an efficient operation of the deposit and
credit systems, preventing the procedures and applications which may cause
considerable loss and damage to the economy, serving to the best interests of the
public and protecting the environment, as well as in consideration of the professional
obligations of the banks such as protecting the rights and interests of the savers,
maintaining trust and stability in financial markets, and the requirements of
economic development of the country.
 
II Banks:

1. a) Honesty

Banks, during their operations, stick to the honesty principle in their relations with
their customers, employees, shareholders, group companies and with other banks,
organizations and companies.
 b) Impartiality
  Banks should make no discrimination and should avoid all forms of bias in their
attitudes towards their employees as well as to their customers. Banks should not
 make any discrimination towards their customers based on their nationality, religion,
financial and social standing, and gender during their service.
 

1. c) Reliability

Banks should offer clear, comprehensible and correct information to their customers
within the principle of reciprocal trust during their entire services and transactions;
and they should provide the customer services in a timely and complete manner.

1. d) Transparency

  Banks should inform their customers in an open, easily understandable and clear
way regarding the underlying rights and responsibilities, benefits and risks attached
to the products and services offered to them.

1. e) Observing Social Benefit and Respect to Environment

  Banks should show due diligence to support all kinds of social and cultural activities
in the light of the principle of observing, aside from the profitability, the social
benefit and respect to the environment.
 

1. f) Fighting with Laundering of Crime-Originated Assets

  They should adopt the fight against corruption, laundering of crime-originated

assets, etc. as a significant principle as stipulated by international norms and the
provisions of national laws and regulations, and do their utmost for the due
cooperation with each other, with other organizations and institutions related with
the subject, as well as with the competent authorities. They should also assume the
required measures inside their organizations for this purpose, and device training
programs to instruct their personnel on the matter.

1. g) Insider Trading

Banks should take all measures in order to prevent the use of insider information for
trading purposes.
 
III. Banks’ Relations with Public Organizations and Institutions
Banks, during their relations with public organizations and institutions, should act in
observance of the principles of honesty, accountability and transparency, and should
show the utmost care for the correct, complete and timely communication of the
information, documents and records the public organizations and institutions may
request from them for supervision and control purposes in accordance with the laws
and regulations.
1. Relations Between Banks

Banks should conform to the following principles in their relations with each other:
Exchange of Information
Banks should carry out all information exchanges between each other on all possible
subjects authorized under the laws and regulations accurately and systematically.
Personal Behaviors
Banks should avoid all kinds of practices and applications that may cause unfair
competition on the employment of the personnel.
Competition
Banks should take the competition as a contest which is in compliance with the laws
and regulations and which helps the individuals make their free economical decisions
from among all banks in the banking industry. Therefore, during all their activities
within the free market economy, all banks should avoid statements and behaviors
that may cause unfair competition, as a requirement, aside from their own interests,
of the following principles and objectives too:

1. a) A continued public trust for the banking sector in general,

2. b) To work for the development of the banking sector, and
3. c) Observing the common interests of all banks.

These principles apply also to the statements and behaviors of the banks’ employees
just like the legal personality of the banks. Banks should allow offer/provide benefits
to employees of another bank in the course of offering or rendering their services to
their customers.
Advertisements and Announcements
Banks should act honestly, realistically, and in compliance with legal regulations and
with the general moral principles during their announcements, advertisements and
notices under the publicity and advertising activities regarding their banking products
and services as well as their own financial structures, and they should avoid all acts
and behaviors that may damage the reputation of the banking as a profession.
They should ensure that their announcements, advertisements and notices do not
contain any statements or expressions degrading or humiliating other banks, or the
products and services of other banks.
 

1. Relations of Banks with Their Customers

Banks should observe the following principles in their relations with their customers:
Informing the Customers
Banks provide accurate, complete and timely information to their customers
regarding all kinds of products and services they offer to them in all phases of such
service relationship and on all subjects by also complying with the limitations
stipulated under the laws and regulations.
Secrets of Customers
Banks are obliged to keep confidential and maintain with due diligence all customer
information and documents, and not to show such information and documents to
 persons other than the persons and authorities who are explicitly authorized to
request to see them under laws.
Service Quality
Banks should assume the service quality as a precondition of meeting the
requirements and expectations of their customers. They should do their utmost for
the employment of the two fundamental elements of this concept of service quality,
the technological infrastructure, and qualified human resources, in a way to lead to a
continuous improvement and betterment of the service quality.
Banks should offer the same quality and the same level of service to all their
customers. However, differentiating the organizational structure and product range
in accordance with an identified target market, or adopting different approaches to
the customers in different risk groups can not be interpreted as a discrimination or
categorization of the customers.
 
Customer Complaints
Banks should establish a system in order to respond all and any kinds of questions of
their customers stemming from the services offered, and should accordingly inform
their customers about this system.
They should investigate the causes for the customer complaints, and implement the
measures required for preventing the fair complaints from repeating. They instruct
their employees for the correction and non-repetition of the complained, wrong
practices.
Security
Banks should recognize that the concept of “Security” includes all measures towards
the protection of all and any service mediums of the bank in banking sector against
any adversities, as well as the prevention of all violations that may bear technical
hazards in the services offered to the customers.
They should take all technical and legal measures required for ensuring transaction
security in all service mediums, a requirement further highlighted by newly-
developed services and changing service channels prompted by technological
improvement and electronic banking. They should inform their customers about the
measures they take, and the measures that should be taken by their customers.

1. Relations of Banks with Their Employees

General Employee Qualities

  Banks should be aware that they should show due diligence in order to ensure that
their employees possess the knowledge, background and a sense of responsibility
required by their jobs. Banks can not employ persons who fail to comply with the
legal conditions specified under the laws and regulations, mainly under the Banking
Law.
Employment and Career Development
Banks should offer equal possibilities to their employees without any discrimination
in terms of both during their recruitment and during their career development
following their recruitment. They should, in line with the principle of managing the
human resources in the best possible way, offer trainings, courses, seminars and
similar opportunities to their employees in order to ensure that they reach to the
 level necessitated by the times and by the banking profession.
They should take into consideration the commitment to banking ethics and the
diligence shown in implementation of these principles as well as the knowledge, skill
and individual achievement during the promotion decisions of their employees.
  Representation and Working Environment
  They should introduce internal regulations requiring that their employees look neat
and clean in conformance with the reputation of the banking profession and also
with the awareness that they represent their banks.
They should implement measures as required for the improvement of the motivation
of their personnel involved in all service units and for their offering services in better
conditions, and so ensure a healthy and convenient working environment.
  Work Hours
  Banks should show due diligence for the employment of the sufficient number of
personnel required by the workload, organize their employees in a way that they
yield maximum productivity during the working hours, and show utmost efforts for
preventing overtime work and for their employees use their annual leaves regularly.
Relations of Employees with Customers
Banks should introduce internal regulations providing sanctions and measures for
the prevention of their employees from:
– Being involved in relations with the customers such as borrowing-lending, being
guarantor and opening joint accounts with the customers which relations cannot be
explained under ethical principles,
– Accepting presents from the current or potential customers of the bank, or
– Deriving personal benefits from both their job potentials and from the business
potentials of their customers by using their status.
Employees’ Rights
Banks should work for the timely and complete satisfaction of their employees’ rights
stemming from the provisions of the laws and regulations to which their employees
are subject.
VII- Professional Rules and Ethical Principles All Bank Employees Should
Comply
 Professional Rules and Ethical Principles The Bank Employees Should Comply Bank
employees are required to comply with the following obligations:

1. a) To comply with the applicable laws and regulations during the performance
of their duties,
2. b) To inform their customers about the benefits and risks of the products and
services offered to them,
3. c) To offer unbiased and fair service to their customers receiving the same
services,
4. d) Not to disclose the secrets of their customers and the banks which they
come to learn by virtue of their positions and titles to anyone other than those
persons and authorities who are explicitly authorized under laws,
5. e) Not to cause any loss of reputation of their bank during their works and
attitudes,
6. f) Not to be engaged in any activity that can be classified as “Commercial
Enterprise” or “Merchant Enterprise “,
7. g) Not to behave in contradiction with the principles of justice, integrity,
honesty, reliability and social responsibility,
8. h) To cooperate with other employees for common purposes through building
a courteous and diligent communication during their fulfillment of duties,

ı) Not to use the bank’s assets and resources unproductively and outside the
designated purpose,

1. j) Not to derive any personal benefits both from their own job potentials and
from potentials of their customers by using their positions and titles,
2. k) To refuse all such benefit offers immediately and to inform such offers to
the competent authorities and to their superiors,
3. l) To direct the potential customers mainly and first to their own bank,
4. m) Not to be involved in relations with the customers such as borrowing-
lending, being guarantor and opening common accounts with the customers which
do not correspond with ethical principles,
5. n) Not to accept presents from the current or potential customers, other than
those presents accepted by the bank personnel under the established practices in
the bank,
6. o) To be aware of his accountability regarding the duties assumed during the
performance of the services,
7. p) Not to assume any position in any private and public organization other
than associations, foundations, cooperatives, and similar organizations without the
approval of his bank.

Ethics in Islami Banking:

Established with the avowed goal of values based banking, Islamic Banks now
occupy an important place in Bangladesh. These Banks occupy a large share of
deposit and credit in the banking sector. Ethical practices is more prominent in
Islamic Banks than conventional Banks. Only “end justifies the means’ is not enough
in Islamic Banks. Here means must be justified. Making profit by investing in sector
harmful to the society like manufacturing wire and cigarettes is not considered in
Islamic Banking. Individual who work hard are more service oriented  & well 
behaved, charge fair prices, pay others their dues and are inspired by Islamic ideals,
Because of religious sprit the employee are mostly self-propelled good in morality.
These Banks are, however lacking in doing the Baking fully true to the spirit of their
great religion due to existing socio-economic condition. For example, the share of
profit loss sharing finance in total investment is very negligible.
Ethics in Banking in Bangladesh:
Govt of the People’s  Republic of Bangladesh Central Bank Bangladesh Bank and
other regulators are of late became very critical to ensure ethics  in Banking in
Bangladesh and among others has successfully implemented  as follows :

1. Each Bank has laid a comprehensive code of conduct.

2. Complaint desk and box has been implemented in each Bank.
 lll. Introduced National Integrity Strategy and Strengthened monitoring to implement
the strategy.

1. To reduce the manifest injustices Central Bank has given number of

directives: Licenses are issuing for opening more branches in rural areas, minimum
2% of the total portfolio must be invested in Agriculture Sector at lower profit rate of
13%

v.SME Financing has been encouraged and minimum 20% of the total portfolio are
required to invest in SME Sector.
Vl. Refinance has been established investment in certain enterprise. For example
financing women entrepreneur is backed by refinance.
Vll. Consideration of large loan / investment and in certain one sector is strongly
discouraged.
Vlll.Rescheduling of habitual defaulter cases, fund diversion cases and other credit
indiscipline case has been prohibited.

1. Introduced Green Banking to ensure healthy environment.

2. Discouraged unhealthy competition and taking over of bad loans/investment
of other banks.
3. CAMELS rating of Banks has been given more significance to measure ethical
standard of a Bank.

Conclusion:
Ethics in banking should not be misconstrued as a nnever-endingjourney for an
unattainable perfect situation. In the spirit of Amartya Sen’s idea of justice, ethics in
banking should be interpreted as continuously evolving compulsions that are
incomplete but realizable. From this perspective, ethics in banking may be divided
into two categories: (1) primary ethical obligation of ensuring the integrity of
financial intermediation, and (2) the secondary ethical obligation of reducing what
Sen (2009) calls ‘manifest injustice’. Some of these manifest injustices arise from the
operations of the banks themselves, such as providing too much credit to too few
rich persons, and too little to too many poor people, taking too much risk with other
people’s money, and provision of finances to businesses that contribute to
environmental degradation and other unethical activities. In banks, ethical
compulsions will have to be enforced at all levels corporate, collective and personal.
The soundness of banks is important not only from ethical point of view but also
from the practical economic angle. Panic in banks is a sure recipe for macro
instability. As a result, the safety of banks can never be left solely at the discretion
of their owners and top management. Elaborate regulations backed by strong
central banks and other supervisory agencies have been established in financial
sector in most countries. This has not at all eliminated the threats of bank runs and
insolvencies. Laws are not enough to reduce risks to banks. The persons behind the
corporate veil should also be made accountable
A survey of ethical problems in banking sector in Bangladesh suggests that both
conventional and alternative financial institutions in Bangladesh are beset by ethical
dilemmas.  The insider -lending, political patronage and corruption undermine the
soundness of most conventional banks. On the other hand, many alternative
financial institutions like microcredit and Islamic banks have degenerated into
commercial and cosmetic operations. To ensure the soundness of banks in
Bangladesh, the issues of ethical climate in the country as a whole will have to be
addressed. The major recommendations of this paper punishment for financial
swindles and willful large loan defaults, revamping deposit insurance, improvement
in the quality of directors in banks by specifying more stringent qualifications and
making members of political parties ineligible for bank boards. The CAMELS ratings
of Bangladesh Bank should be published. Code of Conduct should be laid down for
bank employees and mechanism for attending to customer complaints should be
strengthened. In fire the existing laws, rules and guidelines should be strictly
enforced. Obviously, ethical compulsions of Bangladeshi banks are not fixed; they
would undergo metamorphosis in response to demands of time. The ethical
dimensions of banking operations in Bangladesh should be continuously monitored
by the Central Bank, banks themselves, academicians, researchers and civil society,
The important thing is not to compile a complete catalog of what needs to be done
but to initiate prompt and effective action in areas where something could be done