CODE OF ETHICS IN

BANKING
CODE OF ETHICS IN BANKING
1.0 Introduction
 In this unit, we will define the concept
‘ethics’; explain the general objectives of
banking code of ethics; discuss the basic
principles of professional code of ethics
for bank staff and list the importance of
code of ethics in banking.
 We will also enumerate the advantages of
ethics, state some ethical values, list
sources of ethical behaviours and some
common unethical conducts found in the
banking industry.
Objectives of the unit
 At the end of this unit, you should be able to:
 define the concept ‘ethics’;
 explain the general objectives of banking code of ethics;
 discuss the basic principles of professional code of
ethics for bank staff;
 list the importance of code of ethics in banking;
 enumerate the advantages of ethics;
 state some ethical values;
 list sources of ethical behaviours; and
 enumerate some common unethical conducts found in
the banking industry.
Definition of Ethics
 Ethics refer to a moral system or set of
principles particular to a certain group,
profession, and community or individual.
Ethics relate to the study or the science
of morals. It deals with rules or principles
of behaviour, specifying what is right and
what is wrong.
Definition of Ethics…
 Code of ethics is a set of principles
designed to guide behaviour. It prescribes
rules of behaviour and moral conduct. In
very simple terms, code of ethics specifies
the “Dos” and “Do Nots” within a
particular group, profession, community
or even among individuals. As a normative
science, ethics prescribe acceptable
standards of conduct for individuals,
groups, etc.
Definition of Ethics…
 With regard to banking business, code of
ethics specifies how a bank should behave
towards its various stakeholders in the
conduct of its operations. The basic
objective is to ensure strict adherence to
best banking practices and strong
commitment to ethical and professional
standards of behavior in the operation of
banking business.
General Objectives of Banking
Code of Ethics
 The banking code of ethics is a regulatory
framework designed to guide the behaviour
or conduct of members of the banking
industry.
 The Bankers Code of Conduct (Professional
Code of Ethics and Business Conduct)
defines members of the banking industry to
include individual and corporate members of
the Chartered Institute of Bankers and other
employees engaged in the banking industry
General Objectives of Banking Code
of Ethics…..
 The general objectives of the bankers’ code
of ethics as approved by the Bankers
Committee in include:
 To guide every member, individual and
corporate, in meeting their obligation to
customers and other stakeholders by
maintaining and improving standard of
service, performance, and quality of banking
products.
 To ensure that all bank employees conduct
their duties fairly and honestly.
General Objectives of Banking Code
of Ethics

 To maintain best banking practice and

strong commitment to sound ethical and
professional standards in the banking
industry.
 To guide stakeholders within the banking
industry in complying with applicable laws
and regulations.
 To reaffirm and clarify individual and
corporate members rights and
obligations.
General Objectives of Banking
Code of Ethics….
 To enable members provide a policy to
develop and maintain constructive dialogue
with, seek assistance and advice from
colleagues when confronted with difficulties
in matters of judgment.
 To enable members provide a policy to avoid
acceptance of gifts on services arising from
the performance of their official duties
which might influence member’s capacity to
make independent judgment.
General Objectives of Banking
Code of Ethics….
 To enable members provide a policy to
adhere to generally acceptable principles
of honesty, integrity and fairness so as to
uphold the mutual trust and public
confidence reposed in them.
 To promote (individually and collectively)
the efficiency of bank services as an
instrument of economic growth.
General Objectives of Banking
Code of Ethics….
 To enable members provide a policy to be
fair-minded in their day-to-day dealings
both in office and during their social
interactions. All bank employees are
expected to be committed to high
standards of conduct in daily social life in
order to uphold the dignity, reputation,
and good standing of the banking
profession.
Basic Principles of Professional
Code of Ethics for Bank Staff
 The Bankers Code of Conduct (Professional
Code of Ethics and Business Conduct)
outlines the core principles guiding the
professional conduct of individual members
of the banking industry. The said code
specifically provides that a member shall:
 Conduct himself in relation with customers
and third parties on principles of honesty,
integrity, diligence, credibility, transparency,
fairness, and trust.
Basic Principles of Professional Code of Ethics for
Bank Staff

 In the performance of his professional duties

as a banker, attain appropriate levels of
professional education/certification, training,
competence, skill and expertise.
 Advice his customers, where necessary,
without deliberately misleading them.
 Abstain from discrimination but treat all
customers and co-employees equally
regardless of age, sex, religion, ethnicity,
status, color, language, disability, etc
Basic Principles of Professional
Code of Ethics for Bank Staff
 Exercise care and caution while
discharging his duties.
 Abstain from physical and verbal assaults
of customers, co-employees and other
stakeholders.
Confidentiality/Dissemination
of Information
 The Code provides for
Confidentiality/Dissemination of
Information.The provisions specify
that a member shall:
 Not in the course of discharging his
professional duties, knowingly or
recklessly disseminate false or misleading
information to his customers or any
other party.
Confidentiality/Dissemination
of Information
 Not disclose or permit the disclosure to
any third party, any confidential
information concerning his employer’s or
his customers’ business during or after
employment except as required or
permitted/enjoined by law, thus:
◦ Where a bank is compelled by a court of
competent jurisdiction or regulatory
provision to do so;
Confidentiality/Dissemination
of Information…
 ;-
◦ Where there is duty to the public to disclose;
◦ Where the interest of the bank requires
disclosure;
◦ Where disclosure is made at the request or
with the consent (express or implied) of the
customer.
 Sign a declaration of secrecy to bind
himself to confidentiality of information.
Conflict of interest..
 Another important ethical issue is conflict
of interest. This is provided for in the
Bankers Code of Ethics. A member shall,
at the earliest opportunity bring to the
notice of his employer, customer, or
any third party, in all cases, where
conflicts arise in the discharge of his
duties to such employer, customers or
third party.
Conflict of interest..
 Note that conflict of interest arises in the
banking system when banks or their
employees have an incentive to serve their
own interests rather than those of their
customers through misuse of information,
provision of false information, or
concealment of material information.
 As service providers, banks offer an array of
financial services to their customers. Banks
develop broader and longer term
relationships with their clients.
Conflict of interest..
 In the process, they gather, produce and
disseminate information. The same set of
information can be used for many different
services, leading to conflict of interest.
Conflicts of interest are more apparent
when a bank provides multiple services to a
single client or to many clients. Bringing
financial institutions like banks that offer
multiple services under one roof (either as
universal banks or a conglomerate) is a
major source of conflict of interest and leads
to unethical behaviour.
Conflict of interest..
 In an effort to provide these services,
employees or departments of banking
institutions may conceal information, or
disseminate misleading information to
financial markets.

 Conflicts of interest can adversely affect the

quality of information delivered to financial
markets thereby increasing the challenge of
unbalanced or one-sided (asymmetric)
information.
Conflict of interest..
 Prevalence of asymmetric information
promotes inefficiency in the economic
system because it prevents financial
resources from being channeled to their
most productive uses.
 When there is a conflict of interest, banks
or their employees resort to concealment
of vital information from clients thereby
jeopardizing the same interests they are
supposed to protect.
 Importance of Code of Ethics in
Banking
 The importance of code of ethics in
banking is that it:
 specifies principles guiding conduct and
practice of banking business;
 provides guidance for the resolution of
conflict of interest;
 removes the use of discretion and
promotes professional practice consistent
with acceptable standards;
Importance of Code of Ethics
in Banking
 keeps employees in check thereby
upholding the principles of honesty,
integrity, transparency and accountability;
 secures the trust and confidence of the
public in the banking system; and
 helps in molding the character of the
individual employees which thereby
impacts positively on the larger society.
 Advantages of Ethics
 Banks with a known history of good ethical conduct
are held in high esteem as they are regarded as ones
that play by the rules. They enjoy the goodwill and
support of regulators, employees and investors. The
reputation of a brand is likely to attract ethically
conscious clients.
 It defines the boundaries within which all the parties
(the employer, the employee, regulators and other
stakeholders like auditors, consultants, etc.) should
operate.
 Sound ethical practice promotes confidence, mutual
trust and productivity. Banks occupy a position of
trust and banking business is sustained by trust.
Advantages of Ethics
 Banking Code of Ethics does not only promote
the corporate image of banking institution but
also promotes the perception of the employees
by the society. In other words, it also adds value
to the individual employees. Bank employees
enjoy some measure of respect from the public
because they are perceived to have integrity.
 Ethics compel banks to be conscious of how
their actions affect their customers and
other stakeholders or how their actions are
perceived by these groups.
Advantages of Ethics….
 Ethical codes provide a standard on which
the banking industry can be rated.
 Ethics help to promote stability in the
banking sector. When each party is guided
by the code of conduct, industrial peace is
assured and labour turnover is at a
minimum.
 Maintenance of sound ethical standards is
critical to long-term success of the
banking industry.
Advantages of Ethics ……
 Ethics help to ensure that banks and their
employees conduct themselves in a fair
and ethical manner, bearing in mind the
interest of customers.
 Code of ethics helps to develop the
commitment of the banking industry
towards its customers thereby enhancing
banker-customer relationship.
 Ethical Values
 Commitment or Responsibility: Banks should be
firmly committed to every component of
service delivery necessary to promote
customer satisfaction. To this end, they
should constantly monitor the quality of
service offered to customers in order to
ensure that it meets their requirements and
expectations. This is essential for customer
loyalty and retention. To ensure delivery of
quality-oriented service to customers, a
proper integration of technology and
qualified and dedicated staff is a necessity.
Ethical Values
 Honesty and Integrity: Banking business
should be conducted with a high level of
honesty and integrity. It should
demonstrate a very high level of moral
and ethical standards so that customers
can have confidence and trust in the
industry. Customers should be treated
with honesty and sincerity. With respect
to employees, they should be assured of a
respectable and dignified treatment.
 Confidentiality of Customer Information: One
guiding principle of banker-customer
relationship is secrecy or confidentiality
of customer information. Banks should
treat information on customer’s accounts
as confidential and should not disclose
them to third parties unless with written
consent of the customer or in compliance
with an order of the court.
 Fairness in the treatment of customers: There
should be fairness, equity and impartiality in
the treatment of customers. Customers
should also be treated courteously.
 Transparency: Banks should be as transparent
as possible in dealing with their customers.
All relevant information relating to bank
products and services, including associated
risks, should be fully disclosed.
 Acceptance of Gifts: Acceptance of gifts by
bank staff for services rendered or to be
rendered should be discouraged because it is
capable of compromising the judgement of
the staff in the course of his official duties.
 Corporate Governance: Governance is an
indispensable component of organizational
performance. Sound corporate governance
practices promote accountability, integrity,
transparency and profitability.
Sources of Ethical Behaviour
 Sources of ethical behaviour include:
 The Family: Early training and character
development take place at home. The
parents, siblings, relations and even
neighbours are the first instructors a child
encounters in life and they have an impact
(positive or negative) on his development.
 The School: Educational institutions are also
major determinants of ethical behaviour.
Basic lessons necessary for character
building are also taught at school.
Sources of Ethical Behaviour..
 Peer Group Influence: Peer groups also exert a
strong influence on the development of the
individual. The society has the good, the bad, and
the ugly. The character of the individual depends
on the group he identifies with.
 The Mosque or Church: Moral lessons learnt in the
churches and other religious organizations also
contribute to the formation of human character.
 Professional Associations: Different professional
bodies have their code of ethics and compliance
of members to these codes affect their behaviour
even beyond the group.
Sources of Ethical Behaviour..
 The Legal System: The provisions of the law
specify rules of conduct or behaviour and
clearly states sanctions for non-compliance.
 Workplace: Every organization has internal
codes of conduct which employees are
expected to comply with.
 Culture and Belief System: Every society has its
cultures, traditions, and belief systems and
these have a way of influencing the behavior
of individuals.
Common Unethical Conducts in the
Banking Industry
Some common unethical conducts found
in the banking industry include:
 Kiting of cheques and suppression of
cheques.
 Material Alteration or Falsification of
Figures.
 Colluding with outsiders to commit fraud.
 Breach of duty of secrecy or
confidentiality of customer information.
Common Unethical Conducts
in the Banking Industry..
 Sexual harassment.
 Lending without due authorization, e.g to
family members, friends, etc.
 Misuse of internal expense accounts.
 Use of abusive or vulgar words.
 Fraudulent conversion of bank property
to private use.
Common Unethical Conducts
in the Banking Industry.
 Non-disclosure of other interests which
are at variance with the interest of the
employer or customers.
 Borrowings by staff from customers
 Demand for and/or receipt of gratification
for services rendered or yet to be
rendered.
 Theft.
Conclusion
 Ethics relate to the study or the science of
morals. It deals with rules or principles of
behaviour, specifying what is right and what
is wrong. Code of ethics is a set of principles
designed to guide behaviour. In relation to
banking business, code of ethics specifies
how a bank should behave towards its
various stakeholders in the conduct of its
operations to ensure strict adherence to
best banking practices.
 The Bankers Code of Conduct (Professional
Code of Ethics and Business Conduct)
summary
 In this unit, we have defined ethics; explained
the general objectives of banking code of
ethics; discussed the basic principles of
professional code of ethics for bank staff and
listed the importance of code of ethics in
banking. We also enumerated the advantages
of ethics, stated some ethical values, listed
sources of ethical behaviours and some
common unethical conducts found in the
banking industry.
 Banks Corporate governance is next
Self Assessment Assignment

 1(a) Under what conditions can the duty of secrecy of
customer information be waived?
 1(b)Mention some common examples of unethical
behaviours among bank employees.
 What is conflict of interest and how can it affect the
performance of banking financial institutions?
 What is ethics? Why should it be considered an
important issue in the banking profession?
 Discuss the relevant ethical values that support
optimal performance of the banking system.
 What are the basic factors that determine ethical
conduct in the society?
Good day
End