Moral Morass: Where ethics and morality collide

As regulators consider new rules to govern behaviour in banking, SIMON THOMPSON welcomes some small but encouraging signs of progress.

Two of our regulators, I see, have recently been swimming, with degrees of discomfort, in that treacherous pool where the undercurrents of morality and ethics collide.

Andrew Tyrie, who succeeds John McFall as Chairman of the Commons Treasury Select Committee, was the moralist – or, more accurately, wasn’t, when he addressed the British Bankers Association last month.

Understandable public anger with banks, he warns, threatens to become “an unconstructive turkey shoot”. In that climate, “regulators need to be cautious of moralizing about which activities are socially desirable and whether, if I may quote Adair Turner, the whole financial system has grown bigger than is socially optimal.”

It’s not the regulator’s primary job to moralise, he insists, but to set and enforce good rules. He prefers Harold Macmillan’s pragmatic principle that “morality should be left to the bishops”.

However, I’m not so sure it’s quite that easy to sideline “morality” when we can see the mess created by misguided institutionalised behaviour. Perhaps that’s why I personally prefer the studiously fastidious approach of Hector Sants, the outgoing chief executive officer of the Financial Services Authority, shortly to become the Bank of England’s first chief executive of prudential regulation and a deputy governor.

He recalled to the Chartered Institute of Securities and Investments??that, when he joined the FSA, he’d been firmly instructed that “the FSA does not do ethics”, (see also Roger Steare) and avoided judging behaviours. But it’s now clear that society “wishes its bankers and financiers to behave ethically and with integrity”.

I don’t share his semantic worry about the word “ethics” in financial services – “it’s not precise enough and carries too much baggage for regulators” – but I suppose I can see politically why he prefers to focus on “culture”, reflecting an ethical framework.

His main point, though, is that all the key cultural components – the character and judgments of individuals and the outcomes of their decisions – are perfectly capable of being assessed by a regulator to facilitate the outcomes society deserves.

That’s very much what we’ve been saying, too, for years. Through the Institute's professional education programmes, CPD and Code of Conduct, we instil those “key cultural components” in our members. We’re getting there.

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