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Can Banks be Good?

Can Banks be Good?

Can a financial institution appropriately balance its fundamental role for the economy, its social conscience, goals of servicing clients and optimizing profits for its shareholders?

There are differing views regarding the cause of the global economic crisis of 2008. Some place blame on greedy banks and the greedy executives that run them. Others cite inadequate regulatory supervision as the root cause. The U.S. Senate’s Levin–Coburn Report asserted that the crisis was the result of “high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, the failure of the market itself to rein in the excesses of Wall Street,” or the 1999 repeal of the Glass-Steagall Act effectively removing the separation between investment banks and depository banks in the United States.

These varied problems were all tangible drivers of the harm which befell the world economy. Understanding and remediating the root cause of the crisis is much more complex than an assessment of profits, regulations, or risk – it will take reconsideration and reevaluation of the importance of social responsibility in the banking system.

So, as we envision the bank of the future, “the Good Bank,” that by its design would be more considerate of its social responsibility and its impact on its customer base and the global economy, what might be required for a bank to have a conscience?

For the Good Bank to demonstrate corporate social responsibility it would need to consider the environmental sustainability of its actions and that of its clients.

Bridget Day, Partner based in New York City

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