The Credit Crisis and the Moral Responsibility of Professionals in Finance

21 Pages Posted: 15 Apr 2011 Last revised: 19 Jul 2011

See all articles by Johan Graafland

Johan Graafland

Tilburg University - Center for Economic Research

Bert W. van de Ven

affiliation not provided to SSRN

Date Written: April 14, 2011

Abstract

Starting from MacIntyre's virtue ethics, we investigate several codes of conduct of banks to identify the type of virtues that are needed to realize their mission. Based on this analysis, we define three core virtues: honesty, due care and accuracy. We compare and contrast these codes of conduct with the actual behavior of banks that led to the credit crisis and find that in some cases banks did not behave according to the moral standards they set themselves. However, notwithstanding these moral deficiencies, banks and the professionals working in them cannot be fully blamed for what they did, because the institutional context of the free market economy in which they operated left little room for them to live up to the core values lying at the basis of the codes of conduct. Given the neo-liberal free market system, innovative and risky strategies to enhance profits are considered desirable for the sake of shareholder's interests. A return to the core virtues in the financial sector will therefore only succeed if a renewed sense of responsibility in the sector is supported by institutional changes that allow banks to put their mission into practice.

Keywords: Anglo Saxon capitalism, Banking sector, business principles of banks, credit crisis, external goods, internal goods, MacIntyre, Neo-liberalism

JEL Classification: B31, B59, G01, G21, G31, Z12

Suggested Citation

Graafland, Johan and van de Ven, Bert W., The Credit Crisis and the Moral Responsibility of Professionals in Finance (April 14, 2011). European Banking Center Discussion Paper No. 2011-012; Journal of Business Ethics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1809752

Johan Graafland (Contact Author)

Tilburg University - Center for Economic Research ( email )

Postbus 90153
Tilburg, DC 5000 LE
Netherlands
+31 13 466 2702 (Phone)

HOME PAGE: http://www.uvt.nl/webwijs/english/show.html?anr=516457&lang=en

Bert W. Van de Ven

affiliation not provided to SSRN ( email )

Register to save articles to
your library

Register

Paper statistics

Downloads
353
Abstract Views
3,559
rank
84,103
PlumX Metrics