The Credit Crisis and the Moral Responsibility of Professionals in Finance

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