Research Handbook on Law and Ethics in Banking and Finance
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Research Handbook on Law and Ethics in Banking and Finance

Edited by Costanza A. Russo, Rosa M. Lastra and William Blair

The global financial crisis evidenced the corrosive effects of unethical behaviour upon the banking industry. The recurrence of misbehaviour in the financial sector, including fraud and manipulations of market indices, suggests the need to establish a banking culture that conforms to the highest standards of ethical and professional behaviour. This Research Handbook on Law and Ethics in Banking and Finance focuses on the role that law should play and the effectiveness of newly introduced regulations and supervisory actions as a driver for ethical conduct so as to reconnect the interests of bankers and financiers with the interests of society.
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Chapter 2: Ethics and standards in financial regulation

William Blair and Clara Barbiani

Abstract

This chapter considers the interaction between industry-based initiatives and regulatory-driven ones to enhance ethical culture within financial institutions. The purpose of this chapter is: to highlight the importance of furthering a continuous move towards ensuring standards of conduct both within and outside financial institutions; and, at same time, identifying the limits posed by the existence of different instruments aimed at regulating conduct, with distinct implications in terms of enforceability. The significance of the role of standards has been broadly recognised; however, what remains unclear is whether the new framework created to enhance their role is being shaped adequately, or whether it is producing inconsistencies and confusion due its complexity. The chapter also focuses on the rise of a regulatory framework enhancing ethical values such as honesty, integrity and fairness. The new emphasis shows a move towards the recognition of the importance of these values, but, at same time, the process of placing them in the regulatory framework also raises new questions: how is it possible to expect people to respect these values and translate them into ethical conduct? And, also, how can we ensure that people develop a common and clear understanding of them?

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