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Journal of Financial Services Research

Erschienen in:

18.04.2018

Ethics versus Ethos in US and UK Megabanking

verfasst von: Edward J. Kane

Erschienen in: Journal of Financial Services Research | Ausgabe 2-3/2018

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Abstract

Company law in the US and UK fails to acknowledge that authorities’ propensity to rescue giant banks from the consequences of insolvency creates an implicit contract that assigns taxpayers a coerced and badly structured equity stake in too-big-to-fail institutions. The entrenched managerial norm of maximizing stockholder value abuses this stake. It does so by lending an undeserved moral legitimacy to efforts by TBTF managers to take on dangerous levels of tail risk because their bank’s deep downside is effectively eliminated by the prospect of unlimited taxpayer support. Conventional tools of prudential regulation constrain but do not de-legitimate this behavior. To accomplish that end, this paper calls for: (1) a formal recognition of the fiduciary duties and dividends that TBTF firms owe to taxpayers and (2) criminalizing aggressive pursuit of safety-net subsidies as a form of public endangerment.

Vorheriger Artikel Comments on “The Evolving Complexity of Capital Regulation”

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Members of the boards of Dutch banks took the oath in 2013. In 2014, 90,000 Dutch bankers were required to take an oath: “I swear within the boundaries of the position that I hold in the banking sector:

that I will perform my duties with integrity and care;
that I will carefully balance all the interests involved in the enterprise, namely those of customers, shareholders, employees, and the society in which the bank operates;
that in this balancing, I will put the interests of the customer first;
that I will behave in accordance with the laws, regulations, and codes of conduct that apply to me;
that I will keep the secrets entrusted to me;
that I will make no misuse of my banking knowledge;
that I will be open and transparent, and am aware of my responsibility to society;
that I will endeavor to maintain and promote confidence in the banking system.

So truly help me God.”

In places, this section draws specifically on Kane (2016).

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Titel: Ethics versus Ethos in US and UK Megabanking
verfasst von: Edward J. Kane
Publikationsdatum: 18.04.2018
Verlag: Springer US
Erschienen in: Journal of Financial Services Research / Ausgabe 2-3/2018
Print ISSN: 0920-8550
Elektronische ISSN: 1573-0735
DOI: https://doi.org/10.1007/s10693-017-0288-z

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