Code of Ethics for Banking

Written by donna mcfadden
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Code of Ethics for Banking
Code-of-ethics policies at banks help protect public interests. (bank image by Pefkos from Fotolia.com)

One result of the economic downturn of 2009 was a deeply embedded distrust of banks by the general public. Legally, banks are obligated to act in a manner that safeguards public interests. When banks fail to meet standards and expectations, the interests of all parties are jeopardised. A code of ethics is one method banks use to educate interested parties on banking standards of practice and to gain public trust.

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FDIC Guidelines

Banking codes of ethics differ slightly among financial institutions. To help a bank develop an effective code of ethics, the Federal Deposit Insurance Corp. (FDIC) issued guidelines in 2005 on implementing effective ethics programs. The FDIC guidelines provide a checklist of issues that should be included in a corporate code of ethics and recommendations for disseminating the code to all interested parties.

Conflict of Interest

Employees of banks have a duty to protect the interests of the public while behaving in a manner that avoids conflicts of interest. Bank of America's Code of Ethics defines a conflict of interest as giving family members special consideration or benefits; allowing the interest of the bank to supersede the interest of the customer without just cause; or engaging in personal activities that interfere or compete with professional obligations.

Training and Compliance

Public trust and confidence is critical for the success of any financial institution. Employees who fail to uphold an institution's code of ethics face immediate disciplinary action, including termination. U.S. Bank ensures compliance of its code of ethics by way of training and conducting yearly compliance reviews. New employees are required to complete ethics training within 30 days of being hired. Existing employees are required to complete ethics training as company policy dictates.

Information Security

Information security is vital in the banking industry. Bank of America's ethics code forbids employees from accessing customer information except for "appropriate business purposes." Customer, corporate, supplier and associate information must be guarded and only shared according to the law, company policy and on a need-to-know basis.

Legal Compliance

Banks are regulated by federal laws. These laws dictate actions banking entities can and cannot take in the course of doing business. For example, Bank of America states employees cannot "take any action, either personally or on behalf of Bank of America, which violates any law, regulation or internal policy." This code covers all applicable laws, including those that deal with anti-money laundering, bribery and corruption, political contributions and mutual fund securities. The JPMorgan Chase Code of Ethics states the purpose of its code is to comply with the law, "particularly as related to the maintenance of the firm's financial books and records and the preparation of its financial statements."

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