Ignoring Personal Moral Compass: Factors Shaping Bankers' Decisions

Since the 2007 crisis, there has been renewed interest in professional ethics and banking culture. With a public that is more and more sensitive towards ethical and corporate governance failures, the banking industry has been at the receiving end of strong ethical criticism. Yet, a decade after the 2007 events, and despite the subsequent regulatory changes, ethics is still a major issue in an industry where the corporate governance systems implemented by companies have failed to control employee behaviours, even in companies branding themselves as ethical banks. In this paper, we study factors inside and around institutions in the banking industry, that impact on moral anomie in bankers' professional environment. We apply an Ordinary Least Square regression analysis, preceded by exploratory and confirmatory factor analysis, to test the hypothesised relations between anomie and the factors proposed. Our results show that long-term orientation, strategic aggressiveness and competitive intensity do have an influence on anomie. These results are compared to previous research applied in non-financial industries, and prompt the strengthening of corporate governance systems in financial companies with aggressive corporate cultures. The paper therefore introduces the factors that lead bankers to ignore the morals they gained from society, and provide a better understanding of the reasons behind the deviant behaviours that caused the crisis a decade ago. It represents a crucial first step for future policymaking that fills an important gap in the financial regulation literature. Indeed, the lack of understanding of the factors dictating behaviours in the industry meant that regulatory changes in the past decade have mostly focused of technical aspects of the problem (e.g. new capital structure requirements) and produced little answers to address the ethical challenges