Ethics and Financial Services

Ethics are important aspect of any individuals. When an individual is holding office, they are expected to behave modest. Using dubious mean to win competitive advantage is strictly prohibited. Regardless, recent years have experienced a surge in number of individuals who have been caught engaging in dishonest behaviors such as tax evasion for various organizations.

Table of Contents

1. Ethic and Financial Services. 4

2.  How and Why “A Culture of Greed … Was the Result of Remuneration Mis incentives.”. 4

3. NAB: Lending Institution Case. 4

4. AHL Investment Pty Ltd Case. 5

5. Evidence. 5

6. Poor (Unethical) Corporate Behavior 6

7.  Compare the Behavior and Actions. 6

8. Regulation and Structure of Banking Systems. 7

8. Trend. 9

9. References. 11

1. Ethic and Financial Services

2.  How and Why ”A Culture of Greed … Was the Result of Remuneration Mis incentives.”

Basic greed is involved with power or wealth. Greed is the desire to possess or attain something, which is not essential for their own survival but also cause harm to another individual. In the United States of America, greed is often associated with tax evasion and investment scams. A culture of greed is detrimental to both personal and work ethics. In the interim report of the Royal Commission, various cases involving greed by both the heads and subordinate members of the companies have been identified (Beck and Paton 2018). For instance, the case where NAB introduced home loans. The process involved a third party (Introducer) getting a commission for referring loans application to NAB.

The commission that was paid to the introducer was calculated as a percentage of the loan amount that was paid to introducer the moment a client’s loan go approved.  It was later established that the introducers engaged in business malpractice such as when a client who issued all fund to finish their loan transaction to the necessary introducer and even went to NAB branch to finish the important application in the company of the Introducer. However, the acquired information concerning the customer was inaccurate since it failed to consider that at the time of applying for the loan, she had five dependants. Another case cited by Mr. Waldron concern client’s general living expense was estimated based on the ideas that the customer would lease out the pandemonium which the loan was being used to buy, and a rental appraisal was utilized for the intention.

3. NAB: Lending Institution Case

While the Introducer had been contracted by NAB, it is a lending institution, which was tasked at processing the loans applied by the clients as well as establishing a deduction pattern with the client. On the other hand, the Introducer was to be paid by the lending institution the agreed commission. However, due to greed, several bankers and introducer, especially in South Wales, collaborated with Introducers to reap of the company and client. There was non-disclosure of conflicts of interest between the introducer and the bankers at NAB (Sah, Malaviya and Debora 2018, p.130). There was also the false allocation of incentives under the NABS star Sales Incentive Plan to NAB Bankers so that it would increase the incentive received by the Branch Manager. Agency theory, in this case, is evident as NAB which acts as the principal tenders Introducers who acted as the agent to seek for loan applicant on its behalf. The greed among members of the bank and the introducer resulted in the closure of several branches of the bank as well as employment termination to all the members who were involved in the malpractice.

4. AHL Investment Pty Ltd Case

A second instance which involves unethical behavior of greed at the workplace involves the Aussie Home Loans Broker. The cases analyzed the conduct of AHL Investment Pty Ltd four former brokers namely Shiv Sahay, Bernard Meehan, Emma Khalil, and Madhavan Nair between the years 2011 and 2015. The commission evidence was issued by Giles Boddy, Culture at Aussie, and General Manager (Wanderley). Based on the evidence, it was established that the four former brokers added falsification of documents, which were given to the Lender to be granted a home loan application like payslips, Bank statement, and employment letters.

For every loan that was issued to the lender, Aussie was entitled to upfront as well as trail commission payment. A part of the commission payments was passed through to the broker while whatever remained was reserved by Aussie. Based on the scenario it is evident that bot the head and junior staffs were well aligned financially.

5. Evidence

Even though the two brokers engaged in malpractices while working for Aussie, the actions were conducted behind Aussies’s knowledge (Lambert). However, the malpractices are bound to taint the organization name. Aussies could not establish the misconducted by the four brokers despite that there were obvious anomalies in the documentation used for support and given to the lenders. Luckily, Aussie was notified of the misconduct by a lender who had detected the anomalies. The misconduct done by the fourth broker was established during Aussie random reviews in respect to brokers who were giving over 50% of acquired loan to Westpac. Westpac was a lender with the ability to admit a letter of employment to ascertain income. As a result, Aussie was aware that the letter could be falsified.

The Third instance which portrays the culture of greed is the case of CBA add-on Insurance. The study case assessed two add-on insurance policies that were being offered for a price by CBA to clines who were unable to attain the employment eligibility standards to request for various benefits under the policies. The two products offered were Loan Protection Product (LPP) and Credit Card Plus (CPP) insurance When the organization was investigated, it was established that they proved clients with CPP insurance as a section of their application for a CBA- branded credit card. Between the year 2011 and 2015, 29.5% of the CBA-branded credit cards contained CPP insurance policy fixated on them. It was later established in April 2015, after an internal audit, CBA established there were roughly 64,000 customers who had bought CCP insurance and might not have been legible to demand benefits based on the policy in case they encountered permanent or temporary disability or even involuntary unemployment.

6. Poor (Unethical) Corporate Behavior

Undeniably, ASX Corporate Council issue eight core corporate governance principles recommendations, which ought to be adopted by and adhered to by the companies. However, cases of unethical corporate behave are stimulated for many reasons, with some being beyond the company’s control (Council). First, while an organization will adhere to the necessary protocols to hire the most suitable candidate, the company possess little control over the behavior of an individual serving in the highest level of the corporate ladder. In fact, only a small number of organizations have been found guilty of misconduct. It is a minority group comprising of opportunistic, dishonest managers, unethical entrepreneurs, and corrupt heads have tarnished the name of organizations where they work.

Based on the psychological assessment of individuals, recent positive evolution does not issue enough ethical instructions for the daily operations of entrepreneur and middle managers who are in the current competitive market. Managers often get confronted by difficult choices, which require instance solution (Sundström). It is at the point when a most individual who lack personal ethics opt to seek for the easy way out. For instance, in a recent competitive market, a young manager may be tempted to doctor sales to stand to emerge victoriously. Similar cases involved the doctoring of the company’s sales have been modified.

7.  Compare the Behavior and Actions

One characteristic of the United States of America is that banking institutions were hired, supervised and controlled at both the federal level and state level. Another typical feature with United States finance organization.

While the Australian banking system is dependable and transparent, there are arrangement and operational difference to those in the America system. Historically, Australian banks have not worked under the limitation that limited United States bank operations in 1933 and the opposed Glass-Steagall Act Brown). In Australia, the differences between investment banks and retail banks have continued to diminish.

8. Regulation and Structure of Banking Systems

The regulation and structure of banking systems change widely across nations in a similar way t would cross the United. In 2001, for approximately every three out of four banks was controlled and chartered at both the federal and state level.  Historically, United States of America banking laws prevent interstate banking (Tarnowski and Rustambekov). The American banks also limited branching activities. Despite the removal of restrictions, which favored the existence of most small local banks. Although these limitations were eradicated in 1990a a section of the process of permiting and enforcing interstate

The Australian banking system is facing continuous privatization and deregulation. Foreign banks are permitted to enter the financial market. Generally, the retail bank currently provides a huge field of financial services comprising: general and life insurance, stock brokering, establishing corporate and consumer loan, as well as security underwriting, offered to the retail client. The Australian government allows non-Australian banks like branches to serve the entire market. However, banking policies only permit retail banking activities via a locally-incorporated subsidiary.

The American Banking System is located in the United States and serves as one of the local banking systems. There are various policies and practices differences and similarities when assessed and compared with the Australian Baking system (Alexander).  Undeniably, a repeat of the Interim Royal Commission findings can be avoided in Australia if Mr. Frydenberg warning is adhered to strictly. More often, administrations appoint independent bodies to oversee small business activities. The independent bodies are allowed to investigate, any company within their jurisdiction and report any case of malpractices (Van Der and Ehrsson). The same unit is supposed to enforce the required standards of business operating. Therefore, Mr. Frydenberg is right since every individual within an organization has been assigned a specific role. Therefore, it if every individual would take their duty seriously. The probability of experiencing a repeat of the Royal Commission in effect would reduce significantly.

Bank Power.

Banks in most parts of developed nations are allowed to enaged in insurance and security, which until recent were prohibited by Depression-era banking laws. The instituted of International Bankers issues various activities, which may be permitted for banking organization across the nations. In 2000, those five powers comprise of security power, Real Estate Bank Investments in Industrial firms as well industrial firm investment in banks.

Security and Insurance Power

Insurance and security power have basically been allowed in major European Union nations such as Germany, France, and the United Kingdom. Additionally, it is also allowed for partnering nations such Japan, Mexican and Canada. Currently, in the United States pursuing passage of the Gramm-Leach Bliley Act.

Banks through financial holding companies are currently allowed to prove security products. However, there exist restriction on the basis of how they are hired.

8. Trend

The United States of America banking system has encounter core competitive issues in the past twenty years. The challenges consist of financial market innovation as well as completion faced by fast throwing financial institution which are not in the banking sector. Regulatory reforms have been effective in shaping the United States of America banking industry doing this era. On the other hand, interest rates have been deregulated. Furthermore, interstate banking reforms permit bank to own companies to grow across state lines and establish approximately the services nationwide.  Consolidation, in sections driven by interstate banking, has reduced the number of commercial banks by nearly 50 percent. In march 2000, the Gramm-Leach-Bliley act covered past the banking industry’s ability to provide and insurance services via development of financial holding organizations.

9. References

Alexander, M., 2017. Cities and labour immigration: Comparing policy responses in Amsterdam, Paris, Rome and Tel Aviv. Routledge.

Beck, J. and Paton, G., 2018. Corporate law: The Royal Commission: Corporate culture spotlight: Where is all this heading? Governance Directions, 70(6), p.351.

Brown, S.S., 2018. The role of the United Nations Global Compact in helping to drive corporate social responsibility-related practices in the Australian banking sector (Doctoral dissertation).

Council, A.C.G., 2007. Corporate Governance Principles and Recommendations with 2010 Amendments. Australian securities exchange.

Lambert, C., 2015. Shadow work: The unpaid, unseen jobs that fill your day. Counterpoint.

Sah, Sunita, Prashant Malaviya, and Debora Thompson. ”Conflict of interest disclosure as an expertise cue: Differential effects due to automatic versus deliberative processing.” Organizational Behavior and Human Decision Processes 147 (2018): 127-146.

Sundström, A., 2015. Covenants with broken swords: Corruption and law enforcement in governance of the commons. Global Environmental Change, 31, pp.253-262.

Trendowski, J. and Rustambekov, E., 2017. Risk Taking and Bank Failure Before and After the Onset of the Financial Crisis-A Decade in Review. The Journal of Applied Business and Economics, 19(8), pp.79-93.

Van Der Hoort, B. and Ehrsson, H.H., 2016. Illusions of having small or large invisible bodies influence visual perception of object size. Scientific reports, 6, p.34530.

Wanderley, L.A., 2012. Systems and processes of automatic verification and protection of paper documents against falsification, adulteration, and leakage. U.S. Patent 8,340,291.