What are Banking Ethics?

The moral hazard of commercial banks refers to the fact that bank employees cannot effectively meet their own needs, and are influenced by their ideological conditions, moral cultivation, and value orientation. In order to meet their own needs, their business (job) behaviors have not been optimized. , Thereby causing or intentionally causing the possibility that financial operations are at risk.

Commercial Bank Moral Hazard

The moral hazard of commercial banks is characterized by the value orientation of bank employees at the cost of abandoning relevant regulations, professional ethics, and the benefits of the enterprise, in order to meet their needs, protect themselves, and seek personal or small group benefits. Failure to maximize profits or put operations at risk.

According to the laws revealed by behavioral science and psychology, demand generates motivation. Motivation governs the behavior of people, and the behavioral activities of banking employees are also dominated and driven by needs, while employees' needs are divided into reasonable needs and unreasonable needs. Under normal circumstances, through the employees' own efforts, the help of colleagues, and the reasonable and legal help of the enterprise, the reasonable needs of employees can generally be achieved. And due to various factors, for some reasonable needs of employees and irrational needs of employees, employees take improper means to achieve. Losses and risks to banks.

Specific analysis, the reasonable needs of employees can be divided into survival needs and development needs. Survival needs include: basic living conditions, personal safety, accident protection, normal life order, acceptance and identification of a certain group, etc. To meet these needs, generally take the following actions: work hard to earn more labor compensation; Change to a better work unit or position; ask for a raise; part-time when the bank cannot meet the needs of the employee or the employee does not meet the conditions provided by the bank. Employees will take improper measures to meet their needs. For example: illegal possession of public and private property, illegal operations in business operations, fraud, misappropriation of customer funds, private loans, illegal employment in a second job, abnormal job transfers, disclosure of trade secrets, etc. These behaviors mainly occur among bank employees, especially Vital employees. The development needs mainly include: being recognized and accepted by the unit or a certain group: having a certain status, prestige and power in the society and the industry: being recognized and appreciated by superiors; being promoted and reused in positions: opening up new work situations; Perfect yourself and more. To meet these needs, employees generally take the following actions: work hard, achieve remarkable results, gain appreciation, promotion and reuse; join a party or group to conduct extensive social activities; continue learning, engage in exploration and research in a certain area; The salient feature of seeking new jobs, new posts, etc. is that they expect their value to be recognized by the unit or society in which they work, and to seek symmetric treatment with them. If the development needs are not met, it is possible to take improper actions to meet their needs: such as speculation, preparation of false accounting information, and fraud; congratulations and concealment of problems at work; renegade, buy, sell, and form non-groups Organizations; operating illegally, setting up small treasuries, etc .; embezzling and accepting bribes; using functions and powers to obtain private benefits for the children of relatives, etc.

According to the moral hazards faced by commercial banks, they can be summarized into the following three levels:

The decision-making level of commercial banks (such as the moral hazard of board members: under the current property rights system of domestic commercial banks, most individuals at the decision-making level do not own property rights that are compatible with their functions and powers. In fact, they do not have sufficient economic capacity to be responsible for the results of decisions, or It bears insignificant responsibility, which is the root cause of the moral hazard that still exists in the decision-making level. It is specifically manifested in the non-marketization of decision-making behaviors, the softening of the binding force on senior management, and the slow response to violations.

Moral hazards of the management of commercial banks (such as the management staff of the main branch): Moral hazards at the decision-making level increase the moral hazards of management, such as expressing opinions not from the actual situation but "to meet the intention", short-term benefits, With the softening of the binding force of the decision-making management on senior management, different forms of unauthorized operation, numbness and even acquiescence to subordinates' violations, off-book operations, manipulation of accounting statements, artificial adjustment of statistical data, good news, no bad news, etc.

Moral hazards of the operating layers of commercial banks (such as operators / executives): The operating layers of commercial banks are the collectors of information and the most abundant level of micro-information. Because the amount of micro-information they obtain is the largest, when management supervision does not When in place, it has become the highest level of internal moral hazard in commercial banks. For example, staff members use system loopholes to commit crimes, high-quality personnel use computers to commit crimes, credit and non-performing asset managers delete unfavorable information or provide false information to mislead management and so on.

The reasons for the formation of moral hazard are profound and complex. There are cultural reasons, social reasons, banking reasons, and of course human reasons. The practical reasons for the moral hazard in China's banking industry today can be summarized into the following points from the perspective of solving problems: First, the reasons for the system. State-owned banks have failed to resolve the nature of the entrusted operation of asset owners and operators, and the principal-agent relationship between superior and inferior banks. The weight of personal commissions is more important than the weight of agency commissions. Through restructuring and listing, the property rights relationship of state-owned banks will be clear, and the relationship between investment rights and agency must also be determined. It is believed that the institutional factors arising from moral hazard can be controlled.

The second is the uncertainty of the business goals of commercial banks. Last year, banks fought hard for loans in pursuit of development speed; this year, in order to implement macro-control targets, they resolutely reduced loans. This uncertainty reflects the unhealthy business thinking of banks and is prone to moral hazard. At present, commercial banks are still mainly in the indicator management stage. They do not know much about the laws of modern banks, and their ability to solve problems is still very low. Therefore, today we emphasize that we must use market-oriented methods to achieve the macro-control targets. If we do not engage in "one size fits all", we will notice the occurrence of moral hazard.

The third is the inappropriate performance evaluation methods of banks. At present, the bank's operation decomposes the indicators layer by layer. It can be said that the indicators determine the fate of institutions and individuals. At the same time that they try to complete their tasks, fraud and fraud will come out. This is a moral hazard within the system.

The fourth is caused by improper competition. High interest rates or disguised high interest rate deposits, and the rush to lend to major customers or projects have seriously affected the healthy development of banks. In order to compete for deposits, various banks set indicators, assign tasks, and break them down to people, so as to "package indicators into households". Banks now have indicators for everyone. It is understandable that there are deposit indicators, and sometimes there are loan indicators. Various behaviors have developed, regardless of the cost, using the method of increasing costs to absorb deposits from large customers, and using the method of reducing fees to compete for loans to large customers. Hidden cost management becomes difficult, and the vicious competition in the industry has increased the accumulation of moral hazard between banks.

The moral hazard of commercial banks involves credit business, deposit business, off-balance sheet business and financial activities. It can be said that it is full of all front, middle, and back-end business activities of commercial banks. Due to space limitations, the author mainly analyzes the three hot business moral hazards of credit, non-performing asset disposal, and bill business.

1. Credit moral hazard

In the context of the current macro-control, there are some noteworthy new developments in the credit field, which may evolve into credit risks. Some corporate managers trust their relatives and friends to do everything possible to draw relationships with banks, and some unscrupulously approach the bank president and credit. Compared with the previous ones, the bankers came to look for customers in comparison with the previous ones, and the bosses had to put on display. Now they become corporate bosses and try to come to the bank to find the bank. As long as they can obtain the bank's credit or loan, all methods will be used. This is one of them. The second is the project mainly controlled by the bank and other commercial banks. When they want to enter another bank, they will sometimes ask the government for coordination. Some people with low ability to identify risks in the bank often make such a voice: "This project is strongly supported by the local government and there will be no risks." These two new trends, if not alert and guarded, are likely to evolve into credit moral hazard. As a commercial bank, special precautions must be taken. These two new developments in the credit sector are not surprising. Because since the central government implemented macro-control. The rising barriers to entry for bank credit, tightening supply and demand for funds, have more or less created external conditions for companies to tackle problems with banks. At this time, banks must have a clear head.

2. Moral Hazard of Non-performing Asset Disposal

Recently, the Bank of Communications, China Construction Bank, and Bank of China among the top five banks have carried out large-scale non-performing asset divestitures and capital injections to complete the shareholding system reform and listing as soon as possible. However, the disposal of non-performing assets in China's banks is carried out through the Asset Management Corporation (AMC), which has a lot of hidden dangers of moral hazard.

Many of the non-performing assets divested to AMC are now policy-oriented. In this way, a strange circle was formed. The government's actions contributed to the destruction of the social credit system. Fiscal risks were transferred to commercial banks. After the non-performing assets of commercial banks were divested to AMC, the risk was actually transferred to AMC. The final result of the AMC process is actually to pay the country's bill. In addition to this source of fundamental commonality, there are other specialities:

(1) If the nature of non-performing assets is fundamentally different from that of commercial banks' bad and bad debts, commercial banks have not been able to deal with bad and bad debts at a discount, while AMC mainly disposes of non-performing assets by discount. The Ministry of Finance does not clearly stipulate the specific discount ratio for disposal, but only requires the principle of maximizing disposal benefits and legal compliance. This hides the element of moral hazard.

(2) Contradictions between policy tasks and marketization. At present, the non-performing assets are all stripped at their book values, which is a policy act. The primary market for non-performing assets is currently monopolized, and the secondary market is not fully formed or underdeveloped. Lack of market competition. Monopoly itself contains factors of moral hazard.

(3) Supervisory agencies have insufficient experience in supervising the disposal of non-performing assets and their policies are changeable. On the one hand, there is a tendency to be over-regulated, such as the lack of reinvestment rights in the previous period, and on the other hand, it lacks the necessary norms and guidelines.

3. Moral hazard of bill business

At present, the bill business is a traditional business developed on the basis of commercial bank settlement business. It has a unique role in meeting the short-term capital needs of enterprises, improving banking service functions, increasing liquidity, reducing operating risks and financing costs, improving asset quality and operating efficiency, and has become a commercial bank's means of expanding credit investment and supporting economic development. New financing channels. The bill business is an intermediate business based on credit. As an economic activity based on credit, it is particularly prone to moral hazard. The moral hazard of banks in bill business is mainly manifested as unconscious moral hazard, that is, the bank's internal controls are not strict, staff members are not careful, and excessive pursuit of profit. This type of moral hazard is mainly reflected in two aspects: First, some banks simply pursue the growth of profits as the purpose of developing bill business, causing malicious competition between financial institutions regardless of cost. The second is the risks caused by inaccurate policy masters, inadequate understanding of procedures, weak sense of responsibility, and scrutiny in the review process.

(I) Strengthening professional ethics in commercial banks

1. People-oriented, both "rule of law" and "rule of virtue"

Humans generally have the instincts of bounded rationality and opportunistic tendencies, that is, human nature has a moral risk-taking spirit, thus dominating speculative, adventurous, and opportunistic tendencies. The particularity of bank operation is more likely to generate moral hazard. Since moral constraints are non-mandatory, the rule of law and the rule of virtue "must be tough on both hands." The "rule of law" restricts and regulates the behavior of banking professionals with the authority and compulsory means of law. "Governance by virtue" uses the appeal of financial culture and the persuasion of moral habits to improve the ideological awareness and professional ethics of bank employees. The "rule of law" is the legal guarantee for establishing, maintaining, and maintaining the stable operation of finance. The "rule of virtue" is a professional ethics to restrict and regulate the behavior of financial professionals.

2. Strengthen the guidance of bankers' self-examination and caution

Facing the slogans of slogans for profit-making in some aspects of today's society, the exaggeration of personal supremacy, the widening gap between the rich and the poor, the expansion of the desire for money, the decline of the social atmosphere, and the deviation of moral evaluation, the Bank's employees have effectively strengthened self-reflection Consciousness of self-discipline and self-respect is an important part of cultivating and improving moral quality. Introspection means checking and introspecting your words and actions every day, in order to find violations of common sense and moral requirements and correct them in a timely manner. Being cautious means that even without supervision, you must be careful and prevent your behavior The emergence of consciousness and behavior. Banking professionals should gradually complete behavioral changes from spontaneous to conscious, from outward to inner, from passive to active, and from other discipline to self-discipline in accordance with financial professional ethics.

3. Make overall plans, highlight priorities, and pay close attention to the implementation of rules and regulations

The construction of professional ethics of banks belongs to the construction of group culture, which has a strong industry publicity, and it is also a systematic project. It must be planned and focused, focus on joint management, and persevere.

(1) Strengthen the three consciousnesses. The first thing is to strengthen the overall awareness. Take financial professional ethics and spiritual civilization as an inseparable whole, and achieve the same planning, deployment, evaluation, rewards and punishments. Secondly, we must strengthen the subject consciousness. Make the majority of members clearly recognize that we are both the subject of professional ethics construction and the subject of beneficiary. It is necessary to attract the broad participation of employees and give play to their initiative, initiative and creativity. The third is to strengthen carrier awareness. It is the stage that attaches importance to bank professional ethics construction activities. The first is to catch typical examples and give play to the role of role models. Use advanced typical characters. Propaganda, training, and comprehensive radiation were carried out with great fanfare to drive everyone to make professional ethics education sound and colorful, and avoid the feeling of being far, empty, and empty. The second is to grasp public opinion. Inside the banking system, use information briefings, internal websites, etc. to spread the word. Outside the banking system. We must use the power of the news media to give full play to the role of public opinion in monitoring.

(2) Establish "two mechanisms". The first is the motivation mechanism, through commendation and reward, to mobilize bank employees to activate the inherent requirements of improving their ideological and moral cultivation. The second is the restraint mechanism, mainly through the evaluation and elimination mechanism, so that people with low moral quality do not work everywhere.

(3) Improve rules and regulations, and reflect moral constraints through enforcement systems. Everyone has rules to follow and rules to follow.

(II) Organizational Structure Innovation

Breaking the original organizational structure model of the Chinese banking industry and truly establishing an organizational structure suitable for the market economy and conducive to comprehensive risk control. In this respect, the innovation of Minsheng Bank's organizational structure has taken the lead among state-owned banks and other commercial banks. The bank's organizational structure adjustments include the establishment of an independent review system, the establishment of an asset monitoring department, and an independent audit system. The independent review system is that the credit review department of the South Bank directly sends a credit reviewer to the branch to review the project: At the same time, the separation of loan approval and loan issuing rights is implemented, that is, the "separation of loan review and approval" system. An independent evaluation system for the credit evaluation department of the head office, regional credit evaluation center and branch credit evaluation department since Shangli F was formed. The head office does not have a chief credit executive officer, and has set up an investment credit review department, which has three institutions: a credit policy center, a credit review review center, an integrated management center, and three major economically developed regions with regional credit executives and regional investment review review centers. . Another example is that in the first half of 2004, the bank fully implemented the audit management system independent of the operating agencies at all levels and the vertical leadership of the South Head Office. The entire bank's audit system is not only directly guided by the head office in terms of business, but also the regional chief audit inspectors and auditors are all administratively decoupled from their assigned units, and the personnel relationship belongs directly to the head office. The establishment of an independent audit system is conducive to improving the independence and coverage of internal audits, ensuring that all internal control measures are fully implemented, and playing an important role in preventing moral hazards from external supervision.

(3) Establish a "four-in-one" prevention system for institutional prevention, backbone prevention, key prevention and technical prevention

Institutional prevention is through the establishment and improvement of strict rules and regulations to prevent. The current formulation of financial rules and regulations should be combined with weak links in the work; combined with the spirit of higher-level documents, laws and regulations; combined with the characteristics of business work: combined with the new situation and new problems of financial reform. Backbone prevention is to select people with good ideology and morals, upright style, business familiarity, strong sense of responsibility, and some ability to observe problems, analyze problems, and solve problems to enrich the front line of the business, and let them check the barriers. The key precautions are to control key posts and positions; second, to perform key management on key personnel. Technical prevention is to use computer technology to establish risk control points for various business tasks and strengthen management of passwords and passwords. In the "Four in One" prevention system, institutional prevention is the prerequisite, key prevention is the foundation, technical prevention is the supplement, and backbone prevention is the key. Fortunately, the CBRC recently issued the "Due Diligence Guidelines for Commercial Banks 'Credit Investment Work", which for the first time put forward detailed due diligence requirements and evaluation standards for commercial banks' credit reference, credit granting, and credit due diligence investigations. Comprehensive evaluation and assessment. It can be said that this is by far the most complete operation manual for preventing moral hazard.

(IV) Innovation in management concepts and methods

Performance evaluation and incentive and restraint mechanisms are the baton of bank operation and management. Traditionally, the business plan is usually developed by the head office, and the branches decompose the indicators. Under this situation, the branch and business personnel may blindly expand the scale of credit in pursuit of the operating scale and performance standards, in violation of rules and regulations. The resulting moral hazard is quite hidden and difficult to control. This requires our commercial banks to improve the performance evaluation methods and incentive and restraint methods of branch and client managers, and reduce the subjectivity in the process of formulating assessment indicators. Makes the formulation of assessment indicators in line with the actual development level of the branch, can guide the branch to establish scientific development, promote the transformation of business growth models and management upgrades: at the same time highlight the weight of asset quality in the entire assessment system, and guide branch to focus Risk prevention. Enhance the safety and soundness of business activities. For example, the implementation of the paying bills system for non-performing assets system will be used to digest the non-performing assets made by any operating organizationthat is, to draw reserves from profits for the year. This urges various operating agencies to pay full attention to the prevention of various risks, especially the hidden moral hazard prevention, in the course of business development.

(5) Give full play to the role of market laws

There are several prerequisites for market law to work:

The first is to have sufficient information, otherwise market participants cannot judge the goodness of financial institutions and lack the basis for decision-making in implementing market discipline.

Second, there must be more golden investment opportunities. If there are not many investment opportunities, the market response cannot be used to promote adjustments in bank management.

Third, market participants must have a strong sense of financial risks, otherwise, they will lack the motivation to implement market discipline.

At present, China's depositors have low risk awareness, imperfect market development, lack of investment tools, and the mechanism for market discipline to function. Therefore, the improvement of China's market discipline constraints should start from raising awareness of financial risks. We will improve information disclosure systems, vigorously develop financial markets, and encourage and regulate the development of market intermediary organizations.

(6) Strengthening responsibilities and guidance and playing a typical role

To effectively strengthen financial ethics and prevent financial ethics risks, we must strengthen the sense of responsibility of leading cadres at all levels, truly put professional ethics construction on the agenda, and change from soft indicators to hard indicators. Financial ethics is being incorporated into spiritual civilization. At the same time, because the causes of financial moral hazard are many, it is not enough to rely solely on education to strengthen moral construction. Education and discipline must be integrated, as well as economic, administrative and other means. For example, to strengthen the implementation of party members Supervision and inspection of party regulations and standards, strengthening behavioral restraints: Strengthening integrity assessments and performance evaluations of leading cadres at all levels, strengthening responsibilities and constraints, etc. In accordance with the actual conditions of the region and industry, we must clearly propose standards for distinguishing between right and wrong, good and evil, honor and disgrace, and specifically organize implementation, inspection and evaluation, and include them in the important content of evaluation and evaluation of financial staff, so as to strengthen financial ethics. Construction is really implemented.

In moral construction, the typical role model is infinite, a positive model is a banner, a negative model is a mirror. We should strengthen the regular education of employees using the positive and negative models of the financial industry: at the same time, we should actively find positive and typical people around us, actively cultivate them, vigorously publicize them, and use the models to lead the way, so as to form an advocating advanced atmosphere. Industry has created a kind of selfless dedication, dedication and love, reform and innovation.