Industry ponders 'oath' with an exit clause

Six of Australia's most powerful executives have formed a company to improve ethical conduct at local banks and fund managers.

The Banking and Finance Oath Limited (BFO), incorporated last month, will oversee and enforce a voluntary oath of conduct to be sworn by professionals employed across the Australian financial services industry.

BFO director and chief executive of AMP Capital Investors Stephen Dunne said the not-for-profit company had been established after almost two years of consultations between leading industry executives and advisers from the Sydney-based St James Ethics Centre.

"The idea of developing an oath for bankers and other financial services professionals came from the observations out of the global financial crisis that new regulation was not the only way to rebuild public trust in the industry," he said.

"Trust is at an all-time low and people feel the industry hasn't put the view of the client ahead of its own. Our industry is built around trust and when you violate that the industry creates a great problem for itself."

Dunne told Banking Day that the directors had been required to obtain approval from the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority before establishing the company.

"We engaged at a high level with ASIC and APRA and both were supportive of what we're trying to achieve," he said.

Simon Longstaff, executive director of the St James Ethics Centre, drafted the nine-line vow, which will be promoted as a benchmark for guiding and regulating the professional behaviour of subscribers.

This is the oath:

"Trust is the foundation of my profession
I will serve all interests in good faith
I will compete with honour
I will pursue my ends with ethical restraint
I will create a sustainable future
I will help create a more just society
I will speak out against wrongdoing and support others who do the same
I will accept responsibility for my actions
My word is my bond."

Directors of Bank and Finance Oath Limited include Rothschild Australia's executive chairman, Trevor Rowe; Morgan Stanley's managing director Steven Harker; Future Fund board member Stephen Fitzgerald; MLC chief executive Steve Tucker; and Commonwealth Bank's group general counsel, David Cohen.

David Bell, the former executive director of the Australian Bankers' Association, and St James' research fellow, Clara Payne, are also on the board. Payne worked previously as an integrity officer at Macquarie Bank.

All financial services professionals who subscribe to the Banking and Finance Oath will become members of the company and subject to a formal review process if a complaint about their conduct is brought to the attention of the directors.

Members can be censured, suspended or expelled by the directors if a "Committee of Review" finds that they have broken the oath or harmed the reputation of the banking and finance industry.

However, Dunne said, the policing functions of the new body would be limited and it would be more focused on providing education and support for people employed in the industry who were confronted with an ethical dilemma or who felt a duty to become whistleblowers.

"One of the tenets of the oath is to speak out against wrongdoing and to support colleagues who do the same," he said.

"Through the St James Ethics Centre, and a peer network, people can reach out to us to discuss how they can best deal with ethical challenges. It's about providing a sounding board, legal advice and support on how to do deal with an issue."

Unlike other professions, such as medicine and law, where practitioners are bound by professional oaths for the duration of their careers, the banking and finance oath may endure for only 12 months. If members don't renew their annual subscription to the company their oath lapses as a binding commitment.

Under the BFO's constitution, members are also free at any time to terminate their obligations if they believe they are no longer able to adhere to each of the oath's nine tenets.

Longstaff defended the annual renewal provision on the grounds that members were required to show how they had upheld the principles of the oath in the previous year.

"In other professions an oath is often forgotten when it is made only once," he said.

"In this case, it is slightly more demanding for members who have to reaffirm their oath each year."

The BFO is expected to start taking subscriptions in October.