Banking Industry Sector - Doc

BANKING INDUSTRY
SECTOR

Table of Contents
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
Key challenges which are related to corporate responsibility and sustainability within banking
sector...........................................................................................................................................3
TASK 2............................................................................................................................................5
Best practices within baking sector with reference to ethical and moral issue...........................5
TASK 3............................................................................................................................................8
Recommendations for business in banking sector......................................................................8
CONCLUSION................................................................................................................................9
REFRENCES.................................................................................................................................11

INTRODUCTION
Banking sector are the essential part of economy where the financial assets are invested
or leverage in order to produce additional wealth. The core business of banking sector is to hold
the financial assets or funds of customer which they can withdraw anytime. Further, banks are
the financial institution which offer various financial services such as transferring the amount,
storing valuable items and extension of credit to the people who require it for different purposes
(Lockand and Seele, 2015). For the better understanding report cover following topics such as
key challenges which are related to corporate responsibility and sustainability. Emphasis is given
on best practices adopted within the banking sector with reference to ethical and moral issue and
recommendations on the banking sector are covered in this report.
TASK 1
Key challenges which are related to corporate responsibility and sustainability within banking
sector
Corporate responsibility and sustainability within banking sector helps to keep the
balance between various practices such as social, environment well as economic to meet the
expectations of stakeholders (Ngoand and Nguyen2016). It basically helps the business to
encourage the investment of external stakeholder into the business that helps to gain the
advantage financial return as well as leads to positive impact on society. It is essential for the
abnaks to restore the trust of audience for which businesses makes effort to bring transparency in
the business and share each and every detail regarding their policies or services with the
customer. Additionally, most of the top banks of UK such as Bank of England, American
Express and so on have integrated various CSR factor which has provided the advantage of
growth opportunity as well as long term sustainable development. It act as a foundation that
assist the business for managing their investment strategy as well as risk significantly. Hence,
there are various benefit associated with implementation of corporate responsibility such as it
helps to maintain the healthy relation with the external party that include investor, government ,
customer, supplier and so on creating a long term growth opportunity for the business.
Regardless of this bank can improver their internal culture and motivate the staff to gain the
confidence over company and its practices. This therefore, help the business to expand and
enhance its public image (Izogoand and Ogba, 2015).

The biggest challenges which is faced by baking sector in adopting corporate
responsibility and sustainability is that they lack in paying equal attention in all the three practice
that is economic, social as well as environmental. Like, companies majorly focuses in the
internal staff and consider the social responsibility as an exterior part of business (Feldenkirchen,
2017). Thus, to overcome such issue government has made regulation where it is compulsory for
the banking sector to making initiative for CSR activity. Henceforth, such investment attract the
interest of stakeholder because even they want company to invest there fund for the welfare of
surrounding. Based on the survey there are approximately five hundred banking sector which
make huge investment that is around $15.2bn within a financial year on various CSR activities to
safeguard the interest of society and external environment (Bhat and Darzi, 2016).
In case of Bank of England which is the central and oldest bank of UK have build huge
base of loyal resident because its involvement in CSR activity. Initially, business bear lots of
challenges related to employee as well as customer retention that was not keeping the profit of
company stable. To overcome such challenge respected business has always encouraged the
diverse population due to which in 2014 the target of Bank of England was to increase the
diversity of BAME (Black, Asian, minority ethnic) people within the workplace. Thus, it
gathered the attention as well as loyalty of people. In addition to it there mission is to abolish the
gender discrimination due to which they have made the mission that by 2020 company will have
35% of senior female manager. Along with that company various charitable institution as well as
programme such as “Green Ribbon Day” that help their staff to fight against any mental stress or
anxiety. Moreover, company share various motivational video with their employee such as
“This is me” to improve their mental health. Thus, such practices has strengthen the relation of
business with their employee due to which they remain motivated as well as encouraged to be a
part of organisation. Apart from strengthening the relationship of company with employee they
also took initiative to raise the fund and donate it to the charitable institute like The Brain
Tumour Charity, Child Bereavement UK, London's Air Ambulance and so on for the welfare of
society. Furthermore, Bank of England have remain committed towards environment as well for
which they have designed programme such as “Greener Bank programme”. Within this
programme selected business has made a network of over hundred staff known as green
champions that helps to adopt environment friendly practice. Company conduct the meeting
through virtual media that saves the fuel of people, restrict the use of paper as everything is

performance electronically. Promote recycle of bank notes as well as encourages the staff to
reuse the food container (United Kingdom banks, 2019).
This depict that company has taken all initiative that include all the three practices of
corporate responsibility and sustainability to overall the challenges of retention of employee and
brand equity of business.
TASK 2
Best practices within baking sector with reference to ethical and moral issue
Banking sector:
Banking services include the practices like accepting as well as safeguarding the money
of public and lending it when required by the customer. Thus, it helps in the circulation of fund
from investor to the lender that helps to maintain the requirement of fund within the
economy(Faroukand and et.al., 2016).
Ethical as well as moral issues faced by banking sector:
There are several issue which are encountered by financial market such as inadequate
control over management as well as system. Thus, government of UK has made several
regulations such as high penalties against emerging issues of ethical and moral misconduct.
Some of the issues experienced by banking sector are elaborated below:
Interest conflict: If the intention of employee is to earn profit or growth in short period
of time rather than long term then such greed can lead to adoption of misconduct habit to gain
profit at short run(Makanyezaand and Chikazhe, 2017).
Equity: It refer to the unbiased treatment of company which deliver its services to the
customer. As per the norms of bank they should treat each customer equally while delivering the
services to them. But business deal on the basis of favouritism where they focuses on those
clients who are more profitable to company in terms of revenge.
Lack of competition: If there is lack competition with banking sector or customer prefer
particular bank overt other banks (Cooke and et.al., 2016). Then they can mis-sell the financial
services to the customer as they do not have much choices. In that case banks may indulge into
ethical misconduct where the employee will give the information about only those services from
where they will receive maximum profit and in favour of bank rather than customer.

Result based incentive: Bank may offer the reward based on the result of their staff
rather than process which is an unbiased form of providing remuneration because within this
system the bank of bank can misguide the customer in order to achieve their sales quotas.
Conflict within the demand of business: Business must design its incentive policy
effectively other regressive attention is given by client only on those services which incur high
revenue (Corporate responsibility, 2018). For instance, if a product offer fifteen percent
commission irrespective of other product that include only five percent commission. Then staff
will pay attention only in the services which will help them to generate more fund instead of
other services.
Therefore, these ethical as well as moral issue lead to various scam in UK within banking
sector whether related to breach of data, cheque fraud. To control these practices bank adopted
various practices that are stated below:
Practices adopted by bank
Financial Conduct Authority(FCA): To avoid the unethical practices or any moral or
ethical issue related to financial market the banks of UK has made strict rules and regulation.
The primary purpose of FCA is to make sure financial market must function fairly along with
that regulatory body must maintain financial stability within UK. Moreover, FCA is also
responsible to make financial market competitive to avoid the monopoly rights which large
banks get over small or medium businesses. This therefore relaxes the clients by gaining more
opportunity or services at worthy prices.
Strategic alliance: The banking sector of UK is dominated by very few large bank such
as RBS and HSBC which created oligopolistic market condition. As there market share is very
high in comparison to other banks such as cooperative, TSB, national wide and so on. To
overcome this situation banks adopted practice like collaboration as well as formed strategic
alliance with each other in order to bring uniformity within the market (Menicucciand and
Paolucci, 2016). In context largest banking group that is LIoyds group which was formed in
2009 with the merger of HBOS that is Halifax Bank of Scotland and LIoyds TBS in order to deal
with financial crises. Thus, by 2015 this bank captured the market share of approximately 25% -
27% .
Customer oriented services: Moreover, the large banks of UK created the monopoly
where they emphasized more on those services that are more profitable to business rather then

customer. In that case customer shifted to small or medium enterprises who offer similar types of
services with more benefits. This changed the circumstances of business by lowering down the
market share of large banking companies. In that case banks changes there practices and make
the customer familiar about all the services. This lead to the balance between the interest of
client as well as banking institution.
Concentrated market: AS the banking sector of UK is highly concentrated which
causes barrier for new entrant. Thus, in order to deal with this situation the CMA (Certified
Management of Accountant) made various investigation to encourage the effort of small or
medium business.
Ethical principles adopted by bank: Along with ethical practices there are some ethical
principles which are adopted by banks to maintain the transparency within the banking sector.
Thus, some of the ethical principle of banking sector are defined below:
Mutual trust principle: It is significant for the banks of UK to formulate effective
relation with the client of business. So its the responsibility of bank's staff to share each and
every minute detail with the customer. This assure that customer feel secure while availing the
financial services of bank and maintain goof interrelationship between employee and customer.
Mutual benefit and interest principle: This principle depicts that apart from
formulating mutual understanding between staff and client, the partners or staff of business must
also share desirable relationship with each other. It ensure that the internal culture of banks must
process smoothly where no one feels cheated.
Business compromise and tolerance principle: Respective principle state that the issue
regarding conflicting issue must be minimized. The manager of financial institution must make
sure they formulate those policies where everyone's none of the members whether it is customer
or staff's interest gets compromised.
Good intention principle: In order to maintain ethical as well as moral practices or
behaviour the business partners must have good interrelation with each other. Additionally, it
helps to minimise the undesirable method of practices like threat or deception.
Ethical improvement of business behaviour principle: Within financial institution if
any partner commits any mistake then instead of fooling other or giving excuses they must
accept their mistake. Further, admitting the mistake helps to reduce the carry forward of issue
and everything gets solved within a short spam of time.

Conflict between interest of one's own principle: Business as well as employees of
business must always adopt ethical practice to satisfy their personal interest. As unethical
practice can not sustain for longer duration.
Hence, following practices as well as principles are adopted by bank to make sure the
interest of client does not get exploited which availing financial services (Ghosh, 2017). Along
with that competition is encourages within banking sector so that customer get s the choices of
large option and can select the most suitable ones based on their preferences.
TASK 3
Recommendations for business in banking sector
Though it is challenging for business but they must integrate the ethical as well as
economical practice effectively. Hence, to maintain the balance amongst them banking sector
must determine the amount of desirable profit they will incur, quality of the product or services,
cost of financial services to the customer as well as ethical behaviour of the company must be
predetermined in advance. Therefore, various recommendation for the banking sector to enhance
their performance by providing the services effectively and efficiently to customer are define
below:
Formulate uniform policies, rules as well as regulations: It is the responsibility of
regulatory body of UK that each and every banking sector must indulge into CSR activities. To
make it more opportunistic government can set the ratio which will be invested for the welfare of
various practices such as environmental issues. These ratios are predetermined based on the
financial statement of company like firm which earn more profit can tie up with more charitable
institution. Therefore, such practices helps to shorten the gap between privileged and
unprivileged part of society by distributing the profit of wealthy people to the need one.
Promote ethical practices: The regulatory body of UK must supervise the operation of
financial institution that they are following the ethical practices or not. Moreover, its is the
responsibility of the manager of bank to make their employees regarding the guidelines or ethical
practices. Henceforth, it help to minimise the unethical practice if each higher authority keeps the
control on the actives of lower authority.
Set uniform policies as well as practices: Involving people in financial services is a
sensitivity practice which can easily break the trust of customer. So the government and financial

authority makes uniform policies as well as practices for all financial institution. Along with that
regulatory bodies must make sure banks does not misguide the customer by adopting any
misleading practice.
Exemption from tax: Although most of the practices which are done for social welfare
are tax exempted. But if each and every CSR practices avoid the imposition of tax then it will
enhance the CSR practices rapidly. Thus, it is necessary for the regulatory body to set regulations
against such issues as it safeguard the interest of external factors and make sure no banking or
non banking sector exploit the interest of employee, society as well as financial institution.
Enhance competition in banking sector: The central body of UK makes sure their
banking industry does not remain concentrated or in the hands of restricted people. This gives the
power to few financial institution to offer the services based on their terms and condition. Thus,
the local authority of UK must maintain financial stability and introduces desirable policies that
attract the new financial institution to fall under banking industry.
Change the perspective of financial institution: Most of the financial institution
indulge into corporate social responsibility practices with the motive to gain goodwill as well
reputation in society. In addition to it helps the business in several manner like enhancing the
working culture as every internal member feels privileged to be a part of society which helps to
retain the staff of bank for longer duration. Moreover, investor as well as government prefer
those companies which makes an investment in CSR activity. Hence,, due to several benefit
associated with CSR activities company adopts it. On contrary, banks must their their
perspective for CSR they must consider it as their responsibility rather than business or
investment practices.
Enhance the productivity to run the business effectively: Corporate responsibility and
sustainability encourages the financial institution to make optimum utilisation of resources as
resources are limited but human wants are unlimited. Moreover, everyone depend upon the
natural resources so it helps the business not to face any shortage of resources. Therefore, it helps
the business to gain long term sustainable development.
CONCLUSION
From the above report it has been concluded it is significant for the financial institute to
maintain corporate responsibility and sustainability. This helps to maintain the interest of various
practices so whether it is related to environment, society and internal employee. Moreover, it is

challenging for the business to participate in social responsibility activity but it is there
responsibility to share their profit with the required section of the society. Further, regulations
must be formed to avoid the social or moral issue within banking sector for which bank can
follow the ethical practices as well as principles to carry the business effectively.

REFRENCES
Books and Journal
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disclosure to investors in the chemicals and banking and insurance industry. Corporate
Social Responsibility and Environmental Management. 22(2). pp.113-128.
Ngo, V. M. and Nguyen, H. H., 2016. The relationship between service quality, customer
satisfaction and customer loyalty: An investigation in Vietnamese retail banking sector.
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Menicucci, E. and Paolucci, G., 2016. The determinants of bank profitability: empirical evidence
from European banking sector. Journal of Financial Reporting and Accounting. 14(1).
pp.86-115.
Izogo, E. E. and Ogba, I. E., 2015. Service quality, customer satisfaction and loyalty in
automobile repair services sector. International Journal of Quality & Reliability
Management. 32(3). pp.250-269.
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German industry and German industrialisation (pp. 116-147). Routledge.
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Ghosh, A., 2017. How does banking sector globalization affect economic growth?. International
Review of Economics & Finance. 48. pp.83-97.
Farouk, S. and et.al., 2016. HRM practices and organizational performance in the UAE banking
sector: The mediating role of organizational innovation. International Journal of
Productivity and Performance Management. 65(6). pp.773-791.
Makanyeza, C. and Chikazhe, L., 2017. Mediators of the relationship between service quality
and customer loyalty: Evidence from the banking sector in Zimbabwe. International
Journal of Bank Marketing. 35(3). pp.540-556.
Cooke, F. L. and et.al., 2016. Mapping the relationships between high-performance work
systems, employee resilience and engagement: A study of the banking industry in
China. The International Journal of Human Resource Management. pp.1-22.
Online
United Kingdom banks. 2019. [Online]. Availabl;e
through:<https://www.economicsonline.co.uk/Business_economics/Banks.html>
Corporate responsibility. 2018. [Online]. Available
through:<https://www.bankofengland.co.uk/about/corporate-responsibility>