Will the financial services industry change?

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Live Mint ; TUE, NOV 26 2013. 07 18 PM IST

The EIU report examines the role of integrity and knowledge in restoring culture in the industry

Back in 1980, just 9% of Harvard MBAs went into financial services. By 2008, the figure was up to 45%. Short-term profit priorities led to extreme risk-taking at many firms, with employees selling complex derivative products they did not understand, and lending to people who could not afford the repayments. Since the global financial crisis of 2008, the question being asked about the industry is whether it can change, shifting its culture to become more risk-averse and client-centric.

An Economist Intelligence Unit (EIU) report, titled “A crisis of culture: valuing ethics and knowledge in financial services”, sponsored by CFA Institute, examines the role of integrity and knowledge in restoring culture in the financial services industry and in building a more resilient industry. It is a global survey of 382 financial services executives conducted in September 2013. Of these, 42% are based in Europe, 34% are based in Asia-Pacific and 20% in North America. Nearly one-fifth (18%) are executives from asset management companies, 16% are from commercial banks and 15% are from retail banks.

One of the findings of the survey was that most firms have attempted to improve adherence to ethical standards. Over two-thirds (67%) of firms surveyed have raised awareness of the importance of ethical conduct over the last three years.

A lack of understanding and communication between departments continues to be the norm, notes the survey. 62% of the respondents say that most employees do not know what is happening in other departments. On the other hand, over one-half (52%) also say that learning about the role and performance of other departments would be least helpful to improving their performance.

Here are the findings: