Sustainable banking: the pivotal role of liquidity management

Bace, Edward ORCID logoORCID: (2020) Sustainable banking: the pivotal role of liquidity management. In: Fifth Annual Conference on Emerging Research Paradigms in Business and Social Science ((ERPBSS-2020), 14-16 Jan 2020, Middlesex University Dubai. . [Conference or Workshop Item] (Published online first)

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In the wake of the devastating 2008 financial crisis, many banks appear to display a renewed appreciation for the fundamental ethical values that should underpin banking as a business, including in particular a focus on providing essential services in an effective, honest and transparent manner, as with any other products or services. Despite ongoing abuses, many large global banks, who now trade at a fraction of their previous value, now seem to be more attentive to serving the needs of customers and to the changing preferences of investors. Yet much more needs to be done in the banking and finance sector in terms of building trust, as public perception surveys, particularly in the US and UK, suggest. Even if the big banks continue to be slow to adapt on their own, they will be forced to change for the better by the growing threat posed by so-called ‘challenger’ banks. Many of these have a competitive advantage in a more responsible, sustainable and innovative business model, which is winning over customers and investors. Sustainability in the sense of institutions being able to weather crises effectively comes down to more effective management of risk and greater focus on the customer, based on theoretical models proposed by the Bank for International Settlements (BIS) and central banks. It is undeniable that such a path needs to be followed, as it has in the past, for institutions such as UK building societies, and Quaker-founded banks like Barclays and Lloyds at the outset. Otherwise, we risk repeats of financial crises, which again could require large taxpayer-funded bailouts in order to keep systemic banks afloat, illustrating banks’ violation of the social contract with the government and its people. The aspiration is that stronger regulation and supervision, exemplified by Basel 3 and evolution towards Basel 4, which now stipulate liquidity requirements, as well as conduct-related strictures, will help to prevent future abuses. Yet the banks themselves, led by their boards, need to own this responsibility and build it into strategy to a greater extent than demonstrated in the past. Given the scope for improvement among many large banks, the aim of this paper is to identify and articulate some basic principles which banks ought to be following, to adapt to the (not so) new paradigm of sustainability and responsibility, and explore how these can be implemented. While these points may seem surprisingly simple and intuitive, perhaps equally surprising is the inertia that big banks have tended to show in openly practicing and promulgating these principles. Through this examination we hope to make a contribution to the thinking around best practice and to influence positively the policies of financial institutions.

Item Type: Conference or Workshop Item (Paper)
Research Areas: A. > Business School
A. > Business School > Accounting and Finance
A. > Business School > Centre for Enterprise and Economic Development Research (CEEDR)
A. > Business School > Economics
A. > Business School > International Management and Innovation
A. > Business School > International Management and Innovation > Corporate Social Responsibility and Business Ethics group
A. > Business School > International Management and Innovation > International Business group
A. > Business School > International Management and Innovation > International and Cross-cultural Management group
A. > Business School > Leadership, Work and Organisations
Item ID: 30452
Useful Links:
Depositing User: Edward Bace
Date Deposited: 22 Jun 2020 09:06
Last Modified: 22 Jun 2020 09:06

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