Question

Define ethical problems in bank lending with two examples. Why do banks care about ethics in lending?

Answer 1

Ethical problem in bank lending would be very significant in nature because bank should always be liable to the societal members as the bank is is responsible body to deal with the depositors money and it should organise the depositors money in such a way that their optimum interest should always be protected and hence there should be an ethical consideration while lending and protecting the interest of the depositors.

Two examples of ethical problems in lending are-

A. Manipulation of the credit ratings of borrowers in order to increase their credit worthiness

B. Issuance of the loan to the close AIDS of directors and the other important managers.

Banks should be caring about ethics in lending because banks are always acting as intermediaries between the borrowers and the depositors so they should always be trying to protect the interest of those who had deposited their money into the bank and these are mainly the societal members so they have a higher responsibility to protect the interest of depositors.