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 is highly significant because Bank are often lending unofficially to various parties who are not creditworthy, but they are offered the loan because either their rating are manipulated or they are close relatives of the significant post holders of the bank.

Two examples of ethical problems in bank lending would be-

(A)FALSE CREDIT RATING ISSUED TO VARIOUS ORGANISATIONS IN ORDER TO ENHANCE THEIR CREDITWORTHINESS.

(B) MARKET MANIPULATION OR INSIDER DEALING BY THESE MANAGERS.

banks should be caring about ethics in landing because they are always acting as a part of the society and they should be caring about societal values and only offer loan to those people who have genuine creditworthiness because the money which is deposited in the bank is the money of the the society and it should be used in accordance with the various acts and regulations so the interest of these depositors should be protected at the the utmost priority.