FinCris: Responsibilities, Ethics And The Financial Crisis

  • Description
  • About FinCris

    The FinCris project is funded by a £0.7m grant from the Arts and Humanities Research Council (AHRC). Originally based at the University of Birmingham it has been based at the University of Warwick since January 2013. You can find details of the people working on the project on our FinCris Staff page.

    Goals of FinCris

    This project seeks to enlarge the public understanding of the crisis and the understanding among officials, regulatory and consumer bodies of the ethical issues raised by the crisis, specifically, how responsibilities for what has gone wrong create obligations to some of those badly affected by the crisis.

    The project addresses the question of which institutions are responsible; and the question of whether individuals, including ordinary consumers and sub-prime borrowers, are also partly to blame. Starting from some of the specialist literature on the causes of the crisis, including the financial management literature, it considers which institutions have the primary responsibilities.

    The financial crisis is particularly important in the UK, where financial services constitute one of the largest economic sectors and one of the biggest sources of tax revenue.

    The project will explore the impact of the financial crisis on the way that the risks of consumer lending, including mortgage lending, were spread – notably through

    • a market in securitized debt;
    • overconfidence in the strength of house prices;
    • and conflicts of interest among institutional lenders and those responsible for analysing credit risks.

    It will contribute with regulatory and taxation proposals from its finance experts. But it will also consider bank irresponsibility from the point of view of the defining purposes of banks and from the standpoint of philosophical business ethics and theories of corporate social responsibility. It will also investigate the ethical aspects of different forms of lending to people on low incomes.

    Project components

    Ethical analysis

    A number of philosophical and quasi-philosophical theories will be exploited for ethical analysis: indirect utilitarianism, especially in relation to purposes of banks; stakeholder theory and the Friedmanite theory; the literature on the Rawlsian “basic structure” in relation to whether banks are among the institutions required for the operation of equal opportunity; and liberal justice theory. These different perspectives will initially be brought together in a workshop to be attended by an international group of philosophers who have worked on issues relevant to analysing the crisis.

    Economics-based financial management

    A high level seminar involving tax experts will be used to analyse the Mirrlees Review, financial VAT proposal and other proposals for special financial taxes on banks. Special banks/financial taxes initiated and proposed in various countries will be reviewed, as will the chances of for an internationally agreed tax regime. This will entail substantial desk research on various country level reports for which research assistance will be required. The IMF produced a report on special bank taxes for the Financial Stability Board in 2010 and so a dialogue with its authors will be sought.

    Empirical research from policy studies

    This work-stream will explore different approaches to providing affordable credit to low-income groups. These approaches will be considered under the following classifications: profit-making vs non-profit-making ; self-sustainable vs subsidised; individualised/personal vs mass/impersonal; broader social impact (eg reducing poverty, improving financial inclusion and capability) vs narrower economic purpose (providing a commercial lending service). The research will use case studies to explore these approaches. The research will also consider issues around responsible lending and borrowing.



    Social Networks and Comments