Is Ethical Culture in Banks an Oxymoron?

4 minute read

Canadian banks have had the bragging rights of not following in their southern neighbors’ footsteps during the financial collapse of ‘08/’09. However, recent allegations from employees of Canada’s five major banks of intense pressure to meet sales goals, even at the unethical expense of misleading clients, sounds eerily similar to the recent Wells Fargo scandal.

The toxic sales culture in Canadian banks was brought to light after “Go Public” (an investigative news segment of the CBC) reported that staff at TD were experiencing intense sales pressure, with the threat of dismissal should they not meet quotas. Over 1,000 emails from employees at the other four major banks(Scotiabank, BMO, CIBC, and RBC) detailing the same issues followed shortly after that initial report.

Even though the Financial Consumer Agency of Canada (FCAC) has started a business practices probe that will look at sales practices and whether guidelines on express consent and fee disclosure are being followed, there is still the question of how it was allowed to get this bad in the first place. 

What’s happening in the States

In America, a similar ethical dilemma is being fought in the courts, with Wall Street continuing to fight for brokers’ right to give unregulated advice to retirement investors. Currently, it is legal for financial professionals to recommend higher-cost investment products that provide them with a higher commission but their clients with lower returns. Investors choose these options because they are endorsed by their advisers, believing that they are receiving advice that suits their best interests. 

This is happening at an expedited rate, given that the fiduciary rule set into motion by the Obama Administration that would require the protection of investors welfare, was supposed to be implemented earlier this month. However, on April 5, the Department of Labor delayed implementation of the rule until at least June 9. 

This process was first started in 2010, but action was delayed so that stakeholders could be consulted, the current version of the rule was proposed in 2015. A press release from the Economic Policy Institute states that, “Every seven days that the rule’s implementation is delayed will cost retirement savers $431 million over the next 30 years. All told, the proposed 60-day delay will cost workers saving for retirement $3.7 billion.”

It all boils down to culture

Culture and ethics need to be an ingrained and put into practice, instead of having policies in place that tick off all the right boxes, but are only reviewed during training or predetermined reviews. This matters in banking just as much as it does in other industries. 

"the risk management failures at so many leading global financial institutions were not merely isolated events—a rogue trader here and a deviant employer there—but rather reflections of systematic breakdowns in corporate culture.”

- Anjan Thakor (2016) 

Other major events such as the financial crisis did bring culture to the forefront of important topics for bank executives and regulators, it doesn’t seem to have made a lasting impact. How a company explicitly outlines their culture, versus how it is embodied in the day-to-day can often be two very different things. It is a driving force behind how an organization operates, and needs to be distributed top down, rather than just a statement in the employee handbook to become pervasive. 

A successful culture supports how a business executes its growth strategy, and positively influences all aspects of decision-making. Additionally, when an employee feels engaged with, and a part of the business in a positive way, there is less of a need to rely on incentives, or job security, to bring about a desired behavior or outcome.

So even though the intention behind selling more products to clients may have started out as an innocent way to increase revenue, it certainly didn’t remain so. And while Canada’s banks haven’t reached the level of scandal that Wells Fargo did, they appear to have been on their way. Enabling employees and consumers to hold institutions accountable to their promises and policies of an ethical way of doing business can go a long way towards achieving long-term success.

This work has been funded by Viewpoint Foundation.

Sources used for this post:

Bradshaw, J. (2017). Federal watchdog to review banks’ sales tacticsThe Globe and Mail. Retrieved 17 April 2017, from

Burne, K. (2016). Bankers, Regulators Find No Easy Answers at Bank Culture WorkshopWSJ. Retrieved 22 April 2017, from

Edwards, B., & Lazaro, C. (2017). Investors Pay If Wall Street Wins a Fiduciary-Rule DelayBloomberg View. Retrieved 20 April 2017, from

Ernst & Young. (2014). Shifting Focus: Risk Culture at the Forefront of Banking. Ernst & Young. Retrieved from$File/ey-shifting-focus-risk-culture-at-the-forefront-of-banking.pdf

Johnson, E. (2017). Bank call centre staff reveal pressure to turn customer inquiries into salesCBC News. Retrieved 11 April 2017, from

Ligaya, A. (2017). Watchdog reports surge in bank complaints in wake of high-pressure sales tactics allegationsFinancial Post. Retrieved 10 April 2017, from

Linnane, C. (2017). Are Canadian banks headed toward a Wells Fargo–style scandal over sales tactics?MarketWatch. Retrieved 27 March 2017, from

McGee, S. (2016). Wells Fargo's toxic culture reveals big banks' eight deadly sinsthe Guardian. Retrieved 13 April 2017, from

Salinger, T. (2017). Fiduciary rule to spawn thousands of low-fee mutual fund shares: Morningstar. Financial Planning. Retrieved 21 April 2017, from

Thakor, A. (2016). Corporate Culture in Banking: Why It MattersOxford Law Faculty. Retrieved 15 April 2017, from

Trump delay of the ‘fiduciary rule’ will cost retirement savers $3.7 billion. (2017). Economic Policy Institute. Retrieved 27 March 2017, from

Wursthorn, M. (2017). Billions Gush Into Merrill’s Fee Accounts as Obama-Era Rule LoomsWSJ. Retrieved 20 April 2017, from