What went wrong with banking culture? Yesterday, the London School of Economics’ (LSE’s) Systemic Risk Centre ran an event to pontificate about precisely this issue. In attendance were senior risk managers, senior regulators, a lot of academics, a managing director from Goldman Sachs and Joris Luyendijk, the Dutch anthropologist who’s been touring the City conducting anonymous interviews with banking figures up to MD level in an effort to get beneath the skin of the crisis.
After a year of interviewing, Luyendijk said he’d reached his own conclusions about the problems with banks’ culture.
“Everyone I spoke to had a horror story about being made redundant,” he told attendees. “Banking is a zero loyalty, zero job security environment. You come back from the gym and your neighbour’s desk is clear. In this environment, no one has any incentive to sound the alarm about wrongdoing.”
It doesn’t help that people in banking have (or had) the opportunity to earn “life changing rewards” and that they swap jobs every 12-36 months and have no loyalty to any particular employer, Luyendijk added. Nor does it help that bankers work so hard that they suffer from “social atrophy” and become divorced from the world outside financial services.
“For most of my informants, finance wasn’t a job, it was an identity,” said Luyendijk. He said bankers in their 20s suffered social atrophy as their job consumed their lives and friendships outside work fell away: “I spoke to people who said they’d grown up in India and seen people dying in the streets, but that after working at Barclays for two years all they could think about was why the vending machine wouldn’t give them a Mars bar.”
The quartet of issues identified by Luyendijk is being slowly addressed, sort of. Banking pay is falling, although a first year M&A banker still earns more, on average, than the average British graduate earns after 25 years of work. Loyalty is increasing as banks defer a higher proportion of bonuses and bankers become locked into existing jobs (Lloyd Blankfein recently boasted that average tenure for VPs at Goldman Sachs is now nine years). However, job security is still poor and social atrophy is still prevalent, despite Goldman’s command that its junior bankers must – on no account – do any work on a Saturday.
“You end up in a social bubble filled with people who all think the same way,” said Luyendijk.
Short of commanding that all bankers don’t work weekends or evenings past 6pm, what can be done about this? A senior risk officer at the LSE event suggested a novel solution: banks need to relax their controls on social media. “I’ve been arguing for a while that people in banks should be allowed to spend time on Facebook during the day. They need to be in touch with their support networks outside banking,” he said. “I don’t think they’d do less work as a result, it would just mean that they were connected to the outside world.”