Prairieland Bank Ethics

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depositors, regulators, investors, taxpayers, politicians, the directors and staff of banks. Naturally, all stakeholders have an interest in the proper functioning of the banking system, as none operates in isolation. Each stakeholder differ in terms of their risk tolerance and expect different sort of compensations.

In this case, customers and depositors have an interest towards the bank’s performance in providing reliable financial services. More often than not, taking up a bank’s service requires a certain amount of trust, whether it is in the form of providing financial security, investment accounts or loans. What draws in the customer’s trust is the banks reliability as reflected from its reputation. They’d expect Prairieland Bank to uphold this reputation and perform.

Regulators would be concerned of the banks’ compliance to the domestic and international laws. As provided by the Sarbanes-Oxley Act, regulations are needed to ensure ethical and legal functioning of the banks. It is of their interest to foresee the bank adhere to these laws and avoid the risk of another Enron predicament.

Investors in banks, whether equity holders, debt holders or funders, share a common interest in the effective governance and management of the financial system. In exchange for bearing risk, they seek returns which come from good performance and profitability. Creditors of the Prairieland bank would expect full payment plus interest for their loans. Otherwise, they can refuse to finance new issues of shares, bonds or funding instruments, potentially causing liquidity, business and regulatory problems for the bank as a whole. Separately, the insurance company’s interest is for the bank to pay its premium for the loan coverage insurance.

As a large account, taxpayers and politicians would be concerned on the bank’s performance and economic contribution. The banking industry plays a crucial role in an economy’s performance. Failure would mean bailouts taken from the taxpayer’s coffers, usually in billions of dollars as were with the Lehman Brothers that cost the US Federal Government $85 billion. Deprivatization also usually ensues where control would be taken up by the government.

Last but not least, directors and staff of the Prairieland bank have interest on the organization’s ability to provide remuneration for their work. The management acts as the agent for its investors, their interest is to secure confidence as this ensures the continuance of good business and remuneration. Hence, explains why the CEO and his/her vice president were so adamant to keep their loan provision low so as to reflect higher profits. Similarly, staff of the bank relies on the bank’s performance for employment and again, remuneration