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Prospective Innovation at Ethical Banking and Finance

Vol:0, №:0, Year:2013

The emergence of ethical banks – a way towards sustainable banking business

Iustina A Boitan
Faculty of Finance, Insurance, Banking and Stock exchange - Bucharest University of Economic Studies

Teodora C. Barbu
Faculty of Finance, Insurance, Banking and Stock exchange - Bucharest University of Economic Studies

The paper promotes the incorporation of sustainable development principles in the banking business, as an alternative to traditional banking activities, the more so in the context of global financial crisis, because an ethical business model has the ability to regenerate customer confidence in the financial system's institutions, can transform financial profits into social welfare and it is sustainable over time. It first proposes a review of the main international principles and standards developed by different organizations, at which financial institutions can adhere on a voluntary base. Then the paper introduces delineation between two business models: the conventional banks’ business model and the one adopted by ethical banks, with a particular focus on the latter’s mission and objectives, the origin of financial resources and the destination given to money, the relationship established with customers, the bank management and its attitude towards obtaining profits, the process of risk control and mitigation. The third part proposes an empirical investigation, in order to observe how the profitability (ROE), liquidity (the share of loans in deposits), exposure to risk credit (share of loans in total assets) and capital adequacy (BIS1 ratio) are characterized by homogeneity at the level of financial institutions that have implemented an ethical, sustainable business. Results showed that, although GSIFIs developed and promoted an ethical, sustainable side of their activity, differences still remain between the classical and ethical business models.

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Key words
ethical banks, sustainability framework, sustainable business model, financial indicators, cluster analysis

Blanca Fernandez Milan (2013), Fostering Sustainable Finances: The consideration of a Third Party Certification Program in Leire San-Jose, Jose Luis Retolaza (eds.) Prospective Innovation at Ethical Banking and Finance (Studies in Philosophy, Law and Economics), - Sumy: Vinnychenko M.D., pp.78-99. Available at

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