Much like medical doctors and notaries, Dutch bankers will soon be made to take an oath, promising to uphold a certain moral and ethical standard. Amongst others, they must act with integrity and in the best interest of their client. Additionally, executives will have to take a yearly exam that will test their knowledge of all their latest financial services and products.

The oath is part of a larger set of measures called the Banker’s Code. The Netherlands Bankers’ Association (NVB) together with its members drew up the Code and presented it earlier this week.

The Code will take effect on January 1st, 2010, and applies to all Dutch banks, both to their operations in the Netherlands and in the rest of Europe. It is the first time the banking sector takes such an initiative, and is currently unique in the world.

No sanctions
The oath is only a part of the Code. The banks have made agreements on the expertise level and continuous education of their managers and the maximum height of their bonuses. From January 2010, bonuses may no longer exceed the base income.

So what happens if banks fail to comply with the Code? According to a spokesperson of the NVB, there are no sanctions. “But banks are forced to include in their annual reports whether or not they lived up to the Code. If they didn’t, they will have to explain why. If they can provide a good excuse, they might be pardoned. Of course, shareholders are allowed to make up their own minds. To make a long story short: there are no fixed sanctions, but we will be keeping a close eye on participating banks.”

The details of the Code are currently being discussed in the Dutch House of Representatives. “The lawfulness of the Code is currently being assessed. The Code is never supposed to be a fixed document, it can always be altered depending on the circumstances.”

What do you think?
The Dutch Minister of Finance, Wouter Bos, is happy with the Code because he expects it will make banks less inclined to take big risks. But… what do you think?

Will the oath have the desired effect? Perhaps it will, because it helps to focus everybody’s attention and provides some clear guidelines for banks to follow. After all, the banks themselves helped draw up the Code.

Perhaps you have doubts about the effectiveness of the Code, since medical doctors too can still make gross mistakes, in spite of the oath they took. And what about the lack of clear sanctions? Will banks hide behind the Code and simply state that they did their utmost best for their clients, but unfortunately it wasn’t enough? We look forward to hearing your opinion.