Sustainable Development as Part of the New Paradigm in Banking

Abstract

The term paradigm comes from the Latin word paradigm, which means the approved way of seeing reality in the field, doctrine, or a model, pattern, such as instructive. Paradigms provide ways of looking at reality and create a logical framework for the theory. The latest world economic crisis clearly showed discordance between the theory of finance (including banking) and reality, in particular, how the real world of contemporary paradigms differ, from the traditional neoclassical economics, describing the economic process in terms of homo-economicus and perfect competition equilibrium. Existing paradigms do not include the rapidly progressing globalization, which (despite a number of advantages and opportunities provided) favours widening income gap, which leads to increased poverty and social inequality, preserves ecologically irrational, wasteful patterns of production and consumption, generates multiple divisions and conflicts, causes a stronger dependence of the local risk on a global risk. Therefore, there is no doubt that the time has come to modify (amend or extend) the existing paradigms of finance - especially in light of recent events in financial markets and many years of growing environmental and social problems.