Bank Annual Reports: The Place of Sin, Relationships and Social Metrics Ray Kinsella Banks are expert at measuring all kinds of key performance indicators, but they have yet to learn how to reflectively engage with the moral implications of their decision-making processes on society. In practical terms, this should begin with including social metrics in their annual reports. The capacity to reflect ‘Leadership’, that most misused of words, encompasses a capacity to reflect on the integrity of the relationships on which a bank depends to survive and prosper, and also on the strength of character required to apply to the considerations how best to measure and report on these relationships. Banks rely, of course, on relationships with the markets for, for example, funding their activities. But the single most important relationship that a bank has is with society, from which it gets its legitimacy. Yet while financial relationships are reported in great detail, social metrics do not feature in typical annual reports. It’s worth exploring this dichotomy. These two attributes, reflection and character, should animate all of the technical skills, systems and capabilities needed to manage a bank, especially in relation to risk. Good stewardship, encompassing a capacity and willingness to reflect, sets a bank apart from its peers. They cannot be faked or outsourced. They are part – or not – of a bank’s DNA. They are part of what Alexandre Havard talks about in his classic book, Virtuous Leadership.1 Virtues can be acquired and, through effort, sustained. They can also be squandered, bartered and lost. The history of banking – especially in recent times – demonstrates this all too clearly. Key questions Two key questions arise that wouldn’t arise if reflection and character were taken seriously. The first is: why are there are so many mediocre banks – more specifically, how is it possible that the regulatory fines for wrongdoing 146 Studies • volume 106 • number 422 Ray Kinsella Studies • volume 106 • number 422 147 Bank Annual Reports: The Place of Sin, Relationships and Social Metrics imposed on banks since the 2008 banking crisis run to tens of billions of dollars, a crisis which, through its impact on societies, has wrenched the history and well-being of countries into wholly different trajectories? The second, closely related, question is: what, in addition to all of the financial and accounting metrics, should also be included in a bank’s annual report? In other words, what is missing if the annual report is to be taken seriously as a communication, grounded in character, and reflecting a bank’s relationship with the lives of people? The answer to the first question – why are there so many mediocre banks? – isembeddedinthisproposition:thebesettingsinofglobalbankingandfinance for the last two generations is a wilful refusal to reflect on relationships (greed is a consequence of a failure to reflect). Banks are not connected in a twoway relationship with society and the ‘public good’ – other than on their own terms and those enforced by regulators (whose effectiveness, incidentally, can be measured in ex post fines of hitherto unimaginable billions of dollars). The global banking industry is full of technical excellence but largely devoid of any tradition of reflection on the social economy as an end in itself. There are exceptions but they are rare. ‘Society’ and the public good are orphaned twins, faces pressed up against the window of the HQs of banks and the circle of lotus-eaters encamped around them. Sin versus guilt in banking The words ‘sin’ and ‘reflect’ are carefully chosen. Let me explain. The university chaplain in my undergraduate days was a wise and insightful man. In his talk to students at Mass one Sunday evening, he drew a distinction between ‘guilt’and ‘sin’. For me, at least, it was a life insight. He pointed out to us that guilt was intrinsically unhealthy; it looked inward and focused on the ‘me’. Sin, on the other hand, was intrinsically healthy because it looked outward and asked: how has my behaviour affected the ‘other’. How has it impacted my relationships with the ‘other’? A couple of years ago — not too long after the global banking crisis with all of its attendant consequences — there was a view that it...