Chapter 51: Ethics, Business Ethics and Banking: An Integrated Perspective (JAIIB – Paper 2)
1. Which of the following best defines ‘values’ in the context of business ethics?
A. Written laws enforced by government
B. Rules framed by RBI for banks
C. Core principles and beliefs that guide behavior
D. Market-driven business strategies
Values are the fundamental beliefs that influence decisions, attitudes, and behavior in business and personal life.
2. A bank employee refuses a bribe from a customer even though it could have benefited him personally. This act reflects which ethical principle?
A. Integrity
B. Profit maximization
C. Customer orientation
D. Innovation
Integrity means being honest and adhering to moral principles, even in situations where personal gain is possible.
3. Which of the following statements correctly explains the relationship between ethics and business values?
A. Ethics and business values are unrelated concepts
B. Business values are external, ethics are internal
C. Ethics are only legal rules, business values are voluntary
D. Ethics provide the framework, and business values operationalize them in practice
Ethics form the moral foundation, while business values are practical principles organizations adopt to implement ethical behavior.
4. A bank includes ‘Fairness, Transparency, and Accountability’ in its vision statement. These are examples of:
A. Business strategies
B. Core values
C. Regulatory guidelines
D. Marketing ethics
Fairness, transparency, and accountability represent core organizational values that guide decision-making and culture.
5. In banking, why is it important to integrate ethics with business values?
A. To achieve short-term profit maximization
B. To avoid competition in the market
C. To build trust, ensure compliance, and sustain long-term growth
D. To reduce employee salaries
Ethics and business values together ensure customer trust, regulatory compliance, and sustainable banking practices.
6. Business ethics can best be defined as:
A. Following only the legal requirements of business
B. Application of moral principles and values to business behavior
C. Maximizing profits irrespective of the means
D. Promoting business competition aggressively
Business ethics refers to the integration of moral principles, honesty, fairness, and responsibility into business decision-making and practices.
7. Which of the following is NOT a principle of business ethics?
A. Fairness
B. Transparency
C. Profit at any cost
D. Accountability
Profit is important in business, but “profit at any cost” violates ethical principles. Ethics stress fairness, honesty, transparency, and accountability.
8. A bank discloses all charges upfront to its customers before sanctioning a loan. Which ethical principle does this reflect?
A. Transparency
B. Competition
C. Profit Maximization
D. Secrecy
Transparency means providing complete, clear, and accurate information to customers so that they can make informed decisions.
9. Why is the phrase “Business Ethics is an Oxymoron” sometimes used?
A. Because business is always loss-making
B. Because ethics has no role in customer service
C. Because law and ethics are the same
D. Because some people believe business and ethics are contradictory in nature
Critics argue that profit-making and ethical conduct are conflicting goals, hence call business ethics an oxymoron. In reality, long-term success needs both.
10. Which of the following is a practical approach to ensure business ethics in banks?
A. Focusing only on revenue generation
B. Avoiding compliance with KYC norms
C. Framing a Code of Conduct and training employees regularly
D. Ignoring customer complaints to save time
A formal Code of Conduct and regular training help employees apply ethical values in day-to-day banking operations.
11. Why is trust considered the ethical foundation of banking?
A. Because banks work only for profit
B. Because customers deposit money with banks based on confidence in their integrity and safety
C. Because banks deal only in government funds
D. Because trust eliminates the need for regulation
Banking is based on fiduciary responsibility. Customers trust banks to safeguard deposits, honor commitments, and maintain confidentiality.
12. A customer continues to keep long-term deposits in a bank despite lower interest rates compared to competitors. Which factor is influencing this decision?
A. Aggressive marketing
B. Profit maximization
C. Legal obligations
D. Trust and confidence in the bank
Even if returns are lower, customers often stay with banks they trust due to reliability, safety, and ethical practices.
13. Which of the following best demonstrates a breach of trust in banking?
A. Launching a new digital service
B. Offering competitive interest rates
C. Misuse of customer confidential information
D. Opening more branches
Breach of confidentiality, such as misuse of customer data, directly violates ethical responsibility and erodes trust in banks.
14. The phrase “Finance depends on trust” mainly highlights:
A. The fiduciary nature of financial transactions
B. The profit motive of business
C. The competitive strategies of banks
D. The need for physical infrastructure
Finance is based on fiduciary trust where customers rely on banks to safeguard funds and act in their best interest.
15. Which of the following practices helps banks strengthen customer trust?
A. Concealing hidden charges
B. Delaying customer grievance resolution
C. Focusing only on profitability
D. Adopting transparent policies and prompt service
Transparency, fairness, and prompt redressal of grievances are essential for building and maintaining customer trust in banking.
16. Which of the following is the most important ethical quality of a true professional banker?
A. Maximizing personal income
B. Avoiding competition
C. Acting with integrity and responsibility
D. Ignoring customer grievances
Professionalism in banking is rooted in ethical conduct, integrity, responsibility, and service to customers and society.
17. A professional banker is expected to uphold confidentiality of customer information. This obligation arises from:
A. Ethical duty and fiduciary responsibility
B. Competition among banks
C. Desire for higher profits
D. Marketing strategies
Professionals in banking must maintain customer confidentiality as part of their ethical and fiduciary responsibilities.
18. Which of the following best illustrates “professional ethics” in banking?
A. Promoting personal loans aggressively without suitability checks
B. Advising customers on products suitable to their needs, not just bank’s profit
C. Ignoring compliance procedures to save time
D. Accepting gifts from borrowers
Professional ethics require customer-centric advice, ensuring suitability and transparency rather than only focusing on profit.
19. Which of the following principles is central to being a professional?
A. Secrecy and manipulation
B. Aggressive salesmanship
C. Avoidance of compliance norms
D. Accountability to stakeholders and society
Professional ethics emphasize accountability towards customers, organization, regulators, and society at large.
20. A young bank officer resists pressure from a borrower to sanction a loan without proper documents. This reflects:
A. Avoidance of competition
B. Ethical professionalism and adherence to standards
C. Ignoring customer service
D. Profit-driven decision making
Refusing to bypass rules shows professional ethics, accountability, and integrity — key aspects of professionalism in banking.
21. The collapse of Enron is mainly associated with which ethical failure?
A. Lack of competition
B. Excessive customer complaints
C. Accounting fraud and manipulation of financial statements
D. High employee turnover
Enron collapsed due to unethical practices including accounting fraud, hiding liabilities, and misleading investors.
22. Which auditing firm was implicated in the Enron scandal for failing in ethical responsibility?
A. Deloitte
B. Arthur Andersen
C. PricewaterhouseCoopers
D. Ernst & Young
Arthur Andersen, Enron’s auditor, was accused of negligence and complicity in falsifying accounts, leading to its downfall.
23. What major lesson did global banking and finance learn from the Enron crisis?
A. Deregulation is always beneficial
B. Profit maximization ensures sustainability
C. Employee incentives should be unlimited
D. Transparency, corporate governance, and ethical practices are critical
Enron showed that without transparency, good governance, and ethics, even large corporations can collapse.
24. After the Enron scandal, the U.S. enacted which law to strengthen corporate governance and ethical accountability?
A. Sarbanes–Oxley Act, 2002
B. Dodd–Frank Act
C. Glass–Steagall Act
D. Federal Reserve Act
The Sarbanes–Oxley Act (SOX) was introduced in 2002 to enforce stricter corporate governance, accountability, and auditor independence.
25. In the context of banking ethics, the Enron case emphasizes that:
A. Aggressive sales drive is enough to ensure growth
B. Regulatory compliance is optional
C. Ethical responsibility is as important as financial performance
D. Banks should avoid innovation
The Enron debacle highlighted that long-term sustainability in banking and business requires strong ethical responsibility alongside profits.
26. The Global Financial Crisis of 2007–2008 was triggered mainly by unethical practices in which sector?
A. Manufacturing
B. Housing and mortgage lending
C. Oil and gas
D. Agricultural commodities
The crisis was largely caused by unethical subprime mortgage lending, mis-selling housing loans, and securitization of risky assets.
27. Which unethical practice by banks and financial institutions played a major role in deepening the Global Financial Crisis?
A. Offering low-interest savings accounts
B. Limiting credit card facilities
C. Mis-selling subprime loans and hiding risks in complex securities
D. High ATM withdrawal charges
Banks mis-sold risky subprime mortgages, bundled them into complex securities, and failed to disclose real risks, fueling the crisis.
28. Which major U.S. investment bank collapsed in September 2008, marking a peak in the Global Financial Crisis?
A. Goldman Sachs
B. JP Morgan
C. Citigroup
D. Lehman Brothers
Lehman Brothers collapsed in September 2008 due to exposure to toxic mortgage-backed securities, symbolizing the crisis's severity.
29. The Global Financial Crisis highlighted which critical ethical issue in the banking sector?
A. Conflict between profit motives and customer protection
B. Excessive focus on agriculture
C. Decline in use of technology
D. Reduction in employee training
The crisis exposed how prioritizing profits over customer protection, transparency, and responsibility led to systemic failure.
30. After the Global Financial Crisis, regulators around the world emphasized which key reform?
A. Deregulation of financial markets
B. Unlimited executive bonuses
C. Strengthening risk management, transparency, and ethical governance
D. Reducing supervision of rating agencies
Post-crisis reforms focused on stricter regulation, stronger risk management, transparency in disclosures, and ethical accountability.
31. The Satyam scandal (2009) is often called “India’s Enron.” What was the primary unethical practice involved?
A. Insider trading of government bonds
B. Falsification of financial statements and inflating profits
C. Misuse of CSR funds
D. Manipulation of currency markets
Satyam Computer Services falsified its accounts, overstating cash balances and profits to mislead investors and regulators.
32. Who was the founder-chairman of Satyam Computers, arrested for his role in the accounting fraud?
A. Ramalinga Raju
B. Ketan Parekh
C. Harshad Mehta
D. Nirav Modi
Ramalinga Raju admitted to manipulating Satyam’s financial records, leading to one of India’s biggest corporate scandals.
33. What was the key ethical lesson from the Satyam scandal for Indian corporate governance?
A. Profit maximization is the only goal
B. Transparency reduces growth
C. Stronger auditing, transparency, and independent oversight are essential
D. Deregulation solves all problems
The scandal highlighted the importance of independent audits, ethical leadership, and transparent governance in corporations.
34. In the Indian banking context, which of the following has been a recurring ethical issue?
A. Overuse of technology
B. Excess staff training
C. High ATM transaction charges
D. Rising NPAs due to willful defaults and poor governance
A major ethical issue in Indian banking has been non-performing assets (NPAs), often linked to willful defaulters and weak due diligence.
35. Which Indian public sector bank faced criticism for unethical lending practices and weak credit appraisal, leading to rising NPAs in the 1990s?
A. State Bank of India
B. Indian Bank
C. Bank of Baroda
D. Punjab National Bank
Indian Bank faced a major crisis in the 1990s due to reckless lending and poor governance, raising concerns on banking ethics.
