I continue speaking to thought leaders across the banking industry, to challenge my thinking and help me shape the ideas I will be sharing in my book. This time I speak to Hedwige Nuyens, CEO of the International Banking Federation, who provides some important context about ethos and how it applies to banking.

Hello Hedwige, how would you define ethos in banking?

Thank you so much for sharing my vision on ethos and helping you shape yours. I could give you a general answer that you've already received many, many, many times. Ethos refers to a set of principles and values that guide behaviour and decision-making. This concept is also applicable to banks and their employees.

But there is a flaw in the question itself. When we talk about the ethos of banking, we may assume that there is a universal standard of ethics that applies to all banks. However, this is not the case. Each bank operates in a unique environment with specific business models and cultures. So I think as much as it's an interesting question, the right question should be how to define it. And what does it mean in practice?

It's great to hear that my story is confirmed in this answer. Ethos and ethics are two different concepts that are related to each other. Regulations are often based on ethical principles, which determine what is right and wrong. Ethos, on the other hand, is about how organisations and people translate these principles into their behaviour. It's personal and not universal. During my conversations with bank executives, I often hear that there is so much regulation today that it is burdensome to define their own ethos in many ways. Do you see the same contradiction in your daily work?

Banks operate in a complex world and environment, but that is also part of life. I'm not going to complain about too much regulation. It is like complaining about too much education, too much medical devices, and too much medical procedures. Regulation is part of our life and is also the reflection of the complexity and of the world we are dealing with, also of the growing expectations of people towards society, and then also the increasing diversity within society.

I believe that law and regulation play a crucial role in structuring society. As a lawyer, I understand the importance of having a framework in place that guides the actions of individuals and organisations. This is particularly important for banks, which must navigate a complex set of rules and regulations while also upholding their core values and principles. So no, I think it's much better to have regulation, even though there might be too much, but then to see what, how to operate, then to have societies where there is no rule of law, no certainty. I challenge anyone who disagrees to try living in a country without lawyers, courts, or a justice framework - it would not be an easy or desirable situation.

When I tell people I'm writing or talking about ethos in banking, the common feedback is that it's such an important discussion topic today. Why do you think that is?

Yes, because I believe it is effectively an important discussion. Also, something I think there is that the idea of ethos has a certain romantic appeal. If we consider how much our society has evolved over the last century, we can see that we used to have more uniform values and beliefs. We had a common religion and just a couple of political parties. There was a system in place that lasted for a long time.

The pace of change in today's world is rapid and complex. It affects various aspects of our lives such as politics, economics, cultures, beliefs, nationalities, and backgrounds. Despite these differences, we hope that there are common values and principles that can provide us with a shared understanding. However, it is important to recognise that not everyone will have the same ethos.

For companies, it is crucial to understand that they are accountable not only to the rules and regulations in place but also to how they align with the expectations of their stakeholders, including the public and their clients. Ethos is an essential element that companies must uphold to maintain their accountability and to be a reliable party to interact with.

Do you think that bankers in the West, but also me, may be underestimating how contextual that ethos in banking effectively is?

I certainly think so. And it's a mistake to talk about Europe as if it's a homogenous entity. Europe is a blend of many nationalities and a plethora of historical events. However, within the European Union, we have agreed on certain principles. For instance, we have the right to have a bank account, we are moving towards instant payments, instant payments for free, and there's a lot of discussion around digital euro and privacy, which is all quite typical for Europe.

In China, the implementation of digital renminbi has been entirely different from other countries. Unlike countries where technology change requires a public debate, the pace of technological change in China has been much faster than in Europe. Similarly, in India, banks were asked to open a bank account for every citizen, resulting in the creation of 300 million bank accounts in a record time. The context in which technological change happens can significantly impact the outcome.

As the CEO of the International Banking Federation, I can see how different parts of the world approach technology change.

I can imagine that GenAI is a hot topic on your agenda nowadays; how does it affect or influence ethos in banking, according to you?

Artificial intelligence (AI) and generative AI are going to have a significant impact on every aspect and person involved in this field. For example, banks will be able to offer their services at a lower cost by utilising AI and generative AI. They will be able to perform certain checks more efficiently and at a reduced cost compared to their previous capabilities.

At the same time, there is a crucial factor when it comes to generative AI and the various factors and actors involved - trust. With generative AI, you can have access to a vast amount of information all at once. The question is whether that information is reliable. While having multiple AI assistants is a great thing, it also multiplies the risk of scams and fraud by a million, which is a scary thought.

Like anything in life, technology comes with a lot of advantages, but also a lot of risks. This means that we will need to re-educate ourselves to learn how to embrace it. In this regard, banks can play a crucial role since their origins were precisely to be that trustworthy intermediary. So, I believe that the role of banks will remain important.

It will be intriguing to observe how the situation progresses. During a previous discussion with Joris Krijger, AI and Ethics Officer at De Volksbank, we discussed the findings of the KPMG report, which revealed that banks are likely the least trusted industry when it comes to using AI and data in favour of customers. Customers do not trust banks with these new technologies.

Can I disagree with these conclusions? As much as the perception may exist, which I understand, the financial sector has lost a significant amount of trust and reputation. However, it is important to note that banks still operate despite these challenges. The level of trust may vary from bank to bank, but personally, I still have faith in my own bank and my personal banker. I rely on their services for my day-to-day financial needs.

There is a growing sense of distrust towards many actors, and it's a shame. The rise of crypto offers an opportunity to reflect on alternatives to the traditional banking system. Additionally, the discussions surrounding the digital euro in the European Union highlights the issue of trust since even the European Central Bank got affected. Every technology presents opportunities to maintain the trust of our clients.

All right. Three years ago, in the middle of lockdown, we invited you to a virtual session, where we investigated what will shape the bank of tomorrow. The three themes that came up will also play a prominent role in my book: digital, local, and sustainable. However, how relevant is this conclusion still today, in your opinion?

I believe that digital technology still holds incredible potential, especially with the emergence of AI and Gen AI. However, we need to ensure that we combine digital with trust. Digital technology acts like a booster and multiplier, similar to the invention of the wheel and electricity, for example, but it can also be used for negative purposes like fraud, destabilisation or war. Therefore, it is crucial to have a framework to use AI in a safe and trustworthy digital environment.

As we have seen with the internet, electricity, and all the other inventions?

Absolutely, people will once again seek out institutions, organisations, and actors that can provide a trustworthy counterpart in the new world. Banks have been fulfilling this role for centuries as trustworthy financial intermediaries. However, with the advent of AI and data, the New World has a new fuel for growth. Finance and money are the old world, but data and AI are becoming the new world.

Imagine a scenario where banks would distribute money, but 80% of the money is fake. This would be a dishonest trick to play on the public. Now, consider a system that uses AI and generative AI to generate content with 80% of the generated content is rubbish. It's important to recognise this potential issue and approach AI-generated content with caution.

The banking industry has evolved over centuries and is now one of the few industries that are regulated internationally. AI and generative AI are creating a whole new world, which will be the fuel of the future. The question is, what is behind this new system? And how will we manage the risks?

One last question. Is there a chance that, given the current geopolitical situation and elections this year, my book, expected to be published by the end of the year, may already be outdated at the moment of publication?

It will be outdated for sure Rik. However, that doesn't mean that your book cannot serve as a valuable reference for a particular situation and provide insightful ideas. The content and title of the book are crucial factors that determine its importance. Nevertheless, let us hope that readers will use your book as a starting point and build upon it with their own knowledge and understanding.

We tend to forget that we live in a certain context and that the actions we take can shape a completely new world. Therefore, I invite your readers not only to benefit from the ideas presented in your book, but also to think for themselves about the world we live in. How will it change based on the outcome of the elections in the US, the elections in the EU, and the events happening in India, China, and Latin America? In short, how can we learn from your book and then think critically about our world, while reflecting on what change we can realise in our own life?

Hedwige with be sharing more thoughts and insights during the panel "Defining The New Rules of Engagement" at The Banking Scene Conference in Brussels on May 21. Join us and be a part of the discussions.