Neka Kiser, vice president of operations for Mountain National Bank, has instructed the bank’s computer programmer to use a 365-day year to compute interest on depository accounts (payables). Neka also instructed the programmer to use a 360-day year to compute interest on loans (receivables).
Discuss whether Neka is behaving in a professional manner.
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To analyze whether Neka Kiser is behaving in a professional manner, we need to consider the ethical standards and practices in the banking industry.
Using a 365-day year to calculate interest on depository accounts (payables) is generally considered industry-standard and is in compliance with banking regulations. This method accounts for the actual number of days in a year, including leap years, which ensures accuracy in interest calculations for depositors.
However, instructing the computer programmer to use a 360-day year to compute interest on loans (receivables) raises some ethical concerns. In the banking industry, the industry standard for calculating interest on loans is to use a 365-day year. This method prorates the interest based on the actual number of days in a year, ensuring fairness and accuracy in determining interest payments for borrowers.
By intentionally using a 360-day year for loan interest calculations, Neka is deviating from the industry standard, potentially resulting in borrowers paying more interest than they would have under the correct calculation method. This behavior may be seen as unprofessional and unethical since it would place the bank's interests above those of its customers.
In summary, Neka's instruction to use a 360-day year for loan interest calculations does not align with professional standards in the banking industry. It is considered unprofessional and ethically questionable to intentionally use a different calculation method than the widely accepted industry standard.