Ethical Banking: What’s so bad about the high street?

In recent years, the media has reported several instances of social and financial injustices involving our high street banks. Gemma Dickenson, one of our Environmental Champions,discusses these injustices and how we as consumers can use our money to make a positive change….

“Following the global financial crisis of 2007 the world witnessed waves of protest aimed at the banking industry. Most notable of those are the ‘Occupy’ movements who sought to draw attention to the self –interest, corporate greed and recklessness as well as the blatant abuses of power happening within the corporate world. The financial crisis had pushed banking into the awareness of the general public. With government bailouts of banks such as RBS and Lloyds, which were largely funded by the tax payer and the details of banker’s huge bonuses being released, people began to question what was happening with their money and by banking with a specific institution what exactly was their money funding.

Following the financial crisis the public and to some extent the government have been battling with the banking sector.  In 2007 the OFT (Office of Fair Trading) said that bank charges were excessive. Unfortunately the OFT last a two-year legal battle to try and regulate overdraft charges. Still some headway is being made. The banks lost in court after a legal battle involving the mis-selling of PPI (payment protection insurance). So far they have paid out billions in claims.  There have been several high profile campaigns for re-claiming money for unfair bank charges, the most notable one being by Money Saving Expert.

The OFT is still not happy with the banks. It has recently stated that ‘current account charges are too complex and competition among providers poor’[1] and the industry narrowly escaped referral to the Competition Commission. In June 2013 the Parliamentary Commission on Banking Standards published its eagerly awaited report outlining the radical reforms needed to improve standards in the industry. There are initiatives from the EU too with reforms coming from the European Commission that would make switching and opening accounts easier and the simplification of bank charges.

So there is the greed, excessive bonuses, irresponsible lending and exorbitant bank charges:  Is there anything else besides this going on with the banks? Well yes.  Yes there is. In 2012, Ethical Consumer released a report on the banking industry entitled ‘Bank on something better’. The report is highly critical of our current unsustainable and irresponsible banking sector and heavily criticizes the reluctance to reform and properly regulate the banking system. The report also provides profiles on the big five banks (Lloyds, HSBC, RBS, Barclays and Santander) highlighting their investment in industries that are linked to climate destruction and human rights abuses as well as large scale tax evasion.

For example: Barclays is criticized for its ‘provision of €11.514 billion since 2005 to finance coal-fired electric power stations and coal mining. The company also has significant investments in both the nuclear and arms industries.’[2]  The World Development Movement launched a campaign against Barclays to stop its speculation in agricultural commodities. Barclays is accused of driving up food prices and forcing people into hunger. Barclays has since announced it is pulling out of food speculation.

HSBC is criticized for its involvement in a campaign of intimidation in support of the Egyptian government (prior to the fall of Hosni Mubarak). It has also heavily invested in the coal industry. And this list of things goes on …

For detailed profiles on all banks please see: http://www.ethicalconsumer.org/ethicalreports/bankingindustrysectorreport/bankprofiles.aspx

or and for more detailed reports on banks, human rights violations and industry reform please see Bank Track website:

http://www.banktrack.org/show/pages/publications

Where does that leave us as consumers? What are our options?

One of the best things we can do is move our money elsewhere. The Move Your Money campaign was launched to provide information to consumers on alternatives to the Big Five and to persuade people to move their money elsewhere in order to send a message to banks. Moving your money can be a form of consumer protest.

Some alternatives are: Ethical banks with strong policies on lending and investments such as the Co-op, The Charity Bank, and Ecology Building Society. Building societies are owned by the customers and credit unions are financial co-operatives so these business models can offer alternatives to customers. The Move Your Money website has detailed profiles and information on all the options listed above. They are worth having a look at if you are thinking of switching and they list the pros and cons of each option.

The UK government is trying to fix the current system with the Banking Reform Bill. But many NGO’s, academics and civil society groups have been highly critical of this saying that it does not go far enough to solve the current issues. Professor Andre Spicer at Cass Business School, in a  recent article discussing the report released by the Parliamentary Committee on banking standards, discusses the issue of ‘functional stupidity’ that is rife in the banking sector and questions the will of politicians and banks to enact the changes that the sector so desperately needs.

In the meantime, while we wait for politicians to reach decisions, we could all be moving our money elsewhere. After all we as consumers are meant to be sovereign and maybe it’s time we use our power of protest.”