A broad range of businesses, charities and civil society groups have joined forces to address core issues behind the financial crisis
It is time for a new banking system that serves the economy, society and the environment. This is the view of more than 100 leading figures from the fields of finance, business, politics, academia, the law and social change, who have launched an initiative to design a banking system that is both safe and fit for purpose.
Established by the New Economics Foundation (nef) and pressure group Compass, the Good Banking Forum represents more than 60 UK organisations, ranging from the Bureau of Investigative Journalism, to Manchester Business School, Oxfam and Unite.
Launched during an event at Westminster on 13 July 2011, the forum plans to educate the public about the reality of how banks work, while promoting alternatives and mobilising public pressure for reforms through seminars, reports and online campaigns.
With an apparent return to business-as-usual in banking, the forum will harness public frustration as well as the expertise and innovations of its member groups, in order to push for a transformation of the financial sector, said nef campaigner, Ruth Potts.
“The range of organisations involved in the Good Banking Forum indicates the breadth and depth of society’s concern about the banking system,” she said. “By bringing these groups together we believe we can fundamentally change the debate.
“Because the failures in the banking system are systemic, we saw power in not only pooling our resources but in working together to create a systematic programme of reforms and new regulations, and to develop the new forms of banking that are good for us and good for the planet,” she added.
Established as an open public forum, the initiative emerged from The Good Banking Summit, convened in May by nef and Compass, and was launched during an event at Westminster on 13 July 2011.
A report from the summit, titled Good Banking: Why we need a bigger public debate on financial reform, states that the root causes of the economic crisis have not been dealt with sufficiently. It claims that the Independent Commission on Banking (ICB) – established by the government in June 2010 to consider reforms to the UK banking sector – has a scope that is too narrow. The report calls on the ICB (also known as the Vickers commission) to recommend a further, full public inquiry.
“We have a unique political opportunity, as the ICB completes its inquiry and its proposed reforms are debated in Parliament,” said Potts. “We must use this opportunity to re-imagine a banking system that is fit for people and the planet while there is still time.”
A series of measures are being proposed and as a first step, the group believes the banks need to be broken up and downsized. This would create more competition and more choice for customers it says, as part of a banking system that is more diverse, resilient and democratically controlled.
“The real needs of all sections of society and business could be better met if we localised banking, renewed community banking, improved access to good credit for local business, established more co-operatives and mutuals, and lessened the concentration of power in the banking system,” said Potts.
As well as breaking up the banks and reviving local branches, the forum also proposes new types of financial institutions to fit today’s needs. These include green investment banks as well as banks dedicated to funding innovation, small businesses and social enterprises, and these could initially be funded through government bonds, it suggests.
Potts said: “Practical, positive solutions include a People’s Post Bank run through the Post Office network, and transforming Royal Bank of Scotland into a Royal Bank of Sustainability to fund the transformation of our infrastructure that is necessary for a low-carbon future.”
Crucially, while there is debate as to which is to blame for the financial crisis, high street banking must be fully separated from investment banking, the forum believes.
“Separation would let daylight into the system and enable us to see what has actually been happening,” said Potts, “because one of the biggest problems with banks is how complex they have become. Only a clear division provides the necessary transparency between the very different functions and cultures of retail and investment banks. Retail banks should be there to promote real prosperity by lending responsibly to businesses and people.”
Other measures proposed by the forum include: creating more transparency in the banking lobby’s relationships with parliament; stricter accounting standards and more severe consequences for banks that breach the rules; regulating salaries so that they are spread more evenly; a global cap on bonuses, which should be based on collective rather than personal achievement; rewarding long-term customer service not short-term sales; distributing bank profits more evenly; introducing a financial transactions tax (a so-called Robin Hood Tax, or Tobin Tax); and preventing UK residents exploiting tax havens abroad.