Witch Bank? A Halloween Guide to Ethical Banking

We’re five years into a scary global economic downturn, and this Halloween it’s the bankers who are everybody’s favourite bogey men.  These days they are about as popular as a spectre at a feast, a serial killer in a Sunday School, a were wolf in a Wacky Warehouse or a fart in a phone-booth.

Why? A quick review of the banking-related headlines from the last few years will bring up:-

• The PPI  mis-selling scandal
• The Lehmann Brothers crash
• Multi-billion dollar bank bail-outs
• Liborgate and the rate-fixing scandal at Barclays
•  Money-laundering by certain HSBC subsidiaries
• A catastrophic IT error at RBS and the ensuing systems crash that left customers unable to get at their cash

 Add to that picture the reputation of the big banks for involvement in some controversial and environmentally destructive projects like gas pipe-lines and dams in some of the world’s poorest countries, and it is no wonder that customers are looking for ethical alternatives to their current banking suppliers. Furthermore, it is not unknown for customers to worry that their bank may actually go bust.  Remember the run on the Northern Rock in the UK, and look how the same thing is happening now in Spain, with customers emptying out their accounts and resorting to stashing the cash under the mattress.

People are beginning to question whether they even need to have a bank account at all. That is not really an option, as we all need to have a bank account be able to receive our salary, and even the unemployed need one for their social security benefits these days. Most people need a mortgage to buy a house, and even if you decide to rent, landlords and letting agencies will insist on direct debits. 

Banks like the Co-op and NatWest are getting wise to consumer concerns and using the ethical angle to market themselves.  Back in February NatWest was slammed by the Advertising Standards Authority for pushing its commitment to local communities and portraying itself as a company dedicated to serving its customers wherever they live, whilst at the same time engaging in a program of branch closures.  The Co-op website invites us to ‘join the revolution to make a real difference’, and is proud of its Ethical Plan for assisting local communities, facilitating social inclusion and encouraging green and clean energy. The Co-op has probably gone further than any of its competitors to achieve true ‘ethical’ status, but even they have been criticised for copping out and handing control of its investments over to Axa.

         

For an alternative to a regular bank accounts, there is the Credit Union option, although the service offered there will be limited.  For banks with ethical credentials, consider Triodos, The Charity Bank and the Ecology Building Society. Is it possible for a bank to be truly ethical? Can a bank successfully reconcile moral principles with the need to make sound investments for their shareholders and customers? The brutal reality is that we are in the grip of a worldwide recession.  Who wouldn't like the idea of using our investments to help make the world a better place? Ethical banks promote support for environmentally sustainable development and social enterprise in developing communities in poorer countries. All highly commendable, but the brutal reality is that we are in the grip of a worldwide recession. Financial survival is paramount for everybody, and that includes banks, card issuers and building societies, as well as consumers.

If the ethical banks can survive and prosper under today's financial pressures and in the current economic climate, more power to them!