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Ethical Bank Calls on Financial Opaqueness
Charles Middleton, UK managing director at Triodos Bank, comments on last week’s UK banking crisis
05-07-2012 | ‘Recent events have highlighted very clearly the extent to which something is rotten in the state of UK banking. We’ve only seen the very tip of the iceberg, and the coming weeks will see other banks implicated in ‘Liborgate’ and no doubt other financial scandals too. Such events reveal something more fundamental about the underlying culture inside these banks – and it is this that needs to change. ‘People are becoming aware of the inherently unsustainable nature of the UK’s banking system, recognising established banks as opaque, irresponsible and with little regard for the trust and money their savers place with them.
"Things will start to change now that people are prompted to think more consciously about their money and realise its potential to do good or bad."
"Switching current accounts is all very well, but the power for people to really effect change in the banking system lies in what people do with their savings."
‘Customers who have put their trust in these banks for many years have asked few questions about what happens to their money once it’s deposited. They are now left smarting at the realisation that their hard-earned money is being used to gamble on the money markets, fund large executive bonuses, or engage in risky and complex financial transactions at their expense.
‘I think it is now clear that banking customers have had enough and are making it known that there has to be a fundamental change to the established banking system.
‘Many people are now asking for a return to traditional banking as a solution for Britain’s banking system. Traditional banking does not have to be boring banking – in fact traditional banking, in the form of socially useful banking, is a genuine and exciting alternative for a sustainable financial future.
‘Things will start to change now that people are prompted to think more consciously about their money and realise its potential to do good or bad. Switching current accounts is all very well, but the power for people to really effect change in the banking system lies in what people do with their savings. If people moved their savings away from banks who say very little about what happens to their money once invested, to banks that in fact do the opposite and make a virtue of telling depositors how their savings are being used, UK banks would have to sit up and take notice. They would no longer have the financial support to be able to do all these things that have got them into the mess they are now in.
‘At Triodos Bank we take pride in doing things differently. We offer straightforward banking with a high quality of service and will always tell our savers what we are doing with their money. We think this straightforward model is the way banking should be.
‘A fair profit, a strong capital base and a stable funding base from savers’ deposits are integral parts of our approach. As such we have no need to engage in the wholesale markets and will never lend out more than we have on deposit. Nor do we make use of derivatives and other complex financial instruments that can put savers’ money at risk. Our shares are not listed on any stock exchange to ensure we don’t become diverted from our sustainable banking mission in the drive for a fast profit or negatively impacted by the vagaries of market sentiment. ‘At the core of our banking, we are directly connected to the real economy, only financing sustainable businesses delivering clear social, environmental and cultural benefits with a lasting positive impact.’
Research from Triodos Bank* found almost nine million (18%) customers would not recommend their current bank to family and friends. 40% would not recommend their bank due to poor service, and 24% blame the bank’s hefty bonus practice as a reason to not recommend it. 18% won’t advocate their bank because of its excessive profits and 30% claim it is because their bank doesn’t treat them as an individual.
The research also shows that it is not only the events of recent weeks of, poor customer service, or excessive bonuses that are beginning to change people’s views; people do care about how their money is used. 12% of those who would not recommend their bank said this is because of its lack of lending support to UK businesses.
With UK banks due to reveal their half year financial performance at the end of July, figures also reveal how values-based banks such as Triodos have outperformed more established banks when it comes to their balance sheets. The report** showed values-based banks have higher levels of, and better quality, capital, with an average BIS1*** Ratio of 14% over three years compared to less than 10% among mainstream banks, and an average Equity/Asset ratio of more than 9% compared to less than 5% at mainstream banks.
Middleton added: ‘It’s not only in the UK that we are starting to see unprecedented interest in sustainable banking. Recent events in Europe have lead to vast numbers of Europeans switching to Triodos and other ethical, sustainable banks. In fact, following the Spanish banks' bailout our branch in Spain was overwhelmed, doubling new customers in a single month. Triodos Bank group is also seeing record inflows, with €105m net inflows to customer accounts – a 2.5% increase for May 2012 alone.
Triodos Bank has seen its income, balance sheet, net profit and assets under management grow steadily over 2011 and into this year. Over two decades the bank has built assets under management of 6.8 billion Euros and delivering a consistent profit. It has around 22,000 loans to sustainable businesses such as Hugh Fearnley Whittingstall’s River Cottage, Ecotricity, Cafedirect, and Glastonbury’s Worthy Farm in the UK, and has welcomed more than 350,000 customers across its operations in the UK, the Netherlands, Spain, Belgium and Germany.
Middleton concluded: ‘At last people are beginning to wake up to the fact that there are credible alternatives to the established financial system, and that they can get a social and environmental return on their money, as well a decent financial return.'
In contrast to the opaqueness of the mainstream banks, Triodos publishes details of everyone it lends to via its website: www.triodos.co.uk/transparentbanking
* Research conducted by Opinium Research on behalf of Triodos Bank, February 2012
*** BIS1. The BIS (Bank of International Settlements) ratio gives an indication of the solvency of a bank. It gives the ratio between the risk-bearing capital and the risk-weighted assets.