The good bank

With the longest election campaign in living memory now drawing to a close the bizarre theatre of facts and figures, claim and counter claim has had time to cover every single major issue facing the electorate. Scotland. Housing. The economy. The debt and the deficit. Immigration. Zero hour contracts. Scotland again. Coalitions. The likelihood and legitimacy of those coalitions. Trident. The NHS. Taxes and the avoidance of those taxes.  And a little bit more about Scotland. But there is an important issue that has been as hard to find as an impromptu walk about by a Tory Minister.  Remember those banks and the financial services sector and the mess they caused? Whatever happened to all that?

Scrutinising the role of the financial services became a media and public pastime after the the sector was bailed out by the grand total of £375Billion. Since the financial crisis took hold in 2008 and during every ‘banker bonus’ time since we’ve learned to look at banking through a squinting eye as we wondered just when are we getting our money back? So considering debt and the deficit have been ubiquitous in this campaign it seems to be amiss not to focus on the continuing role of the financial services sector and to ask:

– what has happened to make sure that there isn’t another financial services led crash again? and

– can our banks, if run differently, actually do some good?

What have the political parties been saying in this campaign about the financial sector?

The Tory Manifesto mentions, what has to be seen as an admission:

“our economic growth remains uneven, too reliant on financial services.”

They then cover exactly how the role of the Financial Conduct Authority and the Bank of England will oversee the “best regulation in the world” Careful wording; not the most regulated but the “best”. The Tories talk about how their reforms covered in the Financial Services (Banking Reform Act 2013) – which will come into play in 2019 now that’s a long time in anyone’s book – will continue to strengthen the sector against future market failures.

Whatever you think of the scope of that regulation at least it is mentioned by the Tories but this seems to be the end of the reform. And to prove their lack of vision here’s the coalition government’s pre campaign announcement. Their paper “protocol for bank closures” does absolutely nothing to improve the regional support for SMEs and those consumers who most value a local bank in fact it’s not even on the agenda: “High street banks, consumer groups and the government have signed up to an industry-wide agreement to minimise the impact of branch closures” Yes, you read that correctly. Rather than looking at banks to support the regional development of the UK to how about just limit the negative impact? why set the bar high when it can be set so low?

Back to manifestos. In the Labour Manifesto there is a mention of a new way of banking and a brand new bank:

“We will develop a banking system that works for businesses in every region and every sector in Britain. The long-standing problems of our banking system mean that too many small and medium-sized businesses cannot get the finance they need to invest and grow.

Labour will establish a British Investment Bank with the mission to help businesses grow and to create wealth and jobs. It will have the resources to improve access to finance for small and medium-sized businesses, and will support a network of regional banks.”

Now this sounds good. Like someone is listening to the SME sector and a disenfranchised public. And there is a consensus that seems to be shared by the SNP and the Greens.

The SNP in their manifesto seek to hit the banks hard with an increased bank levy and a tax on banker’s bonuses. But the area of a new bank is the  most interesting part:

“….will seek seed-fund capitalisation of the Scottish Business Development Bank, enabling new investment in Scottish business growth and innovation, helping create thousands of new jobs”

The Green Party dedicate a couple of pages on reforming the Financial Sector in their manifesto. They typically peg their colours to the mast:

“The UK finance industry is a disaster area.”

And within the fruity language we again find the new (well a very old) bank:

“We will use the government-owned Royal Bank of Scotland to create a network of local banks for every city and region, ensuring that each bank is a People’s Bank, obliged to offer cheap basic banking services.”

Now this looks good a People’s Bank. A bank designed to do good?

In a variety of routes Labour, SNP and The Greens all seem to want to start to develop a new way to do banking. The route and the scope appears to differ but this overall vision has the potential to make an impact that will be felt across communities and in the wider economy and it is a shame there has been so little focus on this vision. A new approach to banking in the UK has the opportunity to affect real and meaningful economic and social change. And it is needed.

So far under the coalition government nothing much seems to have changed even in the banks that we own. As you can see from the Tory led coalition government their protocol for bank closures and their reliance on past regulation shows that the ship has sailed on more regulations. But maybe they are right, maybe we don’t need more regulation. So exactly how are things going?

RBS announced its latest figures at the end of April. A £446m loss in the year so far. According to RBS CEO Ross McEwan the bank is improving and if only they didn’t have to set aside millions of pounds to cover their potential loss owing to alleged criminal activity they would be in profit. Damn those illegal activities they can really hurt…..shareholders.

So if it’s not going so well and the opposition parties are looking at a new direction of travel is there anyone there to put meat on the bones? Thankfully there are other organisations talking about reform in the banking sector.

Local banking for the public good

At start of the election campaign the excellent Think Tank the New Economics Forum published a report entitled: “Reforming RBS: local banking for the public good”

In this detailed and explorative report the NEF pictured and supported a revisioning of RBS. A not for profit regional based financing network that focused on SMEs. In the many highlights a reformed RBS would lead to:

1. Increasing credit for the real economy. Local stakeholder banking networks focus more on small and medium enterprise (SME) lending and they increased lending to businesses and households during the recession while large commercial banks withdrew credit from the economy.

2. Protecting jobs and growing their number and quality. Investment in higher staff-to-customer ratios by local stakeholder banks with consequent tax revenues, saved welfare, and benefit costs and social benefits.

3. Improving the diversity and resilience of the UK banking system. Offering greater protection to the economy against future economic shocks. Which is  of particular interest to Scotland with %…..

4. Promoting financial inclusion through access to a current account for all UK citizens, and maintenance of universal branch coverage across the UK.

5. Rebalancing the economy. Increasing investment and economic development in regions outside London, as well as greater financial support for local social, cultural, and sporting activities.

As well as all of the above the NEF suggests that RBS would add between £8billion and £13billion to GDP over the first three years acting as a good bank. The policy could almost single handily reduce that scary £30billion cuts figure that has dominated the campaign. Not only is this a vision but it is a practical solution that adds more good than simply increasing GDP.

Reading between the lines of the red lines there are many issues where Labour can lead a progressive anti Tory alliance. The reform of our financial services starting with a look at the role of RBS could be a way in which a successful working government redraws the lines of banks, challenges them to become part of the community and to serve those communities, not to serve shareholders.

For a bank it shouldn’t be about profit. It should be about doing good. Banks shouldn’t be there to make money for their investors; they should be there to support businesses and consumers to better their lives. Wouldn’t it be great if banks measured themselves on this rather than on the bottom line? What if they could actually do good. What if you wanted to hug a banker rather than bash him?

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