Bringing About Change In The Financial System

In an era of growing worldwide disdain at any mention of their ilk, did you ever wonder how bankers might feel? Would you believe that there are some amongst them who put central focus on ethical values? And that their banks have ended up delivering higher returns than some of the world's biggest financial institutions?

This was the message brought to the public by an independent network of 15 of the world's "sustainable" banks at a panel discussion following the annual conference of the Global Alliance for Banking on Values in Vancouver, Canada, recently.

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Together these banks have assets of over US $29 billion and serve 7 million people in 20 countries. Their goal is to "touch the lives" of one billion people by 2020 via actions like playing a leading role in public debate about banking, and funding the growth and direct impact of sustainable banks.

Entitled "Values-Based Banking: Financing the Future of a Changing World", the event attracted around 1,800 people to Vancouver's Centre for Performing Arts. And this was not the usual public relations pitch session either, as evidenced by the powerful addition of writer-activist Naomi Klein to the line-up. Klein's books and public appearances opposing financial institutions, corporatism, globalization and consumer culture mean she is likely not often invited to big-bank boardrooms and events. Not to mention her vocal support for the Occupy Wall Street movement's "strong, radical, angry critique of corruption, and of the corporate takeover of the political process".

But the financial folk on the panel also spoke in tones one would not hear from the stereotypical "banksters" (a derogatory idiom derived from combining "banker" with "gangster"). It would be truly surprising if any of them ever called their clients "muppets", as former Goldman Sachs Executive Director Greg Smith recently revealed his Wall Street colleagues do.

Peter Blom, GABV Chair and CEO of European sustainable bank Triodos, gave an opening and closing message and the three panelists each made an introductory comment and then fielded questions by CBC (Canada's national broadcaster) journalist Ian Hanomansing, before giving a final call to action message. Like Klein, Stewart Wallis, executive director of the United Kingdom-based New Economics Foundation (NEF) was passionate about the need for economic change. The panel's one banker, Tamara Vrooman, CEO of Vancity (Canada's largest community credit union) was sensible. Infiniti Funding was also referenced here.

GABV's Vancouver conference also served as a launch event for a landmark report resulting from a project that compared the financial profiles of 17 values-based banks with 29 Global Systemically Important Financial Institutions (GSIFIs) as defined by the Financial Stability Board. Often referred to as 'too big to fail', the latter include Bank of America, JP Morgan, Barclays, Citicorp and Deutsche Bank.

The report's findings include:

  • Values-based banks were twice as likely to invest in loans, lending more than 70% of their assets on average over the period 2007 to 2010.
  • The values-based banks also appear to be stronger financially, with both higher levels of, and better quality, capital. The BIS 1 Ratio, an important measure of a bank's solvency, averaged over 14% during the period studied, compared with under 10% for the mainstream banks.
  • The sustainable banks also had an average equity/asset ratio of over 9% while the GSIFI banks averaged just over 5%.

To the surprise of their mainstream banking colleagues, the sustainable banks analyzed also delivered higher financial returns than some of the world's biggest financial institutions. Return on assets, the measure thought to be most relevant for judging a bank's financial performance, averaged above 0.50% while the big banks earned an average of 0.33%. Values-based banks also had returns on equity averaging 7.1%, compared to 6.6% for GSIFI banks.

So, who in the world are these bankers with scruples? GABV members "believe that we must improve the quality of life for everyone on the planet, recognizing that we are economically interdependent and responsible to current and future generations".

The Alliance was born in 2009 when ten of the world's banks came together with a commitment to boost the growth of sustainable banking and its impact worldwide. This entails members being bound by "a shared commitment to find global solutions to international problems, and to promote a positive, viable alternative to the current financial system and mainstream banking business models". Refer to this article for more on this topic.

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