Trust Issues: Holding Banks Socially Responsible
Can we trust our banks?
If you work in the banking industry, you’re really taking it on the chin at the moment. In the wake of a deep worldwide economic recession, people are blaming bankers for everything – in angry accusations on the radio, damning Letters To The Editor, demands for pay cuts and bonus freezes. A deluge of condemnation, followed closely by politicians and media alike.
Over it all, the question hangs: how were certain financial institutions allowed to get away with such reckless and ultimately catastrophic speculation?
One simple answer is a lack of ethical guidelines. Money-making is informed risk-taking, and when ethics are lifted out, it can so easily become gambling with people’s lives without their consent or knowledge.
Customers left in the dark are a blank check for banks to take any risk they deem necessary to reap profits, based on their own ethical criteria which may or may not coincide with ours – not that we would have any idea, of course. Blind trust is risky. Would you trust the former chairman of the NASDAQ? If so, you’d have become yet another victim of the biggest investment fraud ever committed by an individual, representing $65 billion in fictitious stock. Meanwhile, prominent financier Sir Robert Allen Stanford (would you trust a Sir? Me too) is under investigation for an $8 billion investment scheme fraud. All this, in a recession.
And there’s a second danger: that banks may invest in businesses we find morally objectionable. Guns. Tobacco. Casinos. These pay out spectacularly well, so chasing profits is a slippery slope that even the most pious of banks can tumble down. The Vatican Bank, established “for works of religion or charity”, has also been led astray in the search for profits, as when it took the advice of Michele Sindona and used money linked to heroin manufacture.
So you want your savings to be clean and green and be put to good use? You’ll want the SRI route – Socially Responsible Investing.
It’s not a new thing (John Wesley was a supporter) but it’s never been bigger. You put your savings into an SRI-guided financial body such as a credit union, and not only will it promise to avoid investing in ethically dubious activities, it also puts your money towards business with a proven human rights and environmental record, and to influence the way businesses do business.
A powerful example is how investors successfully pushed pharmaceutical companies to drop their legal protest against a South African law lowering the price of AIDS drugs in 2001. SRI banking uses your money to make a difference – but it also tells you about it. That’s the guiding principle. It’s capitalism sharpened.
But there’s a downside. Your interest rate returns will take a hit – expect a few percentage points lower than a standard current or savings account. If you prefer giving money directly to worthy causes (i.e. Razoo) you might have less to donate at the end of the year through an SRI. Interest excepting, this will probably look like business as usual for you: expect cards, checkbooks, online statements and all the trappings of a financial giant.
The biggest difference? The one thing money can’t buy – trust.
Useful Links:
“Going Green: Ethical Banking” at FinanceDaily.
“Socially Responsible Investing Facts” from the Social Investment Forum.
Social Funds: a major SRI advice site.
Image: cmpalmer
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4 Comments
May 5th, 2009 at 12:17 pm
Great research, great article! Thanks Mike.
May 5th, 2009 at 2:20 pm
Thank you, Sarah .
Must admit, I very much like the idea of leaving my money with people who know how to treat it and how to change the world for the better using it. Evidently so do millions of others, judging from how SRI is really taking off…
May 5th, 2009 at 3:55 pm
Well we trast them for somany years and they use our money and when you are ready to buy a house they are treat you like outlaws and they do not give you the money right a way, if you do not have something to back up your loan. But for them to use your money is OK. How about if we start screan them the way they do and after very much thinking we may give them our money. Well they know that we need them to do business and know we have to pay for the mistakes they did, this is not right. No, you are right I do not trust them , I do not trust any one any more and specially with my money.
May 5th, 2009 at 5:01 pm
I agree – banks need screening. And the SRI approach is a good way to do that. But not only initial screening, but continuing accountability and transparency of business practices…
Thanks for popping by, A.
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