Fri, 30 Jan 2009

European alternative banks call for change in banking practices

FRANKFURT (NNA) – Amid the continuing economic crisis, European alternative banks, meeting in Frankfurt at the end of last year, have called for a fundamental change in banking practices.

The socially and environmentally oriented financial institutions involved, none of whom have been affected by the crisis but have experienced substantial growth in new clients, are Banca Etica (Italy), Cultura Bank (Norway), Ecology Building Society (Great Britain), Ekobanken (Sweden), Freie Gemeinschaftsbank (Switzerland), GLS Bank (Germany), Merkur Bank (Denmark) and Triodos Bank (Germany).

“Across Europe there is a growing awareness of the importance of sustainable handling of money,” Ecology Building Society chief executive Paul Ellis said, “and the crisis has underlined the relevance of this. Many people are questioning their banking relationships and are wanting to know what their institution is doing with their money.

“Although developments differ across European states, it is clear that by drawing on our ethical business models the European alternative banks are ideally placed to steer the sector towards a value-orientated development of the financial system,” Ellis added.

The directors and chief executives of the banks, meeting at the invitation of the International Association of Investors in the Social Economy (INAISE), drew up an eight-point plan to bring sustainability to the financial sector, a statement says.

GLS Bank director Andreas Neukirch said it was precisely the alternative banks which could make a contribution to the value-oriented development of the financial system: “The European banks see this task as a challenge and will strengthen their contribution to advancing the new developments. We see ourselves as best practice examples of progressive banking,” Neukirch, who is also a director of INAISE, said.

According to the eight-point plan, financial service providers “must primarily focus upon delivering value and services to the real economy. This commitment should be demonstrated by a reduction in the prevalence of complex financial instruments and unsustainable speculation.”

Furthermore, the unregulated inflation of assets, as demonstrated by property bubbles in both the USA and UK, had a clear tendency to inflate lending volumes and create false prosperity through a credit addicted economy, the banks say. “Alongside the fight against inflation for consumer goods, international monetary stability should also take account of inflation risks with regard to assets,” the statement says.

The alternative banks, all of whom subscribe to an ethical business model, also demand the closure of off-shore tax havens: “The exploitation of regional differences in regulation and the avoidance of tax payments is wholly unacceptable. The community of states must make real efforts to close so-called offshore financial centres or tax havens,” the plan proposes.

Other points in the plan include restraining the size of financial institutions to prevent them growing to a size where alone their collapse could bring down the system, and better supervision and regulations of the rating agencies to prevent conflicts of interest.

The alternative banks place particular emphasis on the transparency of financial services transactions and products. The focus should be primarily on the long term interests of consumers and citizens, as opposed to shareholders, and the design of products should be simple both in the way they work and terms of contract.

“Transparency is the key to mastering this crisis and, above all, avoiding future crises,” the banks say.

Finally, they urgently call for “a wide-ranging programme of public information and education. The ways in which money is invested, bears interest, is used and shapes our society must be brought to public awareness to a much greater extent.”

When it comes to sustainable investments, the European alternative banks are much in demand and have posted substantial growth rates in recent years. The joint balance sheet total of all these banks has risen to more than 8bn euros (£7.24bn, US$10.46bn) with some 150,000 customers and over 1,000 staff.

The meeting also decided to work together with the World Future Council, established by Jakob von Uexküll, actively to present to the political decision-makers the global framework conditions for new financial management in the form of best policies.

END/nna/cva

Item: 090130-01EN Date: 30 January 2009

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