Sunday, 25 April 2010

Better Banking

I've just signed up to support the campaign. Of course it's always tempting for a candidate to sign up to virtually every pledge which is waved under their nose, in the hope that it will coax another voter into the fold, but I have a track record on this issue from my days on the Treasury Select Committee. Indeed, I made a speech in Parliament in 2006 on the need for a UK-equivalent to the US Community Reinvestment Act, which I seem to recall was met with rather blank looks in the Chamber. (Actually I made two speeches on it; here's the other one, you'll need to scroll down.)

Here's an extract from the Better Banking website, setting out their objectives:

1) Transparency

In order to understand how big and widespread the problem of financial exclusion is, we first need to know exactly which groups of people and parts of the country banks are lending money to and which they aren’t. The Better Banking Campaign therefore believes that banks should provide information on where their money comes from and where this is invested, and that this data should be broken down by demographic group and geographic area.

2) An Incentive Structure

Once we know who banks lend to and who they don’t, an incentive structure needs to be created to encourage banks to start lending to people, businesses and third sector organisations in underserved communities. Banks which take their responsibilities seriously should be rewarded, while those performing poorly should face penalties. In America, this incentive structure is provided by a piece of legislation called the Community Reinvestment Act. The Better Banking Campaign believes that an equivalent piece of legislation should also be introduced here in the UK.

3) A Cap on Extortionate Lending Rates

When people are unable to access finance from a mainstream bank, they are often forced to turn to a high-cost lender (such as a pay-day loan company) or, even worse, a loan shark. As the UK is one of the few EU countries without a legal cap on lending rates, these alternative lenders are able to charge whatever rate they like. Sometimes this can be as high as 3000%, meaning people end up paying back vastly more than they originally borrowed. The Better Banking Campaign believes that it is unacceptable that any form of lender should be allowed to profiteer in this way at the expense of people in need. We are therefore calling for the introduction of a cap on extortionate lending rates.

4) A Commitment to Re-invest 1% of Profits

In recognition for the assistance taxpayers have given banks since the financial crisis, we believe banks should be required to re-invest 1% of their pre-tax profits for social benefit. Some banks do in fact already do this through their CSR policies, but the Better Banking Campaign believes that making this a requirement for all banks will help ensure they take seriously their contribution to wider society.

1 comment:

Tyler Durden said...

You do know, don't you, that the Communities Reinvestment act was the piece of legislation which created the whole subprime/Alt A mortgage market don't you?

THe same mortgages which caused the financial crisis....? You really sure that more lending regardless of the credit worthiness of the borrower is a good idea?