7th September 2012
The UK’s banks need to re-focus on the core business of ‘lending to the real economy so as to contribute to balanced and sustainable growth’ according to a submission to the Banking Reform White Paper, issued today.
The submission, from a coalition of organisations supporting community investment (including the CDFA), states that the Banking Reform White Paper focuses almost entirely on the management of risk and fails to address the other failures of banks to deliver their core functions.
It calls on the Government to take additional measures to those set out in the White Paper. These include ensuring that banks are placed under an obligation to demonstrate, through the publication of annual reviews, disclosure of lending data, and pro-active engagement with local authorities and Local Enterprise Partnerships, that they are fulfilling their core purpose and supporting sustainable economic growth at the national and local levels.
Damon Gibbons from the Centre for Responsible Credit said:
“The financial crisis, triggered by reckless lending by the banks, has caused financial hardship in communities across the UK with many businesses and households now struggling to access the financial products and credit they need at prices they can afford. It is essential that the banks do more to help communities recover from the impact of the financial crisis and to support economic growth for the UK”.
The submission asks for a requirement to be inserted into banking licenses that they report on their economic footprint, and disclose the activities that they are undertaking currently to support SMEs, the third sector and low to middle income households. This would help to promote competition, as consumers would be able to take account of the economic impact of banks in their communities when selecting their provider of financial services.
A standardised reporting framework includes a requirement to report on local as well as national banking provision and its impacts. The reports generated should be publicly available and individual banks should be rated by the regulators on their performance.
Government should also consider how good performance could be incentivised, for example through the relaxation of liquidity requirements where lending is clearly being undertaken to benefit UK businesses and households, subject to effective under-writing procedures being in place. Conversely, where bank performance is rated as poor they should be denied access to support from the Bank of England or taxpayer backed schemes unless they have committed to put in place a plan of remedial action.
Download a copy of the submission to the white paper.
For enquiries please contact:
Centre for Responsible Credit – Damon Gibbons on 07961 869473
[email protected]
http://www.responsible-credit.org.uk/
Community Development Foundation – Jennifer Tankard, 07971 510085
A session at the forthcoming CDFA Conference will cover how banks and CDFIs can work together to meet the credit needs of our communities. View the Conference programme
The organisations involved in making this submission are CfRC, CDFA, and CDF:
The Centre for Responsible Credit (CfRC) is a dedicated unit established within the Centre for Economic and Social Inclusion to: monitor the development of credit markets; research models of responsible provision, and promote policy responses which protect the long term interests of households.
CDFA’s mission is to support the development of a thriving and sustainable community development finance (CDFI) sector that provides finance for disadvantaged and underserved communities and, as a consequence, contribute to the increasing prosperity of these communities.
The Community Development Foundation (CDF) is a social enterprise passionate about helping communities. We have unique expertise in using community development to strengthen local voices, improve people’s lives and create better places to live. Our vision is for successful lives in flourishing communities.