Banking for the Common Good

Banking’s corrupt and unassailable and there’s nothing we can do about it, right? On the day that its revealed the Cabinet minister Sajid David was among Deutsche bankers paid massive bonuses under a tax avoidance scam a new Scottish alternative for a sane banking system has been put forward.

Scotland’s banking system is “unsafe and unfit for purpose” and new “safe, sustainable, stakeholder” banks are needed, linked together through a government-owned network, a new report published today has argued. Robin McAlpine of the Common Weal added: “People think that banking is one of those issue where Scotland just has to sit around and hope that Westminster does something good – which it never does. We really want to get across the message that Scotland could create a really powerful, people-centred banking system within the powers it already has and that this could be a really big, really transformative project for a Scottish Government.”

Christine Berry, Senior Researcher at the New Economics Foundation reiterated the point:

“Despite the dangerous complacency guiding a return to business as usual in the City, we are nowhere near having fixed the problems with our banking system that led to the crisis of 2008. We’re still far too dependent on a small number of very large, very similar shareholder-owned banks with little interest in serving small businesses or rural communities, or in financing the transition to a low-carbon economy. Scotland doesn’t have to wait for Westminster to wake up to this: this report shows it has the power to lead the way in building a better system, learning from the best of our European neighbours.”

The report, ‘Banking for the Common Good’, comes as the danger of a new financial crisis has been heightened in recent months, with government-owned RBS – Scotland’s biggest bank – telling investors to “sell everything”, as its shares slumped to their lowest value in more than three years. The report is a collaboration between Friends of the Earth Scotland, the New Economics Foundation, the Common Weal and Move Your Money. It essentially shows with a stark clarity that Scotland’s banking sector is made up of a very small number of mega-banks that are failing in terms of services to customers and companies, and of investment in a sustainable and productive economy.

The authors put forward three key proposals that the Scottish Government could enact now, including:

·         a powerful Scottish National Investment Bank

·         locally-rooted ‘People’s Banks’

·         a publicly-owned interbank payment system

The report, authored by Gemma Bone, argues that the new banks could make the Scottish economy more resilient in the face of a future financial crisis by increasing “counter-cyclical spending”, as well as directing funding to “environmentally and socially useful projects”. The proposals draw on best practice internationally including the German ‘Sparkassen’ model and the Nordic Investment Bank. Gemma Bone said:

“The UK missed a big opportunity to reform the banking system after the crisis of 2008, and banking reform has since dropped off the agenda. We wrote this report to show that systemic reform of banking is both possible and desirable.

“It is pleasing to launch it in Edinburgh, a city with a long and varied history of financial innovation but this year we are calling on Scotland to take up a leading role once again to transform the banking system to better meet the pressing needs of the environment, businesses and society.“

Lesley Brennan,Labour MSP for North East of Scotland who is hosting the report launch at the Scottish Parliament this evening commented:

“Since the financial crises of 2008, taxpayers and consumers have been effectively paying the price for the breakdown of an unsustainable model of banking seen here in Scotland and across the world. Simply returning to yet another unsustainable top-heavy model with ‘light touch regulation’ cannot be an option going forward.”