Recent debacles in banking from various insurance mis-selling scandals (payment protection and interest rate swaps), on-going IT failures (Natwest) and Libor fixing (Barclays, the first of many), have been the natural conclusion of unfettered evolution in financial services that has been taking place since financial deregulation in 1986. Simon Leadbetter explores the inexorable rise of unethical banking and suggests it is time to do some ruthless fettering.
Banks perform a vital task in any liberal economy. They look after savers’ deposits far more effectively than stuffing cash under a mattress (no really), and then invest or lend this money wisely to earn a return for their depositors. This is retail banking and where most people’s experience with banking starts and ends.
Without the borrowing and investment that banking enables, many people would not be able to buy their homes, start or grow businesses and our economy would be a shadow of the sixth largest economy in the world that it is today. Those prudent savers who attack ‘reckless’ borrowers are attacking the very people who pay them a return and grow our economy through consumption, entrepreneurship and innovation.
Banks perform a vital task in any liberal economy
The ecosystem of banking contained many banks, building societies, mutual, friendly societies and credit unions (although an evolving group of four or five banks have dominated the current account market since first world war). The Building Societies Act 1986 allowed building societies to convert into banks. Consolidation rapidly occurred and none of the demutualised building societies remains as a standalone bank today. A sad loss when you consider that the remaining mutuals have not been heaped with the opprobrium of banks in recent years.
What was apparent to mainstream bankers after Big Bang, the 27th October 1986 when the London Stock Exchange rules were relaxed, was that simply lending and investing deposits in safe financial vehicles was a labour intensive business generating marginal returns. Investment banking, gambling on commodities, stocks, bonds, property, currency and derivatives, offered far higher returns albeit with far higher risk.
The solution was simple; close local branches and encourage telephone then online banking, outsource the more mundane operations of the bank such as dealing with customers and allow technology to replace humans, centralise operations and sack thousands of low paid banking workers, to massively lower the cost of the boring retail operation. Management time, the main scarcity in banking as they have plenty of money, could then be devoted to growing the far more exciting investment banking world.
At the same time, loss-making current account holders could be turned to profit if they could be charged exorbitant fees, aggressively sold cheap credit linked to payment protection and several other dubious financial products. Low or average income customers were to be treated like cattle and prodded every now and then to get them to go in the right direction. Personal service was reserved for those who had wealth to invest, that could feed the speculative machine.
Greed, for want of a better word, is good
Gradually the speculative financial markets became disconnected to the definite real markets. For every dollar traded in the real world, £26 is traded on speculative markets. Once it became possible to make digital money betting on the performance of gambles that speculated on the performance of further bets that occasionally had a real outcome, the vital role of retail banking in the non-financial economy was sidelined.
Gradually the speculative financial markets became disconnected to the definite real markets
The relentless bailing out of the banking sector from 2007 to date has removed any moral hazard from bankers who now know that profits from their gambling activities are theirs to keep and losses are nationalised. Markets operate in an atmosphere of fear and greed. In the current era of greed, quantitative easing and bailouts, the fear has gone entirely. A perfectly rational investment banker can still afford to take massive risks as they are using other people’s money, there is no personal risk and any downside is almost certain to be underwritten by the taxpayer.
Tragically, government and opposition parties lack the moral authority to sit in judgement of a financial service sector that lobbies them extensively (to the tune of £93m according to a July report by the Bureau of Investigative Journalism) and pays their bills (50% of Conservative funds come from the City). Nearly one in seven members of the House of Lords has paid connections with the financial sector.
But we desperately need retail banks that behave honestly, with integrity and practice plain talking – the founding principles of Barclays. We need them to lend to small businesses and households. We need them to be part of the communities in which they work so that they can understand and meet the needs of local markets, where most of our trade takes place.
We desperately need retail banks that behave honestly, with integrity and practice plain talking
The time for endless inquiries is over and that uncommon quality, common sense, must prevail. The solutions are simple.
– Crime is crime whatever the colour of a collar, so white collar bankers who have profited through deception must be given exemplary criminal sentences, just as looters were after the summer riots 2011. Personal assets must be seized to repay those that have suffered. Those guilty of a financial crime should not profit in any way. Final responsibility rests at board level so there should be no scapegoating to more junior ranks – if this means a wholesale prosecution and clearing out of boardrooms, so be it. The current cohort of directors have shown little aptitude in developing an ethical banking culture beneath them
– Retail banking plays a vital role in our economy, so investment banking must be separated from retail banking before the next election. If a retail bank fails it should be nationalised. Shareholder will take a far more aggressive role if their investment is on the line. If an investment bank fails, it should be allowed to fail
– Competition works, so big banks must be broken up more aggressively than is currently proposed to encourage far greater competition – an initial limit of 750 branches and 10% market share in current accounts would be a start – both limits would only affect the top four. It is essential that this encourages innovative new entrants rather than the growth of incumbents. This may be painful initially, but an independent commission could ensure that the banks are broken up in a way that ensures national coverage rather than cherry picking of the most affluent areas
– Sunlight is the greatest disinfectant, so there should be significantly greater transparency and public oversight with a well-staffed, well-funded regulator with uncompromising attitude and statutory investigative powers to root out financial crime and unethical behaviour
– Ever more complex regulation isn’t the solution, so financial rules need to be simplified, setting out principles of honest banking rather than the lawyer’s paradise that the current loophole-ridden system represents
In July, we will explore banking in more detail in our Guide to Sustainable Banking. In the meantime, we recommend that you read our Guide to Sustainable Investment. It explores how you can use your money to do more good and less harm, delivering a return for you and vital investment for companies that balance the needs of the planet, its people and prosperity.
Ways Green Preppers Are Trying to Protect their Privacy
Environmental activists are not given the admiration that they deserve. A recent poll by Gallup found that a whopping 32% of Americans still doubt the existence of global warming. The government’s attitude is even worse.
Many global warming activists and green preppers have raised the alarm bell on climate change over the past few years. Government officials have taken notice and begun tracking their activity online. Even former National Guard officers have admitted that green preppers and climate activists are being targeted for terrorist watchlists.
Of course, the extent of their surveillance depends on the context of activism. People that make benign claims about climate change are unlikely to end up on a watchlist, although it is possible if they make allusions to their disdain of the government. However, even the most pacifistic and well intentioned environmental activists may unwittingly trigger some algorithm and be on the wrong side of a criminal investigation.
How could something like this happen? Here are some possibilities:
- They could share a post on social media from a climate extremist group or another individual on the climate watchlist.
- They could overly politicize their social media content, such as being highly critical of the president.
- They could use figures of speech that may be misinterpreted as threats.
- They might praise the goals of a climate change extremist organization that as previously resorted to violence, even if they don’t condone the actual means.
Preppers and environmental activists must do everything in their power to protect their privacy. Failing to do so could cost them their reputation, future career opportunities or even their freedom. Here are some ways that they are contacting themselves.
Living Off the Grid and Only Venturing to Civilization for Online Use
The more digital footprints you leave behind, the greater attention you draw. People that hold controversial views on environmentalism or doomsday prepping must minimize their digital paper trail.
Living off the grid is probably the best way to protect your privacy. You can make occasional trips to town to use the Wi-Fi and stock up on supplies.
Know the Surveillance Policies of Public Wi-Fi Providers
Using Wi-Fi away from your home can be a good way to protect your privacy.However, choosing the right public Wi-Fi providers is going to be very important.
Keep in mind that some corporate coffee shops such a Starbucks can store tapes for up to 60 days. Mom and pop businesses don’t have the technology nor the interest to store them that long. They generally store tips for only 24 hours and delete them afterwards. This gives you a good window of opportunity to post your thoughts on climate change without being detected.
Always use a VPN with a No Logging Policy
Using a VPN is one of the best ways to protect your online privacy. However, some of these providers do a much better job than others. What is a VPN and what should you look for when choosing one? Here are some things to look for when making a selection:
- Make sure they are based in a country that has strict laws on protecting user privacy. VPNs that are based out of Switzerland, Panama for the British Virgin Islands are always good bets.
- Look for VPN that has a strict no logging policy. Some VPNs will actually track the websites that you visit, which almost entirely defeats the purpose. Most obviously much better than this, but many also track Your connections and logging data. You want to use a VPN that doesn’t keep any logs at all.
- Try to choose a VPN that has an Internet kill switch. This means that all content will stop serving if your VPN connection drops, which prevents your personal data from leaking out of the VPN tunnel.
You will be much safer if you use a high-quality VPN consistently, especially if you have controversial views on climate related issues or doomsday prepping.
How Going Green Can Save Your Business Thousands
Running a company isn’t easy. From reporting wages in an efficient way to meeting deadlines and targets, there’s always something to think about – with green business ideas giving entrepreneurs something extra to ponder. While environmental issues may not be at the forefront of your mind right now, it could save your business thousands, so let’s delve deeper into this issue.
Small waste adds up over time
A computer left on overnight might not seem like the end of the world, right? Sure, it’s a rather minor issue compared to losing a client or being refused a loan – but small waste adds up over time. Conserving energy is an effective money saver, so to hold onto that hard-earned cash, try to:
- Turn all electrical gadgets off at the socket rather than leaving them on standby as the latter can crank up your energy bill without you even realizing.
- Switch all lights off when you exit a room and try switching to halogen incandescent light bulbs, compact fluorescent lamps or light emitting diodes as these can use up to 80 per cent less energy than traditional incandescent and are therefore more efficient.
- Replace outdated appliances with their greener counterparts. Energy Star appliances have labels which help you to understand their energy requirements over time.
- Draught-proof your premises as sealing up leaks could slash your energy bills by 30 per cent.
Going electronic has significant benefits
If you don’t want to be buried under a mountain of paperwork, why not opt for digital documents instead of printing everything out? Not only will this save a lot of money on paper and ink but it will also conserve energy and help protect the planet. You may even be entitled to one of the many tax breaks and grants issued to organizations committed to achieving their environmental goals. This is particularly good news for start-ups with limited funds as the Environment Protection Agency (EPA) is keen to support companies opening up their company in a green manner.
Of course, if you’re used to handing out brochures and leaflets at every company meeting or printing out newsletters whenever you get the chance, going electronic may be a challenge – but here are some things you can try:
- Using PowerPoint presentations not printouts
- Communicating via instant messenger apps or email
- Using financial software to manage your books
- Downloading accounting software to keep track of figures
- Arranging digital feedback and review forms
- Making the most of Google Docs
Going green can help you to make money too
Going green and environmental stability is big news at the moment with many companies doing their bit for the environment. While implementing eco-friendly strategies will certainly save you money, reducing your carbon footprint could also make you a few bucks too. How? Well, consumers care about what brands are doing more than ever before, with many deliberately siding with those who are implementing green policies. Essentially, doing your bit for the environment is a PR dream as it allows you to talk about what everyone wants to hear.
Going green can certainly save your money but it should also improve your reputation too and give you a platform to promote your business.