Triodos Bank complies with the growing body of regulations established in the aftermath of the financial crisis. But this presents challenges, not least because of the quantity of new requirements which are principally designed to deal with some of the deep-seated challenges in the financial sector. We hope to contribute to constructive discussions with policy-makers about how best to take account of the learning from sustainable banks who can offer ideas about how to find solutions to these challenges.
The Liikanen report, published in October of 2012 and authored by the European Commission’s High-level Expert Group on Bank Structural Reform, argues that the regulation of financial institutions, and banks in particular, should be differentiated much more than is currently the case, on the basis of their contribution to systemic risk and usefulness for the real economy. The report argues that competition is distorted in the current system because the world’s biggest banks benefit from an implicit guarantee of their debt; the same big banks lack a focus on the real economy; and they are increasingly complex making conflicts of interest more likely. We intend to add our voice to this kind of thinking next year and beyond, because re-thinking in this way can contribute to a healthier, diversified banking sector that will be better for people, the environment and the economy.
The power of a change in culture
Regulations have an important role to play but will be redundant without a change in culture and behaviour. In the aftermath of the crisis however, their quantity and complexity has ballooned. From LIBOR fixing to mis-selling scandals, a culture has emerged that starts with profit maximisation at the top of institutions and filters down to financial incentives rather than responsible care for the interests of customers and wider society.
We believe Triodos Bank, and others like us, have a role to play promoting a return to banking as a respected and valued profession, built around a genuine motivation to serve people. Banks will focus, because they have to, on meeting new regulatory demands. But real and lasting change is cultural and comes from within. It cannot be secured by external rules and guidelines alone. Instead it is a reflection of what we collectively believe the role of banks in society are, or should be. If in the future we want to build a resilient and robust banking system, we have to be clearer about its role and invest in the required change in the culture of banks. In the future, banks will no longer need to focus only on prioritising profit, but on facilitating the real economy and therefore contributing to society in a healthy and fairer way. This change will take time. But it is inevitable.
As individuals, most of us recognise that for change to be permanent, it has to come from inside ourselves. So we have to start with people. Long-term change has to happen if we’re to avoid the economic and environmental storms of recent years. Rather than only focus on clearing up after them, we also need to re-think and address the economic, social and environmental conditions that have helped prompt them in the first place.
Each of us is part of this process, not only the banks. Triodos Bank is part of a growing movement of individuals, more and more of whom are choosing to embrace a better quality of life through a myriad of decisions and actions; from how and where we shop, choosing local food for example, to how we source our energy, participating in local renewable energy initiatives or buying from green suppliers. Individuals are also entrepreneurs, many of whom are choosing to create sustainable enterprises, often financed by a growing movement of sustainable banks of which Triodos Bank is just one. That we, and they, are relatively small has drawbacks, but many more advantages.