A group of directors from alternative banks across Europe are calling for a fundamental restructuring of the financial system with a series of new measures designed to bring sustainability to the sector.
Brought together by the International Association of Investors in the Social Economy, chief executives of leading alternative banks in Europe have just met in Frankfurt to discuss responses to the growing financial turmoil.
Apart from the common view held by the participants on what constitutes good banking practice, the alternative banks have another characteristic in common – none of the banks participating in the forum have been hit by the effects of the crisis, on the contrary they have all experienced a substantial growth in new clients.
Drawing upon their shared experience and ethical business models the alternative banks are calling for significant change and a reshaping of the European financial sector.
It wants to see financial service providers focus upon delivering value and services to the real economy. This commitment should be demonstrated by a reduction in the prevalence of complex financial instruments and unsustainable speculation.
It also believes the unregulated inflation of assets, as demonstrated by property bubbles in both the USA and UK, has a clear tendency to inflate lending volumes and create false prosperity through a credit addicted economy.
The banks believe the exploitation of regional differences in regulation and the avoidance of tax payments is wholly unacceptable. It says the community of states must make real efforts to close so-called “offshore financial centres” or “tax havens”.
It also thinks it must not be possible for financial institutions to grow to a size where alone their collapse could bring down the system. The systemic relevance of institutions should be regulated by transferring and implementing size criteria laid down in national supervisory regulations at a global level. Appropriate lessons should be learnt from the example of Iceland and its banks.
They are also calling for the rating agencies to be subject to financial supervision, amongst other measures.
Paul Ellis, chief executive of Ecology Building Society, says: “Although developments differ across European states, it is clear that by drawing on our ethical business models the European alternative banks are ideally placed to steer the sector towards a value-orientated development of the financial system.”
“The European alternative banks see this task as a challenge and we will strengthen our contribution to advancing the new developments. Despite our relative small size we see ourselves as best practice examples of progressive banking. In the months and years to come we expect heightened cooperation between the member banking institutions of INAISE on these policy issues and a higher profile in public debate. ”