By Diane Small
I know, I know – banking is one of the dullest topics in the world, right? But if you care about ethical fashion, organic food and non-toxic beauty products, you’ll seriously want to read this article.
There’s really not much good I can say about banks. Sure, they’re a safer place to store your money, and they can help you buy a house or start a business. On the other hand, banks have caused the near-collapse of the entire global financial system; have regularly rewarded staff with obscenely bloated bonuses; have the nerve to charge us a fee for the privilege of taking our cash out of a cash point and frankly, they have far too much control over our lives and finances. (I mean, just try to get paid from any job or move money from one country to another without going through the banking system! It’s simply not allowed).
But you should know this: by placing your money with a financial institution, you’re actually making an important decision. You’re loaning money to a bank, which will in turn loan that money out, for profit. And banks do make big profits – that’s why many people invest in them. But how to they make that money? From us, for one (the more money we give them in the form of interest free loans via our savings accounts, the more money they can lend out for profit), but also from the investments they make with our savings accounts – and many of those investments are far from ethical.
In theory, we too should be making at least a small profit for having lent out our hard earned dollars to a bank. Normally, this is seen in the form of interest payments to our accounts. But with European banks charging up to €12 a month just for opening an account, and with interest rates hovering around .5% with most savings accounts, it seems the ones who gain the most from our opening a bank account are the banks themselves.
The good news is that there are increasing numbers of more ethical alternatives to unethical banks. In the UK, for example, there are plenty of banking co-operatives, building societies and green funds that do good things with the money you put into them. In Australia, IG is offering such a platform.
Admittedly, it’s a pain in the butt to switch banks, especially when you have loads of direct debits connected to them. But after learning that their banks were supporting the pipeline that is affecting the rights and water safety of Native Indians in Standing Rock, many people around the world voted against that oppression by removing their ‘loans’ to banks (in the form of savings accounts), which the banks in turn invested in that horrid pipeline.
But while the Standing Rock story made huge headlines, there are loads of other dastardly deals banks make that don’t get that much attention.
7 reasons you should change to an ethical bank
1. Your bank almost certainly supports war
If you bank with Lloyds, Barclays, HSBC, Halifax, the Royal Bank of Scotland, Bank of America or most other major banks, you are helping to support the arms industry. For example, Barclays alone is known to have a portfolio of arms shares worth over £7bn, but all the banks mentioned above invest the money we give them into arms companies, like Lockheed Martin, Rolls Royce and BAE Systems, which then in turn sell those arms around the world. When Israel invades Gaza, or Syria gets bombed yet again, guess who wins? The arms companies – and the banks who invested in them. In fact, it doesn’t matter which side in a war wins – banks will invest in arms on either side of a conflict. After all, it takes two to go to war, and the more weapons sold (no matter to whom), the better for the bank. War is big business! If you hate this idea, then switch to an ethical bank, and tell your old bank exactly why you’re pulling your money out of them.
2. Most banks support environmental destruction
Besides war, another highly lucrative investment is usually in gas, oil and mining – in short, the extractive industries. The more energy burned, the better for the banks that invest in these companies. The more the Earth is torn apart for new metals (as opposed to recycling what already exists or simply constructing less), the better for these banks, too. Wouldn’t you feel better knowing that your bank invests in green energy instead?
But it’s not just the extractive industries that are ruining the planet – big agriculture and pharmaceutical companies are just as much to blame. For example, most mainstream banks will invest in large food companies that promote GMOs, harmful pesticides, and unethical cattle and pig farming. Vegans beware!
3. Your bank might support animal testing
As mentioned above, big pharma is another area banks love to invest. Unless otherwise stipulated, you can pretty much bet that those pharmaceutical companies are testing on animals. Some co-operative banks in the UK, however, have signed a charter stating they will not invest in any companies that harm animals in any way.
4. Your bank is ripping you off
As any saver knows, interest rates today on savings accounts may as well not even exist. In fact, many banks actually charge you for the service of using them! But building societies, including Coventry, Nationwide and Cumberland plough profits back into the business for the benefit of the borrowers (i.e. giving more loans and services), rather than for shareholders, who expect their investments in banks to yield good dividends.
Also, some banks charge insane amounts if you exceed your overdraft limit. So much so, that regulators have demanded that banks refund some of those to their customers – but most of us weren’t aware we were entitled to such a deal.
5. Ethical banks do good things
You’ve already read that most banks lend money to the worst of the worst kinds of corporations. But ethical accounts actually do good with the money you lend them. Savers can rest assured that Charity Bank.org, for example, only lends to charities, volunteer groups and social enterprises trying to make the world a better place. Triodos Bank offers ethical savings accounts that lend that money to groups involved with organic food production, renewable energy and fair trade businesses. Wouldn’t it be great to know that the money you’ve saved in the bank is actually going towards doing something that benefits people in a positive way?
6. Most of the bigger banks overpay their workers by a LOT
We all know about the insane bonuses bankers get. We’re talking six figure bonuses in some cases, for guys (and they are usually guys) who are still only in their 20s. There’s seriously no way to justify this. That money is our money – we lent it to the banks in the first place. What about a better interest payment for us? Or perhaps a lower interest mortgage? Josh Bivens and Lawrence Mishel, economists at the Economic Policy Institute – wrote a report stating that the rise in income inequality over the last few decades could be attributed greatly to the soaring pay of CEOs and Wall Street Bankers. Personally, I’d rather my bank not contribute to the well-being of the 1%.
7. The mainstream banks are behind virtually all the banking crises
As mentioned before, high street banks were behind the last banking crisis. In fact, they’ve been behind every banking crisis, from the Great Depression to the Big Short. It’s not like these were huge mistakes – the bankers knew exactly what they were doing. While millions of people lost their homes and savings, and even while thousands of bankers lost their jobs as banks folded, a handful of wily men at the top became very rich indeed.
While the subprime mortgage crisis is too complex to get into here, suffice it to say that as long as a bank’s key goal is to earn massive profit, no matter what the cost, and as long as governments are politically beholden to kowtowing to the power banks have over their economies, the banking crises will continue. Fortunately, ethical banks have other priorities.
How to Swap Banks
It’s not as hard as you think.
- Choose a new bank. Be aware of what you will need to open an account (ID, cash, etc)
- Transfer your direct debits (Spotify, Netflix, Paypal, etc) into your new account.
- Make sure you have no incomings going into your old account – cheques, payments, etc.
- Close the old account. If it’s on ethical grounds, be sure to tell your old bank this!
- Make sure you have some form of written agreement that you are closing your account, and ensure that there will be no further charges after doing so. Viola! You’re done. You’ll sleep better knowing you’re not indirectly contributing to some seriously heinous activities.
The bottom line on the bottom line
It seems the government is helpless in the face of regulating powerful banks. Even after the last huge banking crisis, little has changed – no wonder many analysts are predicting another, larger crisis is on the way. Isn’t it time we took control over our own finances ourselves?
All images, including Maurice the Stockbroker carton: Wikicommons Main image: bourse.wiki