Banking for the Common Good, written by Gemma Bone, says the current situation where the sector is made up of a few mega banks is “unsafe and unfit for purpose.” It needs more diverse financial institutions, the author suggests.
The report, a collaboration between Friends of the Earth Scotland, think tanks the New Economics Foundation and the Common Weal, and financial campaigners Move Your Money, recommends regional not-for profit ‘People’s Banks’ be created to offer services to local people and business. By investing solely in their region, they would help money circulate within local areas and serve the public interest.
They would work together as part of a network, which would mean they could share risk and work together to provide services such as payments systems.
National investment bank
The research also calls for a new publically-funded Scottish national investment bank. It would offer seed funding for the People’s Banks and support sustainable development and employment. It would also be able to invest in projects private banks are unable or unwilling to fund.
The proposals draw on best practice internationally including the German ‘Sparkassen’ model and the Nordic Investment Bank. Although the research looks specifically at the Scottish system, the findings could be applied across the UK.
The report says implementing the measure would make Scotland’s banking sector more resilient to any future financial crisis and would increase funding for environmentally and socially useful projects.
Gemma Bone, a PhD student at Newcastle University 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.”
The report was launched at the Scottish Parliament this week. “It was pleasing to launch it in Edinburgh, a city with a long and varied history of financial innovation,” said the researcher. “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."
Friends of the Earth Scotland finance campaigner, Ric Lander said: "We need banking that is grounded in local communities and serves society and our environment. We are proud to be launching this report showing how, with some political courage, the Scottish Parliament could create banking for the common good."
Press release adapted with thanks from Friends of the Earth Scotland
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