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Changing banking for the good of communities

JenniferTankardPublication of the parliamentary commission on banking standards’ report ‘Changing Banking for Good’ in June resulted in some sensational headlines. These included ‘Jail rogue bankers’, ‘MPs told to split RBS in two’ and ‘Bankers should face threat of jail and loss of bonuses’.

But beyond the headlines are a wider range of recommendations to improve banking standards by increasing diversity and transparency within the banking sector and improving financial literacy. These are all issues that are crucial to promoting fair access to finance which, in turn, will increase financial inclusion and support local economic growth. They are also all issues that the Community Investment Coalition has campaigned for.

It might be easy for those working at a regional or local level to shrug their shoulders about banking reform and feel that the national and global complexity of the financial services market puts it out of reach of local influence. But in fact many of the commission’s proposed reforms, if implemented, could provide a stronger framework for local enterprise partnerships, local authorities and others to make a real difference in ensuring access to fair finance and affordable financial services for local communities. This would have a positive impact on local economic growth as well as tackling the reliance on payday lenders that has become the scourge of many deprived communities.

Indeed the report’s section on the need for better provision of basic bank accounts, including access to the payments system and money management services and free use of the ATM network, highlights the role of local partnerships in working with the banking industry to ensure that ‘the right to a basic bank account can be realised for all’.

Other recommendations that would increase access to fair finance include measures to create a level playing field for peer-to-peer lending and crowdfunding firms; reviewing the effectiveness of tax incentives intended to encourage investment into community development finance institutions (CDFIs); and that the Department for Communities and Local Government reviews its guidance on local government deposits as this currently penalises new and small banks from accessing this funding. It also highlights the need for disclosure of lending decisions by banks as crucial to enable policymakers to identify communities and geographic areas poorly served by the mainstream banking sector.

The commission’s report was hailed by some as the most important review of banking in a generation. Regional and local leaders should take this opportunity to shape the provision of fair finance for their communities. By encouraging the government to implement these recommendations, championing the need for data disclosure and supporting local credit unions and CDFIs to play a fuller role in providing local financial services, local leaders can also play a significant role in changing banking for good.

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