Banking for the Common Good: Laying the foundations of safe, sustainable, stakeholder banking in Scotland

Stephen Richard — Tue, 31 Aug 2021 07:05:54 +0000

Primary Author or Creator

Gemma Bone

Stephen Richard Tue, 08/31/2021 - 08:05

Additional Author(s) / Creators

Common Weal, Ric Lander Christine Berry, Josh Ryan-Collins, Ben Wray, Fionn Travers-Smith,

Date Published

Thu, 03/10/2016 - 12:00

Category

Banking

Fast Facts

The report makes the case for:

Not-for-profit “People’s Banks” should be established in Scotland’s regions to offer banking services to local people and business.

Local banks would be part of a “People’s Banking Network” to share risk and cooperate on training, marketing and the operation of key services such as payments systems.

This paper is a collaboration between Common Weal, Friends of the Earth Scotland, Move your Money and New Economics Foundation. Author: Gemma Bone.

More details

. UK-wide 2 million people do not have a bank account and there are now 1,500 communities with no access to banking. Evidence suggests that the poorest are the most likely to lack access. Small businesses are neglected, and what lending is available is disproportionately focused outside of Scotland. Our banks are not providing sufficient funds for much-needed infrastructure. Our banking system is structurally unable to fund “patient capital”, i.e. low-return but potentially risky investments, like those which are needed to stimulate the transition to a low-carbon, sustainable economy. Instead, billions are channelled into property, inflating asset prices, as well as unsustainable industries such as coal mining, the manufacture of nuclear weapons, and speculation on food prices, a practice which is fuelling global malnutrition.

We need more diversity in our financial institutions. Other developed economies have a range of institutions which provide stability and public accountability. National investment banks provide strategic and long-term finance to industry either directly or through intermediaries. Examples include Germany’s Kreditanstalt für Wiederaufbau, the European Investment Bank and the Nordic Investment Bank.The existence of national investment banks or other forms of public ownership of banking is closely associated with higher economic growth and greater economic stability

Not-for-profit “People’s Banks” should be established in Scotland’s regions to offer banking services to local people and business. They would be overseen by representatives of local people and bank workers with support from financial experts, and be capitalised by national investment bodies and local authorities. By investing solely in their respective regions, People’s Banks would help money circulate within local areas and serve the public interest. Local banks would be part of a “People’s Banking Network” to share risk and cooperate on training, marketing and the operation of key services such as payments systems.

A “Scottish National Investment Bank” would help establish these institutions by offering seed funding and structural support. The bank would be institutionally independent from Government but publicly owned, and mandated to promote through its lending sustainable development and employment. A national investment bank would leverage Scotland’s existing infrastructure budget to invest in projects which private banks are unwilling or unable to fund. We argue that with only a modest 6.5% (£225 million) of the Scottish Government’s capital budget invested as subscribed capital this new bank would leverage a total of £3.4 billion to invest from year one. Scotland’s local government pension funds, valued at £28 billion, could invest in bonds issued by such a bank, giving them a reliable mechanism through which to invest in local infrastructure.

Scotland is part of the Sterling area and just as this analysis is applicable across the UK, so are our proposals. However in the absence of a response from the UK Government we believe that with vision and political will the Scottish Government can implement these reforms directly.

Our recommendations are:

1. Scotland’s political parties should discuss and endorse the implementation of our model for banking for the common good.

2. The Scottish Government should convene a task force to examine these proposals in greater depth, bringing in a wide range of stakeholders to include Scottish Enterprise, economic development agencies, existing local and municipal banking institutions, credit unions, civil society groups and local authorities.

3. The taskforce should commission legal and regulatory advice on how a Scottish National Investment Bank could be created, to underpin the creation of a People’s Banking Network for local, democratic banking in Scotland.

Resource Address (URL)

https://commonweal.scot/wp-content/uploads/2016/03/Banking-for-the-Common-Good-…

Keywords

banking

Scottish National Investment Bank

Local Banking

Language English