IF BANKS in the retail sector do not perform in a socially responsible fashion, their licences should be revoked, said Church of Ireland primate Archbishop Alan Harper.
“We cannot allow hard-working people to be driven to the point of suicide by institutions, parts of which those same desperate and distraught people actually own,” he said.
In his presidential address to the Church of Ireland General Synod, which opened at Christ Church Cathedral in Dublin yesterday, he said: “Banks have obligations and responsibilities proportionate to the significance of their public role and function. That public role and function is to facilitate financial flows. Banks and financial institutions are not themselves wealth-creators.”
What was now required was “a reassertion of the key understanding that the first obligation of the retail banks is to the customer and that the true interests of shareholders are best-served by implementing customer satisfaction”, he said. “Part of that banking obligation to the customer involves ensuring that credit is available to keep business alive for, without business, wealth-creation ceases and employment collapses.”
The effects of the restriction in bank lending had been “disastrous for small- and medium-sized businesses, especially in the construction sector and, consequently, for those made unemployed as businesses contract”.
Many employers had been forced to the wall, he said. One long-established firm he knew had laid off 60 per cent of its workforce, others have ceased trading altogether. “Punitive rates of interest . . . are being demanded; banks are reducing overdraft facilities; asset-rich but cash-poor businesses are being starved of the cash required to enable them to trade, yet these same small- and medium-sized businesses are the backbone of the local economy,” he added.
It might have been expected that “liquidity having been pumped into the banks to enable them to begin lending again in the real economy, viable business and industry would have found their liquidity requirements readily met by banks anxious to ensure the future for their clients”, he said.
It was as if the retail banking sector had been “morally compromised by association with the culture of investment banking”.
Another problem was “the apparent powerlessness of local bank managers to use their judgment about the needs of clients they know because lending decisions are taken on a ‘tick-box’ basis in a head office somewhere, sanitised from the real world of people”. This, he felt, was “a radical departure from the ethical and moral values which used to inform banking towards a culture of the relentless pursuit of profit at any price and a reckless attitude to other people’s money and future livelihood”. He pointed out “now, however, the majority shareholder is often the taxpayer. In these circumstances, it is not enough for the banks to indulge in the ruthless pursuit of profit on the premise of delivering shareholder value, leading them to invest heavily in what they hope will prove the more profitable investment arm.”
There was “no shareholder value for the taxpayer if banking policy puts people on the dole, causes significant loss of tax revenue, and inflates the cost of the social security system”. What was required was “a completely new banking morality that takes full account of the social obligations of financial institutions and that insulates ordinary people and businesses from exposure to the risks of investment banking”.
Also required were “much more effective and powerful regulators”. But, “current investigations into the conduct of Goldman Sachs and an associated hedge fund do not suggest that morality or social responsibility has yet returned”, he said.