Banking Overview
How much do you know about your bank? Do you know what type of businesses it lends to?
Does it refuse to lend to companies with poor human rights records, that sell arms or pollute the environment, for example? Does your bank offer services to those on low incomes or the unemployed? And how many women sit on its board?
Such questions often go unasked of the banking sector. But the same caring principles that make you buy Fairtrade goods and recycle household waste can be applied to how you bank too.
Key green and ethical issues to consider
Finding a green or ethical banking option
How banks use your money
The money that you deposit in your current or savings account doesn't just sit there untouched until you require it again - your bank lends it on to others at interest.
Banks don't just lend money to current account-holding customers either, they lend to large corporations, public institutions and even governments.
As many banks are listed on the stock exchange, they are answerable to external shareholders who expect healthy returns on their investments.
While the Treasury hands down some prohibitions as to who banks can and can't do business with, it still leaves them relatively free to engage with companies that you might not approve of and they use your money to do it.
Would you approve if your bank was lending money to heavy polluting industries or even to an oppressive regime?
Key green and ethical issues to consider
Responsible Lending
The recent global economic downturn is often attributed to the 'sub prime crisis'.
Sub prime lending means giving loans to people who are considered to be in higher risk categories - those more likely to default or who have a poor credit history, for example.
This type of lending is not problematic in itself - credit unions and community development finance institutions regularly lend to sub prime candidates. Instead, irresponsible lending to customers in the sub prime category is the problem.
In the build up to the 'crunch' some financial institutions were lending 100% mortgages (and in some cases more) to people who would not be able to make their repayments in the long term.
Lending responsibly shouldn't be limited to just mortgages - it applies to all loans, big and small, and to the provision of credit cards too. Figures from the Bank of England show that UK residents owe £233bn on credit cards, overdrafts and other loans.
Key questions to ask: Does your bank have responsible lending policies that ensure that its products are targeted in an appropriate manner? And does it provide advice or debt management services to customers who fall into financial difficulty?
Climate Change and the Environment
Banks have an impact in these areas, not just in terms of who they lend to or invest in, but how they run their own operations. It is important to find out what your bank is doing to improve its environmental performance as a business: have they pledged to go carbon neutral for example? Or do they offer any green products to their customers?
Financial Exclusion
There are an estimated two million people in the UK without even the most basic bank account. Is your bank doing anything to address this situation?
For more details see our Financial Exclusion section.
Project Finance
In its most basic form, this type of financing is for companies and governments where lenders are repaid through the revenues generated, i.e. the lender has a vested interest in the success of a project.
Common projects receiving finance are petrochemical and chemical plants, power plants, telecommunications and infrastructure. But do lenders ensure that these projects are conducted in a green or ethical way?
Use our search facility to find out about your bank's policy on the environment, ethical lending, responsibility towards its customers, equal opportunities and other issues.
Finding a green or ethical banking option
Building Societies and Credit Unions
Mutual building societies and credit unions are generally smaller, customer-owned operations that primarily lend to individuals and so are less likely to have the same exposure to issues like the arms trade, for example.
Green and Ethical Alternatives
There are a number of banks and building societies with prominent green and ethical credentials. The four examples listed below also scored the highest marks on ethical lending in our research:
- Co-operative Bank: this bank's robust green and ethical policies govern its current accounts, savings and investment products.
- Smile: this internet arm of the Co-operative Bank shares the parent company's ethical policy.
- Triodos Bank: this bank offers green and ethical savings accounts and investments. The bank was established in 1980 in the Netherlands and now has significant operations in the UK.
- Ecology Building Society: this mutual building society offers a range of green savings accounts and mortgage options.
You can use the banking section search to find the banks that perform best against our green and ethical criteria.
Your next steps
What do you do now? Check out our guide Next Steps - Banking for information on how to give your bank account a green and ethical makeover.
Banking Search
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Bank / Building Society Profile
Alliance & Leicester
Green/Ethical Products
- Basic Bank Account
- Commercial lending in renewable energy sector
Ethical Lending or Insurance
Alliance & Leicester has an ethical lending policy that covers applications from personal and commercial customers and which is applied on a case-by-case basis. Sectors/customers excluded by the policy are:
- Businesses involved in the manufacture of torture equipment or other equipment that is used in the violation of human rights
- Any government or company which fails to uphold basic human rights within its sphere of influence
- Any company involved in the unauthorised development of genetically modified organisms
- Companies involved in the tobacco industry
- Any individual entitled to claim diplomatic immunity
- Any individual known to have an unspent criminal conviction
Furthermore the bank states that it does not participate in financing sovereign debt to Third World countries or support currency speculation.
It also states that its commercial lending operations have a specialist team focused on supporting businesses involved in recycling and the generation of renewable energy and that it applies environmental screening to its project finance initiatives.
Alliance & Leicester has a team of commercial lending staff based in offices in Manchester and London.
Responsible Lending
1. Credit Lending
Alliance & Leicester offers LTV (loan-to-value) mortgage rates of up to 75%. This compares very favourably with the FSA’s Turner Review suggestion of a maximum LTV of 90%, i.e. the borrower should have at least a 10% deposit.
Specific figures for LTI (loan-to-income) rates were not found.
Applications for secured and unsecured credit are subject to both credit scoring (using information submitted by the applicant) and checking with credit reference agencies. It is not clear what checks are run on credit card applicants.
No evidence was found of a policy to avoid or prevent offering unrequested increases in credit limits to customers.
2. Debt Warning
The bank issues the generic warning to its mortgage customers: ‘Your home may be at risk if you do not keep up repayments on your mortgage.’ No warnings were found about the consequences of falling behind on payments on unsecured credit.
The bank refers customers to the FSA’s Money Made Clear site, which offers a Debt Test and other important financial advice services. The test aims to help customers find out whether you have, or are likely to have, problems with borrowing.
3. Debt Management and Advice
The bank’s leaflet ‘Fair Treatment of Customers with Financial Difficulties' sums up its policies with regard to payment default and handling payment problems. It states that the bank will:
- Make early contact with the customer
- Make ‘reasonable efforts’ to reach a mutually agreed payment arrangement, i.e. consider extending the term of the mortgage, reach a temporary payment arrangement or change the payment date or way payments are made
- Liaise with advice agencies such as the Citizens Advice Bureau if requested
- Allow ‘reasonable’ time for arrears to be repaid
It also outlines the steps involved in repossessing a property.
Some ‘flexible mortgages’ allow customers to take payment holidays for up to six months. The particulars of this arrangement or who qualifies for it are not outlined. Payment holidays are not permitted on personal loans.
No information was found as to what assistance or guidance is offered to unsecured credit borrowers or credit card customers.
No evidence was found that the bank offers re-housing advice or liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with mortgage customers facing repossession.
Financial Exclusion
The bank provides a basic bank account to low income customers.
In mid-2008, Liverpool-based community savings and loan co-operative, Sefton Credit Union, became the first in the UK to adopt Alliance & Leicester Commercial Bank’s upgraded prepaid card self-service facility and there are plans for similar partnerships with other credit unions in the future.
In terms of access provisions, Alliance & Leicester customers can avail of their accounts through the national Post Office network. The bank also has a customer disability support unit. Sign language interpreters can be engaged on request for customers who are deaf, hard of hearing or have speech impairments.
While the bank does not engage in microfinance projects it does provide services to SMEs (Small and Medium Enterprises).
No information was found regarding preferential lending to poor/financially excluded communities.
Environment
Alliance & Leicester’s environment policy addresses our key criteria regarding energy efficiency and waste management. Its commitment to continuous improvement of its environmental performance is captured in targets set by its Environmental Management System (EMS).
Carbon Neutral
The bank has a public commitment to reduce its operational carbon footprint by implementing company-wide policies, however, there is no target date for carbon neutrality.
Equal Opportunities
The bank’s equal opportunities policy addresses the four key areas of gender, race, disability and sexuality.
Women on the Board
According to figures from 2007 25% of board members are women.
Voluntary Standards & Initiatives
Parent company Santander:
Charitable Giving
The bank donated 0.20% of its pre-tax earning in 2007.
Alliance & Leicester
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Family, Card, Identity)
Alliance & Leicester
Alliance & Leicester
Customer Service Centre
Carlton Park
Narborough
Leicester
LE19 0AL
