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
Allied Irish Bank (GB)
Green/Ethical Products
- Basic Bank Account (for customers in Northern Ireland)
The bank offers the following to its customers in the Republic of Ireland:
- 'Add more green' Car Insurance Cashback for customers using low carbon vehicles
- 'Add more green' Car Finance Cashback
- 'Add more green' Home Loans Cashback
Ethical Lending or Insurance
There is no specific reference to who the bank will and will not lend to in their Code of Business Ethics.
However, AIB applies ethical screening criteria in investments and project finance including, but not necessarily restricted to, areas such as tobacco manufacturing, pornography, gambling, armaments, oppressive regimes, human rights abuses and environmental issues.
In 2007 AIB Corporate Banking launched €350m sustainable energy fund to support companies operating in the energy sector.
Responsible Lending
1. Credit Lending
Allied Irish Bank offers 75% LTV (loan-to-value) rates to buy to let and standard mortgage borrowers. This does compares very favourably with the FSA’s Turner Review suggestion that LTV rates should not exceed 90%, i.e. that borrowers should have at least a 10% deposit for a mortgage.
The bank’s LTI (loan-to-income) rate for mortgage products is set at 3 times gross annual salary for an individual borrower and 3 times plus 1 for joint income. Again this compares well with the Turner Review’s analysis which suggests lending to 3.5 times of income for single borrowers.
The bank automatically conducts searches with a credit reference agency for all loan applicants through its New Applications Processing System (NAPS).
It explicitly states that it does not solicit customers with unrequested increases in credit limits (i.e. on credit cards or overdrafts).
2. Debt Warning
The bank offers the following generic warning to mortgage and secured loan customers: ‘Your home is at risk if you do not keep up repayments on a mortgage or other loan secured on it.’ It also warns of potential rate changes on variable rate loans as well as others relating to endowment loans and surcharges.
It does not refer customers to the FSA Debt Test or a close equivalent. Instead the bank uses a ‘Borrowing Wizard’ to calculate monthly loan repayments. However, it is just a calculation, with no related warning system and it is not clearly related to debt management, while the debt test is designed to help customers find out whether they have, or are likely to have, problems with borrowing.
3. Debt Management and Advice
In terms of its policies toward mortgage customers who are defaulting on their payments, the bank states that under the statutory mortgage arrears code, if a borrower is in difficulty the lender will make ‘every reasonable effort’ to agree an alternative repayment schedule and will not commence legal action for repossession until after a certain period from the time arrears arise. In the case of AIB this period is twelve months. No information with regard to possible restructuring options or payment breaks/holidays was found, though the bank stated in its response to our research that if customers fall into arrears options explored with them include restructuring, interest-only payments or a moratorium.
Similar no evidence was found that the bank offers re-housing advice to customers facing possible repossession or liaises with organisations such as Shelter and the Citizens Advice Bureau.
With regard to unsecured loans it states that customers can defer repayments by arrangement e.g. take a break from repayments at Christmas or summer holiday time. It adds the caveat that seeking a deferment may impact on the amount and/or term of the loan.
Financial Exclusion
The bank offers a basic bank account to its customers in Northern Ireland.
All AIB websites comply with WA1 accessibility standards as provided by the World Wide Web Consortium (W3C). This standard ensures that website content can be navigated and read by everyone, regardless of their location, experience or the type of computer technology, and impairment such as blindness, partial sight, deafness, dyslexia, tremors or lack of dexterity in hands and fingers.
Environment
The bank's environment policy addresses the key areas of energy efficiency and waste management. Furthermore the bank states a commitment to improvement of its environmental performance.
Carbon Neutral
The bank has not pledged to make its business operations carbon neutral.
Equal Opportunities
The bank’s equal opportunities statement addresses the key areas: race, gender, sexuality and disability.
Women on the Board
14% in 2007
Voluntary Standards & Initiatives
Charitable Giving
AIB indicates that it makes donations to charity but does not disclose an aggregate amount. One of its main recipients is the ‘Better Ireland’ programme which donated some €2m to children’s groups in 2008.
Allied Irish Bank (GB)
- Current Accounts
