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
Barclays (incorporating Woolwich)
Green/Ethical Products
- Basic Bank Account
- Some preferential lending in Africa, India, to UK and international students, and ethnic minorities and disabled people in the UK
- Long-term finance for renewable energy and social housing (UK)
- Microfinance (Ghana)
Ethical Lending or Insurance
A policy or policy statement on ethical lending is not in place. However, Barclays states that it does not engage in business operations or with the governments in Sudan and Burma/Myanmar and that it considers other contentious borrowing requests on a case-by-case basis.
Barclays further states that it applies the Equator Principles to some development projects.
An Environmental and Social Risk Policy team advises on Barclays lending functions worldwide.
Responsible Lending
1. Credit Lending
Barclays and its mortgage business, Woolwich, offers 60% to 85% LTV (loan-to-value) rates depending on mortgage product. This compares favourably with the FSA’s Turner Review which suggests that LTV rates be set at 90%, i.e. that borrowers should have at least a 10% deposit for a mortgage.
The bank’s LTI (loan-to-income) rates are a standard multiple of 3.25 for single borrowers but that this can be increased up to 4 or 5 times income for applicants with a medium or high credit score. The Turner Review’s analysis suggests lending to 3.5 times of income for single borrowers.
Barclays state that is uses income multipliers as a guide but that it relies on affordability assessments in its lending decisions.
Barclays states that it discloses and carries out credit reference searches on all unsecured credit applicants and that it also uses a credit scoring tool in its assessment.
No data was found or supplied as to whether the bank has a policy to avoid or prevent offering unsolicited increases in credit limits to customers.
2. Debt Warning
Barclays and Woolwich issue a generic warning to mortgage borrowers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage’.
With regard to unsecured loans, the bank states that if it cannot come to an ‘acceptable agreement’ with customers with regard to repayments it may have to take actions such as:
• Tell credit reference agencies about the customer’s account which would have implications for getting further credit
• Issue a default notice or termination notice under the Consumer Credit Act of 1974, which requires the customer to pay the full amount of missed payment in 14 days
• Close the customer’s account, cancel cards and cancel regular repayments of debt and then seek repayment through official channels
• Refer the customer’s account to a debt collection agency
• Take legal action which may lead to a court judgement which will in turn be registered with credit reference agencies and may require customers to pay legal fees
The bank refers customers to the FSA Debt Test from the ‘Thinking of Borrowing’ section on its website. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulty.
3. Debt Management and Advice
Barclays have policies in place with regard to payment default and handling payment problems on secured loans (mortgages). The banks also outline the steps leading up to repossession of property/court action. The bank states that it will:
- Contact customers at an early stage to discuss problems
- Look at arranging a new payment plan
- Give customers ‘reasonable time’ to pay back any missing payments
- Change the date that payments are due each month
- Allow customers to pay their mortgage over a longer period of time
- Pay reduced payments or interest-only payments for a period of time
In these instances the bank adds the caveat that these options may cost the customer more money in the long run. No information regarding the option of payment holidays/breaks was found. However, the bank has stated that in ‘financial hardship cases’ reduced payments may be acceptable for a period of time.
With regard to providing re-housing advice, Barclays states that if they do repossess a customer’s home, they will give ‘advice about getting in touch with your local authority to see if they can find you somewhere else to live’. However, specific information regarding direct liaison with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements was not found.
With regard to unsecured loans, again no information on the possibility of payment holidays/break was found. Apart from the warnings referred to above, no evidence of policies on payment default and handling payment problems for unsecured loans was found apart from generic statements about trying to give customers the ‘best support and guidance’ to manage their debts.
Financial Exclusion
Barclays has offered financial support to the Association of British Credit Unions Ltd (ABCUL) on the PEARLS project. This monitors the financial stability of credit unions and thus assists with strategic planning for the future. It also works with ABCUL and the Citizens Advice Bureau on CONNECT, a project that aims to develop local partnerships in tackling financial exclusion.
Barclays invests in financial capability projects through its Barclays Money Skills programme. In 2008 it invested nearly £6m in the UK to support 48 local financial capability projects.
Barclays funds microfinance in emerging markets via its subsidiary Absa and offers basic banking in Africa and India.
Other projects have included preferential lending to female and ethnic minority entrepreneurs in the UK and to social housing firms in the UK and South Africa.
Environment
Barclays address the key issues of energy efficiency and waste management in its environment policy. The bank also shows a commitment to improving the environmental performance of its business operations in the long term.
Carbon Neutral
Barclays has pledged to go carbon neutral across all of its business operations in 2009.
Equal Opportunities
Barclays equal opportunities policy addresses the key issues of race, gender, disability and sexuality.
Women on the Board
11.76% reported for 2008
Charitable Giving
Barclays donated 0.74% of its pre-tax profits in 2007.
Barclays (incorporating Woolwich)
- Current Accounts
- Savings
- Loans
- Credit Cards
- Mortgages (via Woolwich)
- Insurance (Home, Motor, Health, Travel)
- Student Current Account
Barclays (incorporating Woolwich)
Barclays
Customer Service
1 Churchill Place
London
E14 5HP
