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
Egg
Green/Ethical Products
None
Ethical Lending or Insurance
No evidence of an ethical lending policy.
Responsible Lending
1. Credit Lending
Egg offers 95% LTV (loan-to-value) rates for two and three year fixed-rate mortgages (2007). This does not compare 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. Egg has not publicly disclosed its LTI (loan-to-income) rate for mortgage products. The Turner Review’s analysis suggests lending to 3.5 times of income for single applicants.
However, Egg indicates that it has stopped offering mortgage products. Though the above rates still apply to existing customers.
In terms of conducting checks into the credit history of customers seeking unsecured credit, Egg indicates that it ‘may’ conduct checks with credit reference agencies but specific details are not supplied publicly.
2. Debt Warning
The bank issues the generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’
For unsecured loans the bank provides some general guidelines for customers to avoid getting into debt. These include checking the balance on accounts before making withdrawals, repaying more the minimum amount, paying on time and stressing the importance of budgeting.
The bank does not use the FSA Debt Test or an equivalent. 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
No information was found regarding the bank’s policies on payment default and handling payment problems, or the stages involved in the repossession process or before court action, on secured loans (mortgages).
With regard to unsecured loans the bank states that it might offer a number of options, including arranging an affordable payment plan; short-term reduced payments; amending payment dates; temporarily increasing the credit limit on cards; and altering payment schedules.
Payment holidays are offered on the bank’s two and three-year fixed-rate mortgages but the possible duration of these are not stated. With regard to unsecured credit, information was found for Egg’s credit cards which states: ‘We [the bank] may allow you [the customer] occasional payment holidays. If we do this, we will still charge interest as if a payment was due during the payment holiday.’
No public data was found as to whether or not the bank offers re-housing advice to customers whose homes have been repossessed or whether it liaises with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements.
Financial Exclusion
No evidence of policy or products.
Environment
The company’s environmental policy refers to the key areas of climate change/energy efficiency and waste management. However, there is no evidence of a long term commitment to continued improvement of its environmental performance.
Carbon Neutral
No evidence was found of a pledge on making business operations carbon neutral.
Equal Opportunities
Egg has a non-discrimination policy for employees but does not cover disability and sexual orientation.
Women on the Board
No data found.
Voluntary Standards & Initiatives
No evidence that Egg is a signatory to any charters or initiatives. Its parent company, Citigroup, is a signatory/member of the following:
Egg
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Emergency)
