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
Lloyds TSB
Green/Ethical Products
- Basic Bank Account
- Islamic Financial Services
- Community finance
- Socially Responsible Investment Funds (through Scottish Windows)
Ethical Lending or Insurance
No evidence was found of an ethical lending policy.
Responsible Lending
1. Credit Lending
All Lloyds TSB branded mortgages are administered by partner bank Cheltenham & Gloucester (C&G). Lloyds TSB/C&G offers LTV (loan-to-value) rates up to 90%, matching the suggestions of the FSA’s Turner Review that borrowers should have at least a 10% deposit for a mortgage.
Lloyds also offers a ‘Lend a Hand’ mortgage for first time buyers with an LTV of 95%.
The bank does not publish its LTI (loan-to-income) rates, however, for which the Review suggests lending 3.5 times the annual wage of a single applicant.
The bank states that it uses credit reference agencies in all cases to make lending decisions for mortgages, personal loans, credit cards and overdrafts and that it will also use an internal check where there is an existing relationship with the customer.
There is no policy to avoid or prevent offering unsolicited increases in credit limits to customers. The bank states that customers can request limit decreases or that no further increases are given.
2. Debt Warning
The bank has a statement that ‘borrowing sensibly’ will help preserve a good credit rating. It also runs a generic repossession warning for mortgage customers.
Additionally the bank’s pre-contract agreement for personal loans carries the following warning: ‘Missing payments could have severe consequences and make obtaining credit more difficult’. It also outlines the rights of both borrower and lender under the Consumer Credit Act (1974).
The bank provides a link to the FSA’s Money Made Clear website in its section on debt advice, though does not explicitly link to the FSA’s Debt Test tool or an equivalent.
However, the C&G ‘Am I Eligible?’ page provides tools for customers to calculate their borrowing and repayment amounts and terms which carries a generic repossession warning at the end.
3. Debt Management and Advice
With regard to secured loans (mortgages) the bank recommends that customers seek free debt advice and provides links to organisations and websites including Consumer Direct, Citizens Advice Bureau, the FSA’s Money Made Clear website and the National Debtline.
The bank also states that it will:
- Allow customers a ‘reasonable period of time’ to pay back their debt
- Talk to an agency which gives debt advice, for example the Citizens Advice Bureau, if the customer requests it
- Offer to send a debt counsellor to discuss the customer’s financial circumstances and add the fee for same to the mortgage account
- Attempt to arrange a new payment plan
- Offer to change the method the customer makes their payments by or the date they make them
- Consider extending the mortgage time period, thus reducing monthly payments
- Consider a change in mortgage type to reduce monthly repayments
Further to this the bank outlines the steps leading up to repossession of property/court action.
Short, free-of-charge payment holidays are offered to customers who have made regular overpayments. Those who have not been overpaying may still be eligible for a break but will incur a charge and must have already made 12 monthly payments.
With regard to unsecured loans the bank outlines ‘steps to take to pay off debt’. Amongst these steps is a reference to the bank’s ‘Debt Remedy Tool’ which provides customers with an assessment of their circumstances and access to expert advice, anonymous and free of charge. Financial ‘Health Checks’ are offered to existing customers at branch level.
The bank states that if it repossesses a customer’s home it will give them advice about getting in touch with their local authority to find somewhere else to live. No evidence was found that the bank engages with organisations such as Shelter and the Citizens Advice Bureau to work out re-housing arrangements with the customer or on the customer’s behalf.
Financial Exclusion
The bank offers a basic account to low-income customers.
A number of Lloyds TSB ATMs have been made accessible to disabled customers. The bank has also partnered with the Post Office to allow Lloyds TSB’s personal customers access banking services at around 14,500 post offices. Hearing induction loops are available within all branches while British Sign Language (BSL) interpreters can be called upon for extra assistance in some cases. Typetalk is also available.
Lloyds TSB has been involved in microfinance projects on both a commercial and semi-commercial basis, providing capital for loan funds which are on-loaned to business start-ups, micro-businesses and social enterprises.
The bank's Public and Community Sector team within Corporate Banking states that it is one of the largest funders of the social housing sector in the UK with £6bn committed in 2007. The bank also works in partnership with community-based organisations in the SME sector.
However, no evidence was found of partnerships with credit unions or similar organisations.
Environment
The bank’s environment policy addresses the issue of energy efficiency and waste management. It is also subject to continuous assessment under which targets and achievements will be monitored.
Carbon Neutral
The bank states its goal is to reduce its operational carbon emissions by 30% by 2012 but no pledge for total neutrality was found.
Equal Opportunities
The banks equality policy addresses the key issues of gender, race, disability and sexuality.
Women on the Board
14.28% of board members are women (2007).
Voluntary Standards & Initiatives
Lloyds TSB is a signatory/member of a number of charters and initiatives including:
Charitable Giving
An average of 1% of pre-tax profits was donated to charity over three years (ending 2007).
Lloyds TSB
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Travel, Pet)
- Student Current Account
- Student Credit Card
- Student Contents Insurance
