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
Northern Bank
Green/Ethical Products
- Basic Bank Account
- Parent Study Loan
Ethical Lending or Insurance
The bank does not have an ethical lending policy.
Responsible Lending
1. Credit Lending
Northern Bank offers a maximum LTV (loan-to-value) mortgage rate of 90%. This compares favourably with the FSA’s Turner Review which suggests LTV rates should be no greater than 90%, i.e. that customers should have at least a 10% deposit.
No information on the bank’s LTI (loan-to-income) rate was found. The Turner Review suggests a rate of 3.5 times income for sole applicants.
The bank states that its loan application assessment process ‘may’ involve credit scoring. It is not clear whether this is based solely on information submitted by the applicant or whether checks are done with credit reference agencies.
No specific information was found as to whether a policy was in place to avoid or prevent offering unrequested increases in credit limits to customers.
2. Debt Warning
The bank issues the following warning to its mortgage customers: ‘Your home may be at risk if you do not keep up repayments on your mortgage or any other debt secured on it.’
No warnings were found in relation to the consequences of falling behind on payments on unsecured credit.
No evidence was found that the bank uses or recommends the FSA Debt Test or an equivalent service. This facility is designed to help customers find out whether they have, or are likely to have, problems with borrowing.
3. Debt Management and Advice
In presenting the options/steps it will take to assist customers in financial difficulty, the bank says that it will:
- Contact customers at an early stage to discuss their problems
- Try to arrange a new, mutually agreed payment plan
- Look at changing the interest rate on the mortgage or change the way payments are made
- Consider allowing the customer to pay back the loan over a longer period of time, thus reducing monthly payments but increasing the overall cost of the loan
- Consider allowing the customer to pay reduced payments or just the interest payments for a period of time
- Supply details of organisations who can give debt advice (for example, Citizens Advice Bureau), and talk to them if requested
The bank does not provide information on the steps leading up to repossession or court action.
Payment holidays may be available on secured loans but the necessary circumstances are not publicly outlined.
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 re-possession.
Financial Exclusion
Northern Bank offers a basic bank account to low income customers as well as a low-rate Parent Study Loan.
In terms of access, Northern Bank offers its product literature in Braille, large print and audio tape, on request.
It does not work in partnership with any credit unions or similar mutual organisations nor does it offer preferential lending within deprived communities. Furthermore the bank does not provide funding to microfinance projects.
Environment
The parent company’s environmental policy addresses the key issues of energy efficiency and waste management. It also states a commitment to the continued improvement its environmental performance.
Carbon Neutral
The parent company has pledged to make its business operations carbon neutral by late 2009.
Equal Opportunities
While the parent company’s policy makes reference to race, gender and sexual orientation, we could find no evidence that its equal opportunities policy extends to staff with disabilities.
Women on the Board
33% of parent company, Danske Bank Group's, board are women.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
Charitable Giving
The parent company, Danske Bank Group contributed DKr 29m, c. £3m, or just under 1% of its pre-tax profits, in donations in 2007.
Northern Bank
- Current Accounts
- Credit Cards
- Loans
- Savings and Investments
- Mortgages
- Insurance (Home, Life, Critical Illness, Repayment Protection)
