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
Yorkshire Bank
Green/Ethical Products
- Basic Bank Account (Readycash)
- Personal insurance for terminal/critical illness and disability
Ethical Lending or Insurance
Parent company National Australia Bank (NAB) has a policy not to finance the arms trade, whether it is conventional arms (including landmines or any equipment designed to be used as an instrument of torture) or nuclear, chemical, biological or other weapons of mass destruction. It has similar policies in regard to tobacco, pornography and animal testing. NAB has internal credit policies on the environmental impact of its lending and signed the UN Environmental Programme for Financial Institutions, which outlines criteria for investment in developing countries. In 2007 NAB has become a signatory to the revised Equator Principles which provide criteria for lending to large project finance initiatives.
Responsible Lending
1. Credit Lending
The Yorkshire Bank offers an LTV (loan-to-value) mortgage rate of up to 80%. 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 uses credit scoring to assess loan applications. However, it is not clear if the scoring is based on information submitted by the applicant only or if information from credit reference agencies is included.
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 a generic warning to mortgage customers: ‘Your home may be repossessed if you do not keep up repayments on your mortgage.’ No warnings to unsecured credit customers were found about the consequences of not making repayments on time or running up debts.
Customers are not referred to the FSA Debt Test or equivalent test. This test is designed to help customers find out whether you have, or are likely to have, problems with borrowing. It also has tips on what to do if customers find themselves in difficulties.
3. Debt Management and Advice
No policies were found on handling customers who have defaulted on their payments or fallen into financial difficulty. Nor are the steps leading up to repossession or court action outlined.
With regard to payment holidays on secured loans, the bank states that they are available for up to six months on residential mortgages, though it is not specified how a customer might qualify. Payment holidays are not allowed on unsecured loans, though first payments may be deferred until the 14th day in the case of a loan repaid weekly and the 56th day in the case of a loan repaid monthly.
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
The bank offers the Readycash basic bank account to low-income customers.
It provides access services for disabled customers in the form of talking ATMs, documentation in Braille, in-branch provisions and accessible website features.
Environment
A management system is in place to set targets and monitor progress and the bank expresses a commitment to continued improvement of its environmental performance. We could not however find specific details of the policy and the issues it seeks to address i.e. energy efficiency and waste management.
Carbon Neutral
The bank has pledged to make its business operations carbon neutral by 2010.
Equal Opportunities
No reference to employees with disabilities was found in the bank’s equal opportunities policy statement, but the areas of gender, race and sexuality are addressed.
Women on the Board
Figures from 2007 state that 11.1% of board members are women.
Voluntary Standards & Initiatives
Parent company is a signatory/member of:
Charitable Giving
Parent company, NAB reports 0.47% of pre-tax profits were used in community investment in 2007 (includes cash, sponsorship, employee volunteering, management costs, charitable gifts). Cash contributions account for 0.07% of pre-tax profit the same year.
Yorkshire Bank
- Current Accounts
- Savings
- Investments
- Credit Cards
- Loans
- Mortgages
- Insurance (Home, Motor, Life, Critical Illness)
- Student Current Account
Yorkshire Bank
Yorkshire Bank
Customer Engagement
Head Office Complex
4th Floor
51 West George Street
Glasgow
G1 2HL
