Real Banking for the Real Economy: Comparing Sustainable Bank Performance with the Largest Banks in the World
Five years after the financial crisis began in earnest with the collapse of Lehman Brothers, the negative impact from a damaged banking system on the real economy continues to be felt. Continued stress in the global financial system provides the backdrop to high levels of unemployment, low levels of business borrowing, and unsustainable public finances in many countries. At the same time the impact of climate change increasingly challenges communities coping with a changing environment.
Public policy and banking regulation are now increasingly focused on the need to improve the quality of the banking system in general, with a view to supporting the real economy in particular. Underlying this effort is a back-to-basics approach that relies on traditional measures of capital strength and liquidity. Many in the banking industry oppose the changes, claiming that they will prompt a decline in lending to the real economy.
Throughout this period of private reflection and public debate, a group of sustainable banks, all members of the Global Alliance for Banking on Values (GABV), have continued to successfully finance the real economy through business models based on the Principles of Sustainable Banking that follow.
Principles of Sustainable Banking
1. Triple bottom line approach at the heart of the business model;
2. Grounded in communities, serving the real economy and enabling new business models to meet the needs of both;
3. Long-term relationships with clients and a direct understanding of their economic activities and the risks involved;
4. Long-term, self-sustaining, and resilient to outside disruptions;
5. Transparent and inclusive governance;
6. All of these principles embedded in the culture of the bank.