You’re about to hear a lot more about “good banks” and “bad banks”. The report from the parliamentary banking standards commission, due on Friday, and Stephen Hester’s departure from Royal Bank of Scotland will reignite questions such as whether RBS should be split into “good” and “bad” operations (Mr Hester opposed this).
Running in parallel is a philosophical debate about how you ensure banks are “good” – in the sense of having a strong, positive purpose.
But there is also the question of whether banks that do good are always good banks.
The relationship between banks and societies was discussed on Wednesday at an event in St Paul’s Cathedral, organised jointly by the St. Paul’s Institute and CCLA, which manages funds for charities, churches and local authorities.
Justin Welby, the archbishop of Canterbury and a member of the banking standards commission (whose imminent report he declined to discuss), told a packed room that banking profit and good returns were “a necessity, but only a means to an end [and] the end should be human flourishing”. If banks did not pop the “bubble of inward-looking self-regard” in which they were living, he envisaged a dystopia in which “international banks remain in an ever more prosperous City with ever higher property prices, [where their] needs are served by a disenfranchised population” of “serfs” commuting in from the surrounding countryside:
To move from dystopia to utopia, banks must have values of integration into society, mutual service to all other parts of society, reasonable but not excessive profitability, and effective and measured distribution of wealth, to ensure high levels of investment in sustainable products and things that are good.
Antony Jenkins, Barclays’ chief executive, who is attempting to change the culture at the bank, took up the challenge, saying there was no contradiction between “doing well and behaving well”. In fact the scandals and crises of trust that had damaged his and other banks proved “you can’t have long-term success [if you don't] behave responsibly”.
Fair enough. But the ghost at Wednesday’s feast was the Co-operative Bank. A year or two ago, it would have been extolled – alongside mutuals, building societies and credit unions – as a model of “goodness”. Alas, as we now know, its acquisition of Britannia building society in 2009, to form a “super-mutual”, not only tripled its size, but increased its bad debts and eventually precipitated a credit rating downgrade to “junk” status this year. The 2009 deal now looks like an example of empire-building almost as ill-judged, in its way, as the acquisition of ABN Amro that helped push RBS to the wall a year before.
Activist Laura Willoughby got the biggest cheer of Wednesday’s debate with her message that people should vote with their feet and move their money from the biggest banks towards local, ethical and mutual financial services providers. Some 2.4m already have, according to new figures from the Move Your Money campaign she leads. That is an arrow aimed straight at the bubble of City self-regard that the archbishop identified. But strong purpose is not always synonymous with strong management. The moral of the Co-op story is clear: to be a good bank, in every sense of the phrase, both are required.