MSE Guide: Ethical banking

WillPS

Lions_89 said:

And then you have the other ethics, a bank makes money from you borrowing from them or from the account fee. An account fee is perhaps acceptable, but any bank which makes a profile from borrowing is not ethical in my opinion. Not forgetting, payments will be processed by Visa and Mastercard, they most likely use a big bank for the bank end payments etc. So in reality you are not really avoiding the big boys. Barclays has its hand in most of the payment systems. There is no escape. Many of the small banks do. Metro Bank uses Barclays for it's payments.

I think you might have it a bit twisted. If you're borrowing the money, you know absolutely who is benefitting from that money (you).

The real use case for 'ethical' banking is surely wherever you hold your funds, because those deposits will in turn be used to lend to others (and you have no control over that, other than an ability to withdraw your funds when the terms of your account allow it).

As you note, there's no way of avoiding big banks completely - ultimately you don't control what happens to the funds after they leave your account and it's highly likely it'll be hitting one or more of them.

Lions_89

WillPS said:

Lions_89 said:

And then you have the other ethics, a bank makes money from you borrowing from them or from the account fee. An account fee is perhaps acceptable, but any bank which makes a profile from borrowing is not ethical in my opinion. Not forgetting, payments will be processed by Visa and Mastercard, they most likely use a big bank for the bank end payments etc. So in reality you are not really avoiding the big boys. Barclays has its hand in most of the payment systems. There is no escape. Many of the small banks do. Metro Bank uses Barclays for it's payments.

I think you might have it a bit twisted. If you're borrowing the money, you know absolutely who is benefitting from that money (you).

The real use case for 'ethical' banking is surely wherever you hold your funds, because those deposits will in turn be used to lend to others (and you have no control over that, other than an ability to withdraw your funds when the terms of your account allow it).

As you note, there's no way of avoiding big banks completely - ultimately you don't control what happens to the funds after they leave your account and it's highly likely it'll be hitting one or more of them.

I'm not really sure you have understood my point. No one has disputed if you need money and a bank can lend it to you, it doesn't benefit the person. But that is certainly not ethical. You are making profit from someone else's need. Not a problem, unless you are claiming to be an ethical bank.

gsmh

@blue.peter Interesting. Does this mean serial switching to collect incentives is also amoral? Your description certainly fits!

WillPS

gsmh said:

@blue.peter Interesting. Does this mean serial switching to collect incentives is also amoral? Your description certainly fits!

Depends on whether or not you judge the incentive to be primarily about getting a CASS (and a scattering of activity for a limited period) to happen, or whether you judge it to be something banks offer in exchange for new business.

In my view most (but not all) are more interested in the former, but it doesn't stop me going after the ones that fall in to the latter either.

blue.peter

gsmh said:

@blue.peter Interesting. Does this mean serial switching to collect incentives is also amoral? Your description certainly fits!

Hmmm. I'm out of my depth here. This is one for a real philosopher, to whom I'll happily defer if he/she/they turns up with an answer.

Meanwhile, my strictly amateur analysis says that it might be immoral, amoral or neither.

The first question I'd ask is "is serial switching wrong?".

I've seen folk here who argue that it's not at all wrong. All that serial switchers are doing is taking advantage of a situation created by the banks. If we accept this argument, it's neither immoral nor amoral.

On the other hand, banks do put restrictions on who can benefit from switches. (RBS/NatWest typically gives its incentive in two parts: the first on switching, and the second if you're still with them after a year, which will be some deterrent to serial switching.) I think we can assume from this that the banks might not be keen on serial switching, and would stop making switch offers if they see too much of it (i.e., it reaches the point at which it ceases to be profitable to them). This suggests that it is, or might be, wrong. (I lean towards this view. I've taken advantage of one or two offers, but only when I wanted to try the banks in question anyway, and wouldn't characterise myself as a "serial switcher".)

Then the question is whether the switcher knows it to be wrong (or would decide that if they thought about it) but does it anyway, or just doesn't think about the question. The former would be immoral and the latter amoral.

WillPS

blue.peter said:

On the other hand, banks do put restrictions on who can benefit from switches. (RBS/NatWest typically gives its incentive in two parts: the first on switching, and the second if you're still with them after a year, which will be some deterrent to serial switching.) I think we can assume from this that the banks might not be keen on serial switching, and would stop making switch offers if they see too much of it (i.e., it reaches the point at which it ceases to be profitable to them). This suggests that it is, or might be, wrong. (I lean towards this view. I've taken advantage of one or two offers, but only when I wanted to try the banks in question anyway, and wouldn't characterise myself as a "serial switcher".)

Natwest Group have stopped doing this - it's just a static £200 since the incentive returned early this year.

TSB do it though, I tend to believe of them that they don't really know what they're doing...

blue.peter

WillPS said:

Natwest Group have stopped doing this - it's just a static £200 since the incentive returned early this year.

Fair enough. Obviously, I've lost touch with that side of things. Could we retrospectively change the tense of my verb from "gives" to "used to give"?

eskbanker

Lions_89 said:

eskbanker said:

Lions_89 said:

eskbanker said:

Lions_89 said:

WillPS said:

Lions_89 said:

And then you have the other ethics, a bank makes money from you borrowing from them or from the account fee. An account fee is perhaps acceptable, but any bank which makes a profile from borrowing is not ethical in my opinion. Not forgetting, payments will be processed by Visa and Mastercard, they most likely use a big bank for the bank end payments etc. So in reality you are not really avoiding the big boys. Barclays has its hand in most of the payment systems. There is no escape. Many of the small banks do. Metro Bank uses Barclays for it's payments.

I think you might have it a bit twisted. If you're borrowing the money, you know absolutely who is benefitting from that money (you).

The real use case for 'ethical' banking is surely wherever you hold your funds, because those deposits will in turn be used to lend to others (and you have no control over that, other than an ability to withdraw your funds when the terms of your account allow it).

As you note, there's no way of avoiding big banks completely - ultimately you don't control what happens to the funds after they leave your account and it's highly likely it'll be hitting one or more of them.

I'm not really sure you have understood my point. No one has disputed if you need money and a bank can lend it to you, it doesn't benefit the person. But that is certainly not ethical. You are making profit from someone else's need. Not a problem, unless you are claiming to be an ethical bank.

Not sure I'm understanding your point either, aren't you effectively suggesting that any commercial business seeking to make a profit is inherently unethical by virtue of that aim?

I have said that twice now, I thought it would be clear.

Your point was made in the context of a thread about ethical banks, but if you favour a Marxist ideology and object to any profit-making enterprise in any sector then that's not necessarily invalid but goes some way beyond a sensible and reasonable dialogue about ethics in banking....

I am not sure where you are going with this. Nobody mentioned Marxist ideology and nobody mentioned making profile in any sector. And that includes the nine members who voted this post. I was simply referring to banks, lending money to people, and making a profit from it. As you said yourself at the start of the reply, the point was made in the context of ethical banks. They are loan sharks and nothing more. 

I suspect that this has probably run its course, but if you read back, I was highlighting that the logical conclusion from your remarks about banks making profits seemed to be a wider ethical objection to "any commercial business seeking to make a profit", and you seemed to confirm that this was what you meant.  Do you believe that a bank lending money (or charging fees, etc?) for profit is unethical, but a supermarket selling baked beans for more than cost price (for the ultimate benefit of its shareholders) is behaving more ethically somehow?

Section62

eskbanker said:

Lions_89 said:

I am not sure where you are going with this. Nobody mentioned Marxist ideology and nobody mentioned making profile in any sector. And that includes the nine members who voted this post. I was simply referring to banks, lending money to people, and making a profit from it. As you said yourself at the start of the reply, the point was made in the context of ethical banks. They are loan sharks and nothing more. 

I suspect that this has probably run its course, but if you read back, I was highlighting that the logical conclusion from your remarks about banks making profits seemed to be a wider ethical objection to "any commercial business seeking to make a profit", and you seemed to confirm that this was what you meant.  Do you believe that a bank lending money (or charging fees, etc?) for profit is unethical, but a supermarket selling baked beans for more than cost price (for the ultimate benefit of its shareholders) is behaving more ethically somehow?

...if it is Waitrose maybe?

I can't help but feel that a thread on ethical banking is up there with 'debate house prices and the economy' in terms of its ability to cause argument for argument's sake, with very little enlightenment of the forum in general being possible.  Entrenched views on what 'ethical' looks like don't really help us figure out whether bank 'A' is better than bank 'B'.

And if all banks are "loan sharks" then we may as well find something more constructive to talk about, like the price of baked beans perhaps.

gsmh

Section62 said:

I can't help but feel that a thread on ethical banking is up there with 'debate house prices and the economy' in terms of its ability to cause argument for argument's sake, with very little enlightenment of the forum in general being possible.  Entrenched views on what 'ethical' looks like don't really help us figure out whether bank 'A' is better than bank 'B'.

I think some people pretend they haven't a clue about what ethical finance is all about. I would imagine the majority of people would look to what the institution does with the money invested in it. Here Triodos excels as it is completely transparent as to who it lends to. The other side of the coin is how those institutions treat their customers. This is where some 'ethical' institutions fall down. Offering a good, competitive service and being ethical are not oxymorons - but companies often use being ethical as an excuse for poor service - they know that if ethics are so important to the customer then a lower quality of service will be tolerated. That's where the compromise I mentioned earlier in this thread comes into play.