The UK government increased the pressure on banks to provide better services for the financially excluded, when on January 19 it announced ideas for a new central services organisation to support new and existing credit unions – to be run as a joint venture with the financial service providers. The government also wants the banks to support a new national strategy to improve radically adult basic skills including numeracy.
President of the Chartered Institute of Bankers and former chief executive of NatWest , Derek Wanless, is to lead a group to investigate financial exclusion. One in ten families have no access to financial services and the group will recommend ways the industry can help provide educational services in the most disadvantaged neighbourhoods. Contact DfEE Enquiries on 020 7925 5555 (http://www.dfee.gov.uk)
Consumer skills to combat social exclusion
A partnership between the Consumers’ Association, the Basic Skills Agency, the Financial Services Authority, the European Union and the government is developing a programme to promote learning of consumer skills among both adults and young people. The programme, launched just before Christmas, will run for 18 months and has three objectives:
-to develop consumer skills and knowledge among vulnerable adult consumers and so help to combat social exclusion;
-to develop a learning programme in retail finances for adults;
-to develop consumer education for schoolchildren aged 14-16 focusing on personal finance.
The total cost of the project is around £530,000 of which the EU will provide half as it is hoped that the results will be shared across Europe. Contact Basic Skills Agency on 0207 405 4017 (http://www.basic-skills.co.uk)
Finance and minority ethnic communities
A team from De Monfort, Middlesex and Paisley Universities began work in January on a £100,000 research project into the relationship between banks and their minority ethnic business customers. Sponsored by the British Bankers’ Association , the Bank of England , the DTI and the Commission for Racial Equality, the two year study is focusing on difficulties experienced by minority ethnic businesses, particularly in obtaining finance and business support. The study will also address issues of perceived and actual discrimination. Contact Brian Capon, BBA, on 020 7216 8810 (http://www.bba.org.uk)
Financial inclusion for women
At a breakfast meeting on January 25, representatives of the financial services industry met government ministers to discuss access by women to financial products. Issues addressed included types of marketing, improving women’s financial capability and providing appropriate products for different stages of women’s lives. Among attendees were the Financial Services Authority, Tesco Personal Finance and Virgin One . Research by the FSA has found that on average women lack confidence in their understanding of personal finance to a greater degree than men, and that their numeracy skills tend to be less proficient. Contact FSA on 0845 606 1234 (http://www.fsa.gov.uk)
Calling for a CRA
The New Economics Foundation wants the government to pressurise banks to reveal where they are lending money, as the first step towards a US-style strategy for combating financial exclusion. A report published towards the end last year, Show and Tell: a community reinvestment act for the UK? shows how banks can act on such information to invest profitably in the most disadvantaged areas. New Economics argues that the US Community Reinvestment Act has dramatically increased investment in community development since 1977, up eight times over the past six years alone, and says that similar British legislation would allow banks to be rated on how well they service poorer areas. Other recommendations include:
-all retail banks should offer basic bank accounts to any customer, subject to minimum legal requirements (currently only the case in Scotland);
-capital directed towards social inclusion through community finance initiatives should rise £192 million from £96 million at present;
-closure of the last bank branch in a neighbourhood should be subject to minimum community consultation requirements and a detailed consideration of the alternatives.
The Association of British Insurers , which represents the pensions, protection and investment industry, is establishing an independent regulatory body, following criticisms over pensions mis-selling. The Pensions, Protection and Investments Accreditation Board, whose members will come from outside the industry, will introduce new market standards based on three principles: clarity of information, appropriateness of the product purchased and the quality of the service provided. Brands that meet the new standards, to be set after consultation with consumer groups and the FSA regulator, will be use a new quality ‘kitemark’. Contact A BI on 020 7600 3333 (http://www.abi.org.uk)
Comment
Community Affairs Briefing has long argued that some social issues are so profound they demand an industry response. Indeed we have gone further and said individual companies will not improve their own corporate reputations while their sector is mired in controversy. Some years ago, the natural resource sector of oil and mining companies was the main bête noire of campaigners. Now it is financial services.
That sector is at the sharp cutting edge of economic restructuring. Call centres spring up where once ship yards and coal mines were the main employers. Branch banks are ‘hollowed out’ or closed. Hardly a day goes by without news of another take-over or merger. Within Europe, the sector is slowly being liberalised with all the possibilities and pains of greater competition. At a local level, the banks’ traditionally important role, with the branch manager as a pillar of the local community, has changed beyond recognition.
None of this can be undone, yet perceptions of financial exclusion must be addressed. For companies in the sector, they must redouble their own individual activities, both on basic products and in community involvement (what fate awaits NatWest’s excellent financial literacy programme under Royal Bank of Scotland management?). But crucially, they must also expand the type of industry-wide schemes we report above. For other companies in different industries – supermarket retailers? utilities? pharmaceuticals? – the lesson to learn is that charges of profiteering are easily levelled and hard to rebut if the sector as a whole is perceived to be acting irresponsibly.
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