A study comparing key financial information about the world’s biggest banks, or Global Systemically Important Financial Institutions (GSIFIs), and a group of sustainable banks shows significant differences.
- Sustainable banks allocate almost twice as much of their balance sheet to lending to the real economy than the too-big-to-fail banks.
- Financial results over the last ten years show sustainable banks are resilient, support the real economy, and provide stable returns.
The report, which examines the performance of banks over the last decade (2002-2011) shows that dominant big banks lend less, attract less deposits and have a weaker capital base than sustainable banks. The study reveals that sustainable banks are both investing more in a greener and fairer society, and their business model is more robust and resilient.
Key findings:
- Loans/Total Assets
GSIFIs 40.7%
Sustainable Banks 72.4%
- Deposits/Total Assets
GSIFIs 42.0%
Sustainable Banks 72.5%
- Equity/Assets
GSIFIs 5.3%
Sustainable Banks 7.5%
- Tier 1 Capital/Risk Weighted Assets
GSIFIs 10.0%
Sustainable Banks 12.2%
- Return on Equity
GSIFIs 10.8%
Sustainable Banks 9.7%
The Global Alliance of Banking on Values (GABV), an independent network of 20 of the world’s leading sustainable banks, believe the results of the study demonstrate the strength of values-based banks in this unique comparison. They are calling on politicians and regulators to use the sustainable banking model as an important reference point for making the banking system more resilient and to ensure it serves the real economy.
Peter Blom, Chair of the GABV and CEO of Triodos Bank: “This study is crucial because it highlights the fact that the banks that dominate the current banking system have relatively low levels of lending to the real economy and relatively low capital positions.
“Sustainable banks haven’t developed their banking models because of regulations. They operate a different business model because of their values-based approach. The evidence now shows that this approach means a commitment to the real economy, a demonstrable resilience, and steady and reasonable returns.”
Thomas Jorberg, member of the GABV Steering Committee and CEO of GLS Bank: “For some time sustainable banks have quietly gone about their business, focusing on financing the real economy and adopting a prudent approach to their capital position, precisely because they view profit as a means to an end, not an end in itself.
“This new study is crucial, because it exposes how the world’s biggest banks have disconnected from the real economy. Regulators have a chance to learn from these findings and move the banking industry on to a surer, fairer footing. We call on them to take it.”
———
The study also revealed marked differences in growth between both groups, with the sustainable banks growing significantly faster than the GSIFIs.
|
Compound Annual Growth Rates (CAGRs) |
||
|
Sustainable Banks |
GSIFIs |
|
|
Loans |
19.7% |
7.8 % |
|
Deposits |
19.6% |
10.0 % |
|
Assets |
19.0% |
10.4 % |
|
Equity |
20.1% |
11.5 % |
|
Total Income |
16.6% |
6.9 % |
The Global Alliance for Banking on Values (GABV) released the ‘Strong and Straightforward: The Business Case for Sustainable Banking’ report today, comparing the financial performance of 22 sustainable banks, and 28 of the world’s Globally Systemically Important Financial Institutions (GISIFs) between 2002 and 2011.
Developing this analysis required the gathering of substantial financial information from a variety of public and private sources. The sustainable banks were asked to validate the publicly available information used in the study. Publicly available annual reports were gathered for the GSIFIs.
The Global Alliance for Banking on Values (GABV – www.gabv.org) is a membership organisation, made up of 20 of the world’s leading sustainable banks, from Asia, Latin America and Africa, to the US, Canada and Europe. Members believe that we must improve the quality of life for everyone on the planet, recognizing that we are economically interdependent and responsible to current and future generations. Across the world, GABV members provide the money entrepreneurs and their enterprises need to transform lives and deliver sustainable development for unserved people, communities and the environment.
The organisation began when ten of the world’s banks came together in 2009 to commit to supporting the growth of sustainable banking and its impact worldwide. GABV banks have combined assets of over $26 billion, and operate in 24 countries. In 2010, Global Alliance for Banking on Values pledged to touch the lives of a billion people by 2020 by expanding its network of banks, further increasing the capital it raises and training a new generation of sustainable bankers to use that money to make a lasting difference, and help meet the biggest challenges of our time.
To qualify for membership, each institution must: be an independent and licensed bank or financial institution with a focus on retail customers; have a minimum balance sheet of $50 million; and be committed to responsible financing and the triple bottom line of people, planet and prosperity. Members are bound by a shared commitment to find global solutions to international problems, and to promote a positive, viable alternative to the current financial system and mainstream banking business models.
The members of the GABV are:
Affinity Credit Union (Canada), Alternative Bank Schweiz (Switzerland), Assiniboine Credit Union (Canada), Banca Etica (Italy), BancoSol (Bolivia), BankMecu (Australia), BRAC Bank (Bangladesh), Centenary Bank (Uganda), Cultura Bank (Norway), First Green Bank (US), GLS Bank (Germany), SAC Apoyo Integral (El Salvador), Merkur Cooperative Bank (Denmark), Mibanco (Peru), New Resource Bank (US), OnePacificCoast Bank (US), Sunrise Community Banks (US), Triodos Bank (Netherlands), Vancity Credit Union (Canada), XacBank (Mongolia).
