A report released today by Friends of the Earth Scotland calls on the Scottish Government to break up our two dominant banks and reform the banking system so that it better meets the needs of society with a particular focus on supporting environmentally sustainable activities.
Post-referendum discussions could provide the Scottish Government with the powers to reform the financial system north of the border.
The report by financial journalist and author Ray Perman makes the following seven recommendations:
On the dominance of big banks:
· Whatever the outcome of the referendum on independence the Scottish Government should present as strong a case as possible for breaking up the two dominant banks to form a more diversified and competitive market in Scotland.
· Banks should be encouraged to devolve more decision-making to local managers and to adopt governance models which promote local accountability.
On the continued financing of fossil fuels:
· The Scottish Government should consider contributing to the Green Investment Bank to counter the fall in investment in renewables, with a particular focus on increasing finance for community renewable projects and the development of wind, tidal and wave technology.
· To respond to concerns about the “carbon bubble” the Scottish Government should re-examine its policy on the extraction of fossil fuels including North Sea oil and gas.
· All banks and investment management companies operating in Scotland should be required to publish the carbon intensity of their loanbooks and equity portfolios to enable them to reduce the carbon intensity of their investments in line with existing legislation to cut carbon emissions.
On creating a financial sector of small, accountable banks in a post-referendum Scotland
· In an independent Scotland the Scottish Government should influence banking competition to encourage new entrants to create a more diverse banking sector which takes more notice of community needs and builds environmental sustainability into its lending criteria.
· If there is a No vote in the referendum in September 2014 the Scottish Government should lobby in London and Brussels for regulatory frameworks which favour non-traditional business models including credit unions, regional, local, cooperative and municipal banks.
The report’s author Ray Perman said, “whatever happens on 18th September, the Government needs to act to create a competitive, diverse banking market in Scotland. Government should break up RBS and Bank of Scotland to develop smaller banks that are more accountable to local communities and which make sure their investments improve the world instead of financing environmental destruction.”
He continued, “our current banking market does not serve the needs of people or the planet. Banks should publish the full carbon footprint of their loans and adopt governance models which promote local accountability.”
The five largest banks – Lloyds, Barclays, RBS, HSBC and Santander – have between them 73% of the UK market. But in Scotland the position is much worse. Just two banks – Lloyds (owner of Bank of Scotland) and RBS – hold 70% of the small business banking and personal banking markets. 
“This concentration is anti-competitive and works against the interest of consumers and the economy. It should be rectified by forcing the banks to sell or spin-off branches and head office operations to form new challenger banks.
“The Competition and Markets Authority is to launch a full inquiry into UK retail banking. The Scottish Government should use this opportunity to present as strong a case as possible for breaking up the two dominant banks to form a more diversified and competitive market in Scotland.”
RBS is 81% owned by the UK taxpayer having been bailed out by the UK Government in 2008.
Ric Lander, Friends of the Earth Scotland’s Sustainable Finance Campaigner said, “these taxpayer-owned banks cannot continue their environmentally and socially destructive lending practices. Scotland’s world leading climate targets are eclipsed by the loans and investments made by banks such as RBS . The Government needs to act to break up these self-serving banks.”
He continued, “citizens should be appalled that publicly owned banks are continuing to invest billions in destructive industries such as coal mining companies operating in Africa, Asia and Latin America . The Government must stop banks investing our money in fossil fuels projects which will ultimately be left stranded by our need to tackle climate change.”
1. The report will be launched at 6pm tonight at the Scottish Parliament with Ray Perman, Patrick Harvie MSP and Gemma Bone.
The author will introduce the report and a panel will discuss its implications for banking reform in Scotland. Full event details: http://www.foe-scotland.org.uk/smaller-greener-banking-event
The report is available at www.foes.do/smallgreenbank
2. Together Bank of Scotland and RBS control 70% of the small business banking market in Scotland. http://www.scotland.gov.uk/Publications/2013/05/3325
3.The carbon footprint of RBS' loans are 18 times the entire carbon footprint of Scotland. http://www.wdm.org.uk/sites/default/files/rbs_true_carbon_emissions_2012...
4. The Cerrejón coal mine in Colombia is the biggest in South America and has resulted in the displacement of indigenous people, dire working conditions and huge carbon emissions.
Read the World Development Movement media briefing: http://www.wdm.org.uk/sites/default/files/cerrejon_media_briefing.pdf
Banktrack briefing on Cerrejón: http://www.banktrack.org/manage/ajax/ems_dodgydeals/createPDF/cerrejon_c...
5. Much of the finance behind the Indonesian fossil fuel industry comes from the UK. This boom has led to displacement of people, deforestation, localised water and air pollution and enormous carbon emissions.
World Development Movement Report, September 2013, ‘Banking while Borneo burns: How the UK financial sector is bankrolling Indonesia’s fossil fuel boom’: http://www.wdm.org.uk/sites/default/files/banking_while_borneo_burns.pdf
6. Scottish pension asset management companies Scottish Widows and Standard Life are involved in destructive agriculture, industrial and mining projects overseas, see Friends of the Earth England, Wales and Northern Ireland’s report ‘What’s your pension funding? How UK Institutional Investors finance the global land grab’:
7. Friends of the Earth Scotland is
* Scotland's leading environmental campaigning organisation
* An independent Scottish charity with a network of thousands of supporters and active local groups across Scotland
* Part of the largest grassroots environmental network in the world, uniting over 2 million supporters, 77 national member groups, and some 5,000 local activist groups.
8. Ray Perman was a journalist in London and Edinburgh for thirty years. He was a co-founder of the business magazine Insider Publications and was Chief Executive of Scottish Financial Enterprise from 1999 to 2003. In 2011 he was appointed Chairman of The James Hutton Institute, the first institute of its type in Europe dedicated to making new contributions to the understanding of key global issues such as food, energy and environmental security. Ray Perman is the author of The Man Who Gave Away His Island: A Life of John Lorne Campbell of Canna (2010).