Occupy’s persuasive selling acknowledged in part by Bank of England

As autumn leaves were falling in London's Euston Road last night, Andrew Haldane Executive Director of the Bank of England gave an address  about ‘socially useful banking ‘ .

The venue was the Quaker Friends Meeting House, well beyond the square mile of the financial district the ‘City’ and the 'Old Lady of Threadneedle Street' ( Bank of England) .

In his speech Mr Aldane used the Meeting House as a link with the origins of  the banks Lloyds and Barclays which have Quaker roots.

'Socially useful banking' Mr Aldane stressed is not only a question for the banks. It is a key issue for the UK as well.

 We have all felt the financial consequences of banks’ failings and failures.  Mr Aldane suggested two questions

1.       What do we want our banking system to do?

2.       How do we create that system?

October 2011 OccupyLSX Protest at the steps
of St Paul's Cathedral
 in London's City / Financial district

It is now over a year since the OccupyLSX movement  encamped outside the steps of  St Paul’s Cathedral  and sold their peaceful protest  through social and conventional media  to the public and policymakers.

 One year on, what has it achieved?

Some have suggested rather little, that Occupy’s voice has been loud but vague, long on the rhetoric  of problems,  and little to offer in terms of solutions.

Others have argued that the crevasses of the global financial system, which opened during the crisis, are basically unchanged and  that reform has failed.

Perhaps to the surprise of many Mr Aldane argues that this is wrong on both counts. He says that Occupy’s argument had been both loud and persuasive and that policymakers have listened and  are reforming.

He not only acknowledged Occupy’s moral case but also their analysis.

“For the hard-headed facts suggest that, at the heart of the global financial crisis, were and are problems of deep and rising inequality.”

 

Giant Monopoly Board Stunt at St Paul's October 2011

Mr Aldane suggested that the popular banker bashing of 'heads on sticks strategy' missed the key point.

 He considers that the crisis was not about individual greed and hubris but of a system with built-in incentives for self harm.

Mr Aldane chose to focus on the system - its structure, its leverage, its governance, the level and form of its remuneration, its (lack of) competition.



( He did not expand on the responsibilities of those who set the incentives of the systems , set up the structures, oversaw the governance but then maybe that’s a' heads on sticks' approach !)

Mr Aldane put forward a 5Cs solution Culture, Capital, Compensation,Credit and Competition.

 

For more detail on this 5 Cs model this link is for the pdf of the whole speech. Click here

 

Mr. Aldane cited Handelsbanken as evidence of competition - not yet a Barclays or a Lloyds but they may be the fastest-expanding bank in the UK at the moment.

 On average, they open a new branch – not a cost centre, a branch - every two weeks. Their business model is fascinating,( Quaker-even), in its orientation.

They offer only basic banking services, mortgages and small business loans, to people in a tight, locally-defined catchment area.

All credit decisions are taken locally by people, not centrally by a computer. No bonuses are paid and no-one has a sales-target. When the whole firm out-performs, a contribution is made to a pooled fund which is invested on employees’ behalf.

The fruits of success are distributed equally and gratification is deferred.

Challenging his audience Mr Aldane said

“If that sounds attractive, then it is down to us – not regulators, not politicians, you and I – to deliver it.

If as bank customers we want to change the culture of banking, then we should start by supporting those banks who are delivering that change. Putting your money where your mouth is would deliver far greater and more durable change than any amount of banker-bashing.”

He concluded his speech.

“There is the quiet, but unmistakable, sound of a leaf being turned. If I am right and a new leaf is being turned, then Occupy will have played a key role in this fledgling financial reformation. You have put the arguments. You have helped win the debate. And policymakers, like me, will need your continuing support in delivering that radical change.”

Time will tell whether Mr. Aldane’s ‘ leaf’  being overturned will turn out to be a 'new leaf' for the financial sector or a 'fig leaf'.