Labour has said UK banks should be required to publish data on their lending to charities and social enterprises to help grow the community and charity banking market.
In a new policy document entitled ‘Open Banking’, the Labour government argues that greater transparency on the UK’s banks work with the civil society sector will strengthen the credit union, community and charity banking market in the UK.
Banks in the US are required by law to disclose their levels of lending to small and medium sized-businesses, which, Labour says, has helped alternative financial institutions emerge in places where traditional banking has been weaker.
The 40 community development finance institutions in the UK were lending £77m in 2011, up from £1m in 2004. However, a recent survey of some US community banks found that there was $24.2bn available for loans to businesses.
Labour says the success of US community banks shows the large potential for growth in the UK community bank sector:
“In the US, revealing areas or groups of people without access to financial services has actually helped identify new market opportunities for alternative ‘banks,’ the report says.
Gareth Thomas MP, shadow civil society minister, said:
"Consistent disclosure by the banks of anonymised data on what they lend, to whom and where; and stronger incentives to work in all communities including with community ‘banks’ could help banks become more accountable to the communities they serve. Over time it could also help government, banks themselves, community banks and the charity sector plug the gaps in the market for access to financial services.
“It is right that a banking sector which has benefitted from around £1 trillion of capital and guarantees provides greater transparency."
The recent US Dodd-Frank Act requires US banks to disclose their levels of lending to small and medium sized businesses. Other countries such as South Africa have similar legislation and others are planning to introduce such requirements.
However, the current government appears less keen to introduce similar laws. Exchequer to the Treasury David Gauke said that requiring UK banks to disclose lending levels would create a significant regulatory burden and too considerable an undertaking for the banks, after Thomas asked for such a requirement to be proposed in banking reforms.
