Letter to the FT: Policymakers can help bank model
>> Read: FT briefing "Familiar yet strange”
>> Related: FT briefing "Do we still need community banks?
The following Letter to the Editor was submitted today to the Financial Times that comments on two pieces on community banking that appeared last week in Martin Sandbu’s FT Free Lunch. Penned by WSBI-ESBG Managing Director Chris De Noose, the letter specifically reacts to the briefings “Familiar yet strange” and “Do we still need community banks?” on behalf of the ‘community banks’ (savings and locally focused retail banks) in Europe who form the association’s membership.
BRUSSELS, 5 March 2018
Congratulations to FT Free Lunch on two days of shrewd coverage last Thursday and Friday on the role and future of 'community banks'.
The analysis made clear that local communities and their civic leaders are reaching into their toolbox for answers to nourish economic growth and address any market failures. But as the global economy turns the corner, perhaps the more pressing need to address social inequalities. Why? Because seemingly for the first time in decades, people are seeking ways to narrow the gap between the gains made by the few in a globalised world and the rest. That is why the need for community banks is greater than ever.
Community banks are taking bold steps to connect more closely to local people. Mindset change, greater use of smartphone apps and new ways to use bank branches enable Sparkassen, cajas, and locally focused retail and savings banks in Europe to be even closer to the households, local businesses and public authorities they serve. Savings and retail banks who are members of ESBG remain close to the Mittelstand too, with €500 billion in SME loans on the books, about a third of the market. That's not saturation or dominance of a local market, but rather the proof of an effective tool that is much-needed. Community banks are a tool that helps start up and expand job-creating SMEs, build infrastructure like schools, bridges and hospitals, and weave social cohesion through cultural programmes and worker training.
Beyond nuts and bolts banking, communities see the value in community banks. Their oftentimes pioneering foundation work accounts for €1.7 billion in annual contributions to local social and cultural programmes in the EU. Shareholders in big, more complex banks would not stand for such commitment. Large multinationals, whether in banking or otherwise, in the name of profit maximization, may turn to shedding jobs locally and pivot activity offshore.
Policymakers can help the community bank model – which includes locally savings and focused retail banks – to be even closer to the customer and achieve its social aims. Through a proportionate, tier-based approach – where our specific nature is understood and acknowledged – community banks' retail, regional and responsible approach can still exist and help people reach their dreams, no matter how big or small, from the bottom up. If policy fails to do this, it will put a spanner in works, widening the gap between the many communities – rural or urban –and the fruits of globalisation.
Chris De Noose
European Savings and Retail Banking Group