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Scotland’s banking system is unstable and unfit for purpose, finds new report

Scotland’s banking system is unstable and unfit for purpose, finds new report

Scotland’s banking system is unstable and unfit for purpose, according to a new report from a coalition of campaign groups.

The ‘Banking for the Common Good’ report, which was produced by Friends of the Earth Scotland, the New Economics Foundation, the Common Weal and Move Your Money, warns that the risk of a new financial crisis has increased in recent months.

The report, which will be launched at the Scottish Parliament this evening, says: “Eight years have passed since the crisis and our banking system is broadly unchanged”.


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Christine Berry, senior researcher at the New Economics Foundation, said: “Despite the dangerous complacency guiding a return to business as usual in the City, we are nowhere near having fixed the problems with our banking system that led to the crisis of 2008.

“We’re still far too dependent on a small number of very large, very similar shareholder-owned banks with little interest in serving small businesses or rural communities, or in financing the transition to a low-carbon economy.”

The coalition urges the Scottish Government to convene a taskforce to commission legal and regulatory advice on how a Scottish National Investment Bank could be created.

The report says not-for-profit “People’s Banks”, overseen by local representatives with support from financial experts, should be created in Scotland’s regions to offer banking services to local people and business.

It says these banks would be part of a “People’s Banking Network” to share risk and cooperate on training, marketing and the operation of key services.

A Scottish National Investment Bank would help establish these institutions by offering seed funding and structural support, according to the charities. The bank would be institutionally independent from government but publicly owned and mandated to promote through its lending sustainable development and employment, they say.

“The existence of national investment banks or other forms of public ownership of banking is closely associated with higher economic growth and greater economic stability," says the report. "Studies of Germany, China and Russia have also evidenced that public banks are more efficient than private banks.”

Report author Gemma Bone, a researcher at Newcastle University, said the document was intended to show that systemic reform of the banking system is both possible and desirable.

She said: “The UK missed a big opportunity to reform the banking system after the crisis of 2008 and banking reform has since dropped off the agenda.

“It is pleasing to launch it in Edinburgh, a city with a long and varied history of financial innovation. But this year we are calling on Scotland to take up a leading role once again to transform the banking system to better meet the pressing needs of the environment, businesses and society.”

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