A Civic Approach to Finance
The global ‘credit crunch’ and ensuing economic challenges have revealed a deep crisis in the world of finance. Public opinion on the integrity of the financial sector is at an all-time low and the faith of the banks in their own customers has been severely undermined. Unsure of the security of their loans, many credit providers withhold the lending that many, particularly SME clients, rely on to survive and grow.
ResPublica will be conducting a wide-reaching programme of research that will engage practically with partners in the financial sector to determine how financial mutuals, ethical investors and other alternative models of finance can be incentivised to both add to the competition on the High Street and better meet the needs of Britain’s small businesses. As part of this, this research will also explore how mutual and community responsive models of finance can be used to inculcate a culture of trust, ethics and reciprocity in the financial sector as a whole.
Key themes for investigation include:
* Local Banking and Business Responsiveness – The theme will examine how a new tier of local and regional banks could be established to serve the needs of local businesses and communities. As part of this, the role of local authorities as ‘civic investment platforms’ will be assessed to determine their suitability as providers of local business finance. This strand will also explore the potential for LEP-led ‘securitisation platforms’ that would cater for the needs of local business. By encouraging smaller firms to bundle together capital needs across their supply chains, it is possible that business loans could be shared and commercial risk pooled.
* The Growing Potential of Traditional Finance – Rightly, policy makers have highlighted the need for greater competition from within the financial sector. But too often solutions focus on how standard ‘plc’ banks can be incentivised to start-up or enter the market, without paying much attention to more established forms of finance – such as building societies, friendly societies and credit unions. This theme will explore what can be done to increase competition in the sector from more traditional and mutual forms of finance.
* Democratising Finance – This theme will examine a range of new financial platforms that are revolutionizing the way renewable energy firms, social enterprises and SMEs raise capital. This theme will explore peer-to-peer networks, ‘crowd-funding’, new models of infrastructure finance and the resurgence of ‘old’ models such as co-operative finance. These will all be assessed to scope people-centric solutions to currently unresponsive and undemocratic models of finance.
* Beyond Regulation, Towards Ethos – There is no shortage of professional standards and ethical frameworks for industry actors to take guidance from, but recent events have called into question their real utility. Fundamentally, no externally imposed quotas can achieve meaningful cultural change, as this must come from within the industry itself. Building on the work of the Parliamentary Commission on Banking Standards, the project will propose ways in which a fundamentally new configuration of standards can be instituted in a self-governing form which recognises and certifies behaviour within the industry, whilst at the same time remaining firmly rooted in an ethos-driven framework.
The project is now open to external engagement from the public, private and third sectors. We would like to establish a consortium of sponsors who will feed in to our further research and debate in this area and benefit from co-branding on publications and events.