Cohen ups pressure on banks to publish lending data
Henry Palmer, Ian Allsop, Social Enterprise Magazine
The only way to increase banks’ activity in the poorest parts of the UK is to introduce new laws to force them to publish how much they lend to deprived areas, according to venture capitalist Sir Ronald Cohen.
In an exclusive interview with Social Enterprise magazine, Cohen argued that legislation was the only way forward as the banking sector had repeatedly resisted pressure to disclose lending data of its own accord.
Cohen, who is chair of the influential social investment task force set up by the then chancellor Gordon Brown in 2000, added that politicians in the UK should look to laws introduced in the USA in the 1970s for inspiration, such as the Community Reinvestment Act (CRA).
Under the CRA, banks are compelled to reinvest part of their profits in rundown neighbourhoods or risk tough penalties, such as being barred from opening branches or merging. Banks are also required to publish lending data, enabling the general public to see which institutions are most committed to serving poor neighbourhoods.
Cohen said: ‘When we wrote to the Chancellor in 2000 we said that if in seven years we hadn’t made progress without legislation, we would need it.
‘Despite the fact that banks do have a social conscience…I believe we are only going to increase significantly the flow of banking finance into deprived areas through this type of legislation.’
He also said that the banks’ co-operation would also help rebuild trust in the financial services sector.
‘I think the United States experience suggests that banks have gained some goodwill through their CRA activities but they have also discovered that they can do valuable business in poorer areas,’ he said.
The department for communities and local government is currently examining whether community reinvestment laws could be introduced in the UK. The department is due to report on this in late summer.
The full interview with Cohen, in which he discusses his plans to boost the provision of investment for social enterprises, will be published in Social Enterprise magazine’s Social Investment Almanack later this summer.
From the Social Enterprise Magazine http://www.socialenterpriselive.com/