Updated study confirms continuing and significant differences between the financial performance of ‘too-big-to-fail’ banks and sustainable banks
Results strengthen case for a more diverse, transparent and sustainable banking system in the future.
Washington, 10 October 2013 – An updated study comparing key financial information about the world’s biggest banks, or Global Systemically Important Financial Institutions (GSIFIs), and a group of leading sustainable banks has shown continued significant differences.
The results, consistent with past research, show:
- Sustainable banks lend almost twice as much of their assets on their balance sheet, when compared with the big banks (75.9% compared to 40.1%, from 2003 to 2012)
- Sustainable banks rely on customer deposits to a much greater degree to fund their balance sheets (73.1% versus 42.9%)
- Sustainable banks maintained stronger capital positions, relative to their larger contemporaries, especially when measured by equity/total assets (7.2% versus 5.5%)
- Sustainable banks deliver comparable returns on assets over the cycle (0.56% versus 0.57%) with lower levels of volatility, and better returns post-crisis (0.53% versus 0.37%).
Speaking at ‘A Better Future for Finance’, a special event at Georgetown University, Global Alliance for Banking on Values (GABV) Chair, Peter Blom, said the results show that sustainable banks lend more proportionally than the ‘too big to fail’ banks, benefit from funding that’s primarily drawn from customer deposits, and have a stronger capital base.
“We cannot afford to ignore the increasingly compelling business case for sustainable banking. It’s now clear that over the long-term, values-based banks that put people and the planet they depend on first, have proved to be more robust and resilient than the world’s biggest banks.”
“The results matter because we need a stronger banking system to support a more resilient, modern economy. And we need it soon, so finance can play its role in helping to meet urgent and converging social, environmental and economic challenges. If we take the mounting evidence seriously, we have an unprecedented opportunity to build a more diverse, transparent and sustainable banking system in the interests of us all.”
The research was extended to include a comparison of the European banking market, with similar conclusions to the overall report. Sustainable banks in Europe showed higher levels of lending to the real economy, compared to European GSIFIs, stronger levels of equity capital, and better and less volatile returns on assets.
Leading CEOs from the Global Alliance of Banking on Values (GABV), including Tamara Vrooman, President and CEO of Canada’s largest community credit union, David Reiling, CEO of Minnesota’s Sunrise Banks, and John Fullerton, Founder and Director of the Capital Institute, a collaborative working to transform finance to serve a fairer more sustainable economic system, used the Georgetown University event to describe what a banking landscape made up of banks that balance people, planet and prosperity would look like. For details, including a web stream of the event, and Twitter Chat, visit our site here.
The GABV is an independent and growing network of 25 of the world’s pioneering sustainable banks, from Asia, Africa, North and South America, Europe and Australia. The network’s members have combined assets of over $70 billion, serving millions of customers around the world.
James Niven, GABV