BankTrack’s study finds that client confidentiality is not an absolute legal requirement in any of the world’s major banking centres. Banks can – and do – include the right to disclose information into their contracts. Will the EIB & EBRD acknowledge this in their policies on intermediated lending?
Recent scandals show how susceptible the financial sector is to misuse and abuse. One of the main reasons for these violations is that the sector is cloaked in a shroud of confidentiality. Is there a better way for the financial sector to decrease the risk of mismanagement?
Civil society groups have repeatedly called on financial institutions to share more information about individual projects they finance, particularly when there are concerns about the social and environmental impacts of projects in the coal or hydropower sector.
A new report from BankTrack examines such calls for moving beyond confidentiality, examining 150 bank responses to different enquiries made by the organisation between 2012 and 2017. Nearly half of these responses said that the bank could not comment on whether it had a relationship with a customer or project. In 37 of 70 responses, client confidentiality concerns were cited as the primary reason for non-disclosure.
Yet client confidentiality is not an absolute rule – indeed many banks are able to comment on specific clients. The report suggests that banks readily share information when they see this as in their own interest or business practice such as in commercial databases (eg. Bloomberg) or registries of secured transactions. Moreover, ethical banks such as those in the Global Alliance for Banking on Values (GABV) share information about their investments routinely, showing that where there’s a will, there’s a way.
The report cautiously suggests a solution to the issue of banking secrecy: asking the client for consent to disclose information. In many major jurisdictions, including the UK, the Netherlands, Germany, Singapore, Switzerland, the US and Japan, there was no evidence that banks would be unable to disclose client information with their client’s consent.
Read the full article here.
Courtesy of CEE Bankwatch Network.