Bank safety and soundness - The Bergamo Report 55

Proceedings of the Third International Conference on Financial Services

"Bank Safety and Responsibility towards the Consumer"
Bergamo, Italy, 23 through 25 September 1993

III SOCIAL RESPONSIBILITY OF BANKS

7
by Philip J. Jennings

Banks play a key role in a market economy: we recognise their impor-

tance to oil the wheels of commerce, as wealth creators, as providing a
crucial service to the international, national and local community. We
need socially responsible banks.
We recognise that banks and financial markets are in a state of turbu-
lence. Banks are touched by the recession. We know of bad debts and
concern over balance sheet structures. We want banks to approach
these difficulties in a socially responsible way. Many of them do not.
They should also realise that they were also responsible for the prob-
lems they themselves have created. In the liberalisation fad of the 80's
money was fast and loose and we questioned judgement on landing de-
cisions taken then. We do not see why bank staff should be penalised
today for poor performance by bank management yesterday.
Banks and the wider world
Today we have a global economy. Global banking operations. Global
banking networks. We have a global labour market.
Welcome to the global market, where workers in Latin America, Central
and Eastern Europe, in Africa, in Asia and the Pacific have fought for
their democratic freedom. The reward? An unprecedented attack on un-
ion rights. In 1992 40,000 people lost their livelihoods because they
were union. 300 lost their lives. The irresponsible political and business
leaders compound this repression by saying a union has no role in these
last years of the 20th century.
We know corporations are now seeking to exploit this. They try to
source their products where labour and labour laws are weakest, where
wages are lowest, where unions are weakest. We have to fight back. We
have to start asking more questions about where things are produced
and in what conditions. Who makes what they sell? Is it fair that con-
sumers are offered products made in Chinese prisons, by political pris-
oners? Should we accept that fabrics and textiles are produced by child
labour? Can we accept that this is what generates profits and fat salaries
being earned by company presidents?
And yet those same people talk about the need to deregulate global la-
bour markets, to make our labour markets more flexible. You don't build
a prosperous, stable nation on the back of poverty wages.

7
Philip Jennings is General Secretary of FIET, a trade union organisation. FIET has 11
million members in over 100 countries. FIET was founded in 1904. In the past 10
years, more than 200 unions have joined them. Over 3 million of FIET's members are
in financial institutions. FIET is a global union force - the only global union force in
banking: the only union force in Europe. FIET is the voice of unions to the IMF, World
Bank, GATT, ILO and EEC, to employers everywhere. They have members in Africa,
Asia and the Pacific, America and Europe.

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Bank safety and soundness - The Bergamo Report 56
Proceedings of the Third International Conference on Financial Services
"Bank Safety and Responsibility towards the Consumer"
Bergamo, Italy, 23 through 25 September 1993

The world is changing, through global investment, global transfers,

global communications. A new and brutal world economy has emerged,
where all manner of sins are committed in the name of global competi-
tion. There has always been competition but it is now more acute with
the integration into the global economy of the former communist world
and developing countries.
We in FIET believe that banks have contributed to the global develop-
ment crisis. The IMF and World Bank continue to apply failed policies
which further aggravate problems of poverty and unemployment. Com-
mercial banks made a fatal error: they did not think that nations went
bankrupt - they were wrong.
The debt crisis may have slipped off the agenda but the daily reality is
still with us ten years after the event.
The IMF and World Bank, the international banking community appear
that they are concerned about the problems of debtor nations but are
yet to make sufficient changes in practice. It is not acceptable that one
quarter of all export income in Africa is devoted to debt interest pay-
ments. The debts should be written off.
I also want to say a few words about banks and European integration.,
Economic and monetary union as contained in the Maastricht Treaty will
aggravate and not solve the jobs crisis. The convergence criteria are too
strict. There is too much power in the bands of unaccountable central
bank governors. The policy is flawed: it is not socially responsible.
With the internal market in banking of 1 January 1993, we now have
freedom of capital movements. $1,000 billion a day is traded in financial
markets. No one knows where the money is from or where it will move
the next day. It does not create a single job.
I thought bankers liked stability. This shows that the hand of the market
is blind as well as invisible. When the financial and speculative bubble
bursts, it is people's livelihoods that are at stake. The first victim has
been the ERM. Now Jacques Delors is trying to put the genie back into
the bottle.
The financial behaviour is not socially responsible. We believe that it will
undermine and attempt to put together a co-ordinated strategy for
growth which is required to defeat unemployment.
But what of the impact of the internal market in banking?
Today we have the banking passport based on the principle of mutual
recognition and home country control. To us it is deregulation in dis-
guise.
It is our belief that it will make banks more difficult to supervise and
regulate. There is still no EC-wide depositor protection. We believe it will
make another BCCI more likely not less.
BCCI, you will recall, was a bank created in Pakistan, financed in the
Middle East, bribing central bankers in South America and swindling de-

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Bank safety and soundness - The Bergamo Report 57
Proceedings of the Third International Conference on Financial Services
"Bank Safety and Responsibility towards the Consumer"
Bergamo, Italy, 23 through 25 September 1993

positors in every continent of the globe, and indicted in New York. It

was made possible through a too liberal regime of supervision.
We are not only concerned about the quality of supervision in Europe.
We feel it has inherent stabilities. There is a global regulatory vacuum -
banking collapses are accidents waiting to happen.
The lack of adequate global regulation is socially irresponsible. Freedom
of capital movements cannot make it any easier to control money laun-
dering. We know that this is a matter of great concern for FISAC and the
entire labour movement in their fight against organised crime. We owe it
to the memories of Falconi and Bursalino, who lost their lives in the he-
roic struggle against money laundering, to effectively control money
laundering.
So what of the consumer?
Many of you are better qualified than me to present a consumers cri-
tique of banking practices. But we do share the concerns of consumers.
Union and consumer groups should be working closer together in coali-
tion to build in more social responsibility in banking practices in areas of
mutual concern.
There has never been a fair balance of power between the banks and
their consumers. We are concerned about transparency, lack of informa-
tion, and costing of products. We know that transferring money from
one EC country to another is unreliable, slow and expensive. We know
that the costs involved in changing money abroad are excessive and nut
fully or clearly displayed. If a summer survey of consumers in the UK is
anything to go by, then a decade of liberalisation has led to a major de-
crease in consumer satisfaction with banks.
But we also share concerns over technology. For example, European
consumers who us home banking systems do so at their own risk since
they have scant legal protection. We feel that the time has come for the
legislators to catch up with technology. We are concerned about data
protection, about data stored on customers and on personnel. In the
same respect, we are concerned about possible application of genetic
screening techniques in the future.
There is another issue which joins us as unions with the interests of
consumers and that is the provision of services. The reaction of banks to
recession has been restructuring and revision of provision of services.
Record bank closures, record redundancies are putting a squeeze on
provision of services.
Let's look at the consumer - and we put the following concerns to
banks:
– Are banking services being withdrawn from the poor and unem-
ployed?
– With bank branch closures banking services are being withdrawn
from entire communities. Closing a branch and replacing it with an
ATM is not the same thing.

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Bank safety and soundness - The Bergamo Report 58
Proceedings of the Third International Conference on Financial Services
"Bank Safety and Responsibility towards the Consumer"
Bergamo, Italy, 23 through 25 September 1993

– We feel that more "red lining" is taking place, that the vulnerable
members of the community, the elderly, the unemployed, the low
paid, are being robbed of mainstream banking activities, of access
to credit, leading them no alternative but to go to other sources -
the underworld, the shadow financial sector.
– We feel that the moves afoot in banks are to retreat to the
wealthier class and to avoid low balance and high transaction ac-
counts.
We consider that these acts are not socially responsible. Banks should
be more aware of the needs of the communities and consumers in their
business practices.
My final area for consideration is that of the staff. FIET represents over
3 million bank workers in over 100 countries.
The past three years have been an unnerving experience for FIET, our
affiliates and our members. There is not a bank employee in Europe that
can look to the future with a degree of certainty. We have unprece-
dented closures, mergers, rationalisation and restructuring.
Imagine if you are one of the 19,000 staff of Banca Commerciale Ital-
iana or the 16,000 in the Credito Italiano. They are candidates for priva-
tisation. We hope that job security guarantees will be there for every-
one. We don's want to see any compulsory redundancies. The pressure
to perform on the staff that remain in banking is unprecedented. It is
more stressful. How can staff deliver quality services in this environment
where staff are demoralised?
Using the economic and political climate to their advantage, banks are
seeking:
– more casualisation among the workforce;
– longer opening hours;
– to escape from traditional collective bargaining arrangements;
– to retreat from providing a decent working conditions package;
– not to implement equal opportunities.
Banks in lending policies and unemployment policies are contributing to
the jobs crisis that affects one in ten Europeans today.
We cannot accept that banks unilaterally move to pay structures which
are not negotiated, not transparent and are linked a hundred percent to
some arbitrary judgement of their performance.
We cannot accept that banks are introducing technology, introducing
adjustment plans without consultation with our affiliates.
We need a new social contract in banking nationally and internationally.
In FIET we have a number of immediate priorities:
– Social dialogue
– European Works Councils

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Bank safety and soundness - The Bergamo Report 59
Proceedings of the Third International Conference on Financial Services
"Bank Safety and Responsibility towards the Consumer"
Bergamo, Italy, 23 through 25 September 1993

If Maastricht is ratified in Germany in November, we want to see the

ratification of the social protocol. The aim is to get a European social
dialogue off the ground.
The savings banks have said yes, The co-op banks have said yes. We
now await the response of the commercial banks.
We want to discuss employment, mergers, Equality, bank security in
European-wide negotiations.
On ratification of Maastricht, we have demanded that Commissioner
Flynn take immediate step to introduce a Works Council directive.
We want agreements with all banks that satisfy the criteria.
We will use there structures to talk about corporate change and social
policy. We will talk about jobs. We will talk about consumer issues. We
will talk about ethical issues - about banks and environmental protec-
tion, about trade and labour standards.
We will use social dialogue and works councils to make banks more so-
cially responsible.
In conclusion, many thanks for the invitation to speak to you. I apolo-
gise if I have not covered all concerns or seemed to treat others superfi-
cially. Today there is an imbalance of power and rather than satisfying
their social obligations banks are seeking to retreat from them. Banks
can act in a more socially responsible way to the public at large and to
their staff. This conference contributes to change.
Let us work together to change political agenda to bring in
– a new era for human rights
– a new era for understanding
We want banks to make a positive contribution to this.

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