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The UK needs a smaller, community-based and accountable banking system

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Authors call for a greener, smaller banking sector

Dearbhla Crosse

October 19th, 2010

In an exclusive Ecologist interview, David Boyle and Andrew Simms of the New Economics Foundation advocate a more sustainable banking sector for Britain

The large-scale corporate banking sector needs to be broken up into smaller, community-based banks, argue David Boyle and Andrew Simms of the New Economics Foundation (NEF) in an interview with the Ecologist this week.
‘Big makes it harder and harder to be responsive to local circumstances. We have not yet found a way to make large institutions work well at a local level. When you have too many large organisations you get imbalance, frailty and vulnerability,’ said Simms.

‘Diversity of scale, size and range, and type of organisation - as in nature - is an insurance policy against disaster. Optimal diversity delivers greater resilience.’

Boyle told the Ecologist that ever-expanding companies are increasingly ‘dominating larger shares of the market’, and argues that Britain needs to eradicate big banks by splitting them into ‘smaller scales’ and creating a ‘new small banking sector’.

According to Simms, the larger the banks are the ‘harder they fall’, and in order to create a green economy we need to acknowledge that the economy cannot ‘outgrow’ the biosphere.

‘To get us there means a whole range of other things: the prices we pay for things have to include the social and environmental cost; we have to have indicators telling us whether we are moving in the right direction or not.’

The government has already been accused of using taxpayer’s bailout money for environmentally damaging investments. Earlier this year, Barclays and RBS were criticised for financing projects that led to environmental damage. RBS had been found to have invested in tar sands oil extraction in Canada, an opencast coal mine in Bangladesh and oil exploration in central Africa.

Boyle argues that despite the availability of information there is ‘very little knowledge’ on what the banking sector does with the taxpayer’s money.

Read the interview in full

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