Only radical reform of the UK banking and financial sector can deliver institutions capable of investment and lending that is economically and socially productive, an alternative white paper on banking reform says today.

The Ecology of Finance is published by nef (the new economics foundation) in anticipation of the Treasury’s follow-up White Paper on banking, expected this month.

It calls for recasting the entire banking and financial sector according to what the proper function of finance should be.

Recommendations include:

• Separating retail from other banking and preventing deposit-taking banks from engaging in other, risky activities
• Setting up a social investment bank, a green investment bank and a Post Bank
• Regulating financial institutions according to their functions and how risky their activities: the bigger the bank the higher the capital requirements
• Reforms to encourage more mutuals, co-ops and community finance
• Legislation to force banks to be open about their lending and to lend to the financially excluded.

Sargon Nissan, nef researcher and co-author of the report said:

Instead of fixating on failed banks and returning to the failed one-model-fits-all ethos, reform of the financial system needs to look at what it is for and identify how a stable and diverse ecology of financial institutions appropriate to that task can be brought about.

Instead of a monoculture of mega-banks deemed too big to fail and answerable only to the demands of private shareholders, The Ecology of Finance envisages a landscape characterised by transparency, stability and sustainability – three crucial benefits the current financial system has so signally failed to deliver.

Key changes such as long-term investment and finance that meets the needs of small businesses, an end to financial exclusion and an economy that is environmentally sustainable and socially just will not happen without radical top down reform and measures to enable alternatives to flourish.

The alternative white paper on banking and financial sector reform, is available to download from www.neweconomics.org

From a press release

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1. Finance Venture

   Liberal Conspiracy » New call to overhaul entire financial sector http://tinyurl.com/ycxjumo

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