Frequently Asked Questions
Banking is a utility and the banking system should work for the benefit of society. Major high street banks have enormous power to steer the economy through their lending decisions, but instead of using that to build a productive and stable economy that benefits wider society, they have used that power to narrowly benefit a select few. You can read about how the high street banks are currently working against us on our website.
When you deposit your money with a bank they don’t keep your money in a vault, they use it to make loans. Their lending decisions determine what direction our economy takes, which is why we need banks to lend your money to useful enterprises, not to socially useless activities like speculation, ethically-questionable investments or environmentally destructive projects. Deposits are a major source of funding for a bank and they are also the cheapest, because banks pay less interest on your deposits than the interest they pay on other forms of borrowing.
The banks won’t change of their own accord and politicians and regulators are too narrowly focused on maintaining the status quo. Rather than stabilising the existing system, we think it’s time to ask what sort of financial system we really want, and to use our power as consumers and depositors to create it.
Banks rely on the deposits of ordinary savers. So when you choose where you keep your money, you are choosing between supporting business as usual or taking a simple but powerful step towards a better banking system and a better future. By moving your money you can directly support an ethical and socially useful bank, and send a message about the sort of society and economy you want to see. And one you’d rather not.
Whilst regulations have the potential to curb some of the excesses of the financial sector, they do little to boost the alternative financial sector. We can proactively support those banks that engage in socially useful activities, without waiting for regulation which may never arrive. (The recommendations of the Independent Commission on Banking don’t have to be implemented until 2019.)
Don’t worry, you can still be part of this movement! Instead of moving your money you could spread the word about the campaign to your friends, family and colleagues who might be in a position to move. Write a letter of complaint to your bank about their business practices, or write to your MP to tell them that you support the campaign. And, of course, you can still get involved with campaign events.
We are not trying to bring down the UK banking sector; the people supporting this campaign are taxpayers and are not out to devalue the companies they part own or subsidise.
By putting your money into mutuals, ethical banks and local institutions like credit unions though, we can help channel credit into the communities and enterprises that need it most, and thereby help stimulate sustainable growth that will be better for jobs and incomes in both the short and long term.
The UK banking sector is one of the most consolidated in the world, so it’s very unlikely that the campaign will significantly impact the big banks balance sheets, but opening up an account of investment product with an ethical alternative will make a big difference, and help the sector to continue to grow. Moving your money will help shift jobs to more ethical and socially useful banks that lend to the real economy, which will create a lot more jobs and wider prosperity.
On the face of it, the banks make lots of money, but it is very doubtful that benefits the broader economy. Mostly the money they make benefits their senior executives via large bonuses and other remuneration. Whilst banks do contribute tax, they are very good at avoiding it too.
While some politicians claim the UK economy would be nothing without banking, Andrew Haldane, executive director of financial stability at the Bank of England, has seriously questioned its contribution to the economy ("The Contribution of the Financial Sector: miracle or mirage?", 2010) and concluded that the growth and expansion of the financial sector has mainly been driven by increased exposure to risk, not productivity. In another paper, “The £100bn question” (2010), he estimates that the total cost to the UK economy of the financial crisis could be up to £7 trillion - that’s 4.5 times UK GDP.
In other words, the banking sector has the appearance of being important to the economy, but only because it’s taken on excessive amounts of risk. This leads to crashes that inevitably damage the truly productive sectors of the economy.
No. A bank run happens when people fear a bank has become insolvent and race to take their money out. The banks do not have a solvency problem, and nor do we wish to create one.
We are encouraging consumers to engage proactively with the banking system and hold banks accountable for their activities by exerting their right to move their money. We also aim to raise awareness about the broad range of financial institutions available so that individuals can make an informed choice. People are moving their money because they believe it will be better used elsewhere.
The ‘Better Bail-out’ events that we are holding are a way to publicly demonstrate that people want to move their money to better banks - they are not bank runs.
No. Move Your Money is about raising awareness and providing information so that people can move their money (their financial capital), to a bank whose values and business practices they agree with. We encourage and empower people to use their capital more effectively - that’s hardly anti-capitalism.
Given that the big banks are an oligopoly bolstered by state subsidy, they are hardly subject to true competitive pressures of capitalism. Campaigns like MoveYourMoney, which boost competition, would actually help change that.
Specific questions about moving
Moving your money is easier than you might think. Your new provider will often do most of the legwork for you. Obviously it’s different depending on where you’re moving your money to and what type of product or service it is.
People often don’t move their money because they think it’s going to be really difficult and they’re not sure of what the alternatives are or what difference it would make. You can find information to help you choose a new and better provider, and how to make the move on our website.
Unfortunately, the options for moving an overdraft or loan over to a new provider are limited, and for this reason some people won’t be able to move their money. However, a lot of people have a range of financial products and services. For example, you may be tied into your current account because you have an overdraft, but if you’re going to open a savings account or ISA then you could do it with an ethical provider. If you are looking to take out a loan, all of the “alternatives” on our website offer lending facilities.
The Nationwide and the Co-operative Bank provide a full range of services very similar to those of the big high street banks. There are also many other building societies and credit unions who offer current accounts - the banking service that most people need.
If you have savings accounts or investment products, then ethical banks or CDFI’s are a great alternative; they are transparent about who they lend to, invest for social and environmental benefit and offer good rates of return and excellent customer service.
Deposits in credit unions, building societies and ethical banks are covered under the government deposit insurance scheme, just like the major banks.
Building societies have tended to offer consistently attractive rates of interest for savers, according to Which? magazine. Some high street banks, by contrast, offer high rates initially and then suddenly drop them. According to a report commissioned by the Building Societies Association, building societies score 45% higher than banks on value for money and 39% higher on treating customers fairly. Building societies beat the high street banks on all measures of customer satisfaction. The Co-operative bank was voted number one for customer service for the last 5 years.
The customers of credit unions and building societies are also members, and so owners. This means that these financial organisations are much more focused and responsive to the needs of customers. Credit unions and building societies have no external shareholders extracting profits, so they can provide cheaper loans and more attractive rates for savers. Whereas the high street banks reward senior bankers with lavish bonuses, managers at credit unions are usually paid a standard salary and the board comprises elected community members, sitting voluntarily.
If you have a current account or savings account the bank can use your deposit for whatever they wish, and if you have a loan you support them with interest payments.
Savings might be the most significant deposit for a bank because it is often larger, and might be held by them for a fixed term, which means the bank is certain of how long it can use the money for.
When this writer left Lloyds TSB, she was kindly taken aside by a manager who suggested that she invested in one of their “ethical funds”. Taking an option like this might be better than the unethical fund, but think about the broader institution that you are supporting by keeping your money in your current bank.
About the alternatives
These include credit unions, building societies, banks with strong ethical commitments, and community development finance institutions. They have ownership structures and business strategies that are more geared towards benefiting people, communities and the environment.
Move Your Money UK is raising awareness a wide range of alternative financial providers from banks and building societies like the Co-op and Nationwide to small local institutions like credit unions and CDFI’s. This means that their benefits are diverse vary from institution to institution, but they include:
- transparent investment policies
- strong ethical commitments
- mutual ownership
- a grounding in the local community
- the pursuit of social value as well as private profit
There are a number of things that mark building societies out from the big PLC banks. They are mutually owned, that is, owned by their customers, which means that members can exercise a degree of control over management. This also encourages a much more long-term approach to risk. They also have a more narrow focus on retail banking rather than riskier investment banking. For a full list of benefits, view our page on where you can move your money http://www.moveyourmoney.org.uk/where-can-i-move-my-money-to.
There are hundreds of better banks in the UK! There are around 580 credit unions, 53 building societies, 6 ethical banks and 66 CDFAs.
Credit unions, building societies and the ethical banks that are mentioned on our website are covered by the government deposit insurance scheme, just like the major banks are - the Financial Services Compensation Scheme (FSCS), which guarantees 100% of the ﬁrst £85,000 of any eligible deposits for individuals and up to £170,000 to couples with a joint account.
The “other” lending and saving platforms listed on our website are not covered by this scheme because they are investments.
About the Campaign
The campaigns aims to a) raise awareness about ethical and socially useful financial providers, b) encourage people to move their money to these providers, and c) broaden and enhance the debate around financial reform.
We hope that the big banks look on this campaign as an opportunity to reconsider their actions; if they increase transparency, develop ethical investment policies, give customers and shareholders a stronger voice in their governance structures and invest in communities and SME’s then they will gain the support and trust of the public.
Move Your Money’s a demonstration of consumer and citizen strength and intent - and we hope the big banks will listen and internalise an ethical ethos into their business models.
Although we would support appropriate government intervention in the banking sector the campaign is not targeted at the government. Move Your Money is about consumer and citizen power. It’s about people making an informed choice about the sort of financial institutions they want to support.
By raising awareness and increasing support for the alternative financial providers we hope to encourage growth in the sector and stimulate a wider public debate about what a socially useful financial system looks like and how we can get there. At that point, the public may call on the government to take action, for example to improve regulation or to change legislation around ethical, mutual and community banks.
The campaign is not party political. Whether you’re on the left or right of the political spectrum it’s clear that something has gone pretty wrong in our financial system.
It’s also not political to support an alternative financial sector – institutions which invest in local communities, green businesses, social enterprises and charities or simply provide services to people who need them.
Move Your Money is about engaging the public with the financial system and channelling the public interest so that the financial system responds to, and acts in, it. Our end goal is to see a financial system that works for people and society because there is an open and constructive dialogue between the two.
Moving money is a way that the public, as consumers, can exert their power. It’s a method that certainly needs improving because it should be easier to switch provider, and people need much more information from which to make an informed choice about their new provider. In the longer term we are also interested in improving switching facilities and other channels that present the possibility for the public to engage with the financial system, such as financial education, shareholder activism, greater parliamentary debate and growth of the community-run finance sector.