The Banking Commons

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At the Global Alliance for Banking on Values meeting I attended in June, I learned about and discussed many concepts. One of them was about the Banking Commons.

My CEO, Tamara Vrooman reflected that she could think of no industry—except for banking—where the liabilities of the companies are partially or, in some cases, entirely, guaranteed by the people through their government. This indicates the there is inherently a social, or at least a common purpose to banks, holding people's money for a cooperative benefit.

"The model that is prevalent instead is a complicated, artificial system that leads to confusion and intense skepticism among the public of banks and bankers."

In our meeting, we discussed the need for a Banking Commons, where money is pooled to advance the society we desire. The model that is prevalent instead is a complicated, artificial system that leads to confusion and intense skepticism among the public of banks and bankers. It is a system that abhors sunlight and transparency, a system in which it is impossible to track where a person’s money deposited at the bank is put to use. This is partially because big banks make more money from moving money around via treasury games and complicated financial instruments, rather than being invested in the real economy. Values-based banks lend almost twice as much into the real economy as the Too Big To Fail banks do, according to a study by the Global Alliance.

We need a model where the system is simple. The system, perhaps I'll call it the It's A Wonderful Life System, is the simpler model, the one that's much easier to understand and relate to. But for some strange reason, this simpler system is the one that is so much harder to convey because we're so used to our current overworked, complicated, problematic system. It's the model of gathering deposits and putting them to use in the real economy, financing things that strengthen our communities, creating greater sustainability, equality and shared prosperity.

In our meeting there was good discussion given to the concern that all the bank bashing going on isn‘t something we should partake in. The word banker applies to us all. Most people have never understood the difference between banks and credit unions, so engaging in bank bashing only bashes ourselves in the eyes of the public. We need to draw a much better distinction through offering tangible proof that our model is different, and that money can do good things for people when smartly invested into organizations and entrepreneurs that matter. Proof through transparent banking practices, and a direct link to what people's money is funding in their communities. We need to offer a viable alternative, to be for something amazing and not just against the status quo.

Credit unions spend ample time talking about how we're not banks, but should spend far more effort demonstrating the ways that cooperative finance is advantageous for people over traditional banking. The model itself isn't the message, it's what the model enables that is worth promoting. And, in the vast majority of cases, the model can enable far more than it currently does.

"It seems like there is a movement within credit unions that is doing this work, but most are too concerned with their own bottom lines, taxation and earnings to step back and look at the big picture of what cooperative finance can accomplish."

Throughout the meeting I had this sense of optimism, but also curiosity about why I've never had a meeting like this within credit unions. It seems like there is a movement within credit unions that is doing this work, but most are too concerned with their own bottom lines, taxation and earnings to step back and look at the big picture of what cooperative finance can accomplish.

My views are changing. I used to believe that credit unions were better than banks. I no longer believe this to be true. I believe financial institutions working to create a more inclusive, sustainable, equitable society are the solution. I believe that cooperative finance is a key to making this happen. But if the goal is values-based banking, then I look to any organization, be they bank or credit union who can make that happen for their members, customers or clients. We need a strong banking commons to ensure there is financing for this sustainable, inclusive, equitable future. And the nationwide system of credit unions can be the backbone of such a commons. If they choose to do so.

William 

This is the second of a three-part series. The first part was From Community-based to Values-based.

William Azaroff lives in Vancouver, British Columbia, Canada. He is Director, Business & Community Development at Vancity, a values-based financial co-operative serving the needs of its 500,000 member-owners and their communities. William leads a team who work with local businesses, not-for-profits, social enterprises and co-operatives that contribute to a vibrant, sustainable, inclusive local economy, and engage Vancity's members and the public around their Good Money™ brand. 

Posted on August 6, 2013 and filed under Author: William Azaroff.