The announcement on 17 December 2013, by the British Bankers’ Association (BBA) and the Council of Mortgage Lenders (CML), to release lending data at a postcode level, marks a significant turning point in the quest for both greater transparency and greater fairness in financial lending.
CDF is proud to be part of the Community Investment Coalition which has been campaigning for 18 months to bring this to fruition, building on the aspirations of many non-profit and business organisations over the past 10 years.
Swimming against the status quo
We have worked systematically alongside senior politicians, financial policy-thinkers, makers and doers, to arrive at this point and I applaud their shared commitment. It has required a sustained effort to swim against the status quo. As a result we will now be able to see the outstanding stock of lending committed to customers across 3 categories, broken down by 9,000 postcodes across:
- Loans and overdrafts to small and medium enterprises (SMEs)
- Unsecured personal loans
Major step in transparency
Our CIC partners include the Centre for Responsible Credit, the new economics foundation (nef), CCLA investment management and the Community Development Finance Association (CDFA). I would like to thank them for providing the evidence required to support this campaign. Our shared aspiration is that this major step in transparency will help to tackle ‘credit deserts’ across Great Britain, where businesses and consumers struggle to access fair credit.
This new data will allow businesses and the public to see clearly how the banking and building society sectors are serving the wider economy, and in which areas of Great Britain there is less lending. Publishing data in such a detailed way will assist competition, allowing new entrants to identify where there is unmet demand and to pursue new business in these areas.
Dispelling industry myths
Of course, there are those within the banking industry who will continue to flex their muscles by purporting that this opportunity for transparency is a problem rather than part of the solution to rebuild trust, support economic growth across the whole economy and extend their reach into potential new markets.
One of the Chinese whispers doing the rounds is a comparison to the US’ Community Reinvestment Act (CRA) and that the CRA was responsible for the sub-prime crisis. This is nonsense, of course, and is a myth contradicted by evidence. For the nerds among you, take a look at the US Congress’ Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States (page xxvii) which concludes that:
“The Commission concludes the CRA was not a significant factor in subprime lending or the crisis. Many subprime lenders were not subject to the CRA. Research indicates only 6% of high-cost loans—a proxy for subprime loans—had any connection to the law.
“Loans made by CRA-regulated lenders in the neighborhoods in which they were required to lend were half as likely to default as similar loans made in the same neighborhoods by independent mortgage originators not subject to the law.”
We have helped lay the foundations for fair lending – please stay with us and tell your friends about the CIC campaign and help us to maintain this, so far, voluntary arrangement to disclose data.
– See more at: http://www.cdf.org.uk/blog-17-december-2013-transparency-in-banking/#sthash.swSuGOOl.dpuf