Safer savings and clearer consciences?

Janice Warman looks at two ‘ethical’ banks that are drawing customers away from the shamed high-street giants

The credit crunch left most of our major banks in disarray, not to say disgrace. But it has been remarkably good for some of their smaller competitors. ‘Ethical banks’ might once have been dismissed by the high-street giants as a benignly unthreatening fringe, just as ethical share investment was considered by mainstream investors to be little more than an eccentric luxury for trustafarians. But in terms of cash savings, as opposed to equities, the opportunity cost of choosing to go ethical varies widely — and may actually be zero. As a result, savers disenchanted by City greed, or simply disconcerted by the near-collapse of big banks that had always seemed so permanent, have been switching in significant numbers towards alternative providers such as the Co-operative Bank and Triodos.

Triodos Bank — founded in Holland in 1980 — has increased its UK lending by almost a third in the first half of this year, to £305 million. At the Co-operative Bank, lending and deposit balances also increased strongly in the first half of this year, and bad debts were significantly lower than those of the major banks. In a Which? Money survey of 15,000 respondents, the Co-op Bank and its internet banking arm, Smile, were ranked in the top three for customer satisfaction; Triodos won this year’s Financial Times Sustainable Bank of the Year award. To have piled on new lending in the middle of the worst recession in living memory might look dangerous, but Triodos at least has the merit of being transparent about how it has done so: it is the only UK bank that offers an online tool which pinpoints every organisation it finances by keyword, location or sector.