Customers disillusioned with Britain’s bigger banks are switching to smaller alternatives believing they operate more responsibly.
The campaign group Move Your Money UK reports that this year 500,000 customers have left the ‘big five’ – Barclays, HSBC, Lloyds Banking Group, RBS and Santander – to entrust their money to smaller, ethical banks.
Trust in the large banks suffered a blow when Barclays and allegedly others were reported to have misled regulators about Libor rates, the London interbank offer rate (EP, July 2012, p1
Barclays was fined a record £287m ($451m, €356m) by US and UK regulators. HSBC, Lloyds and Royal Bank of Scotland (RBS) are believed to be under investigation.
HSBC has since been found to have allowed money laundering, after ignoring warnings about clients linked to drug cartels and terrorists. A US court fined HSBC $1bn (£645m, €822m).
Several banks have been involved in mis-selling fixed interest rate deals to small and medium-sized businesses, for which the UK Financial Services Authority has arranged a compensation scheme.
In addition, millions of RBS customers recently lost access to their accounts when the bank’s IT systems failed.
In the backlash, the number of depositors at Charity Bank, which lends savers’ money to charities, has doubled.
The Ecology Building Society has seen a 266% jump in applications. Triodos, the Bristol-based ‘sustainable’ bank, is also benefiting.
Credit unions have found week-on-week increases in savers of at least 20% and overall membership has topped a million.
Other alternatives include the building societies that shunned the rush to demutualisation in the 1990s, as well as the Manchester-based Co-operative Bank, which is acquiring 632 Lloyds branches in a deal which will give it an estimated 7% market share.
The Co-op has seen account applications spike at 61% above normal levels in recent weeks.
Adam Scorer, external affairs director at the advocacy group Consumer Focus, said: “Consumers have decided to mete out their punishment by moving away from banks which have been tarnished by recent events and revelations.”