why do we need banks in our society
If you relocate a dollar to where it will have more positive impact, you can create a profit of 5 to 10 cents on that dollar. Values-based banking places its emphasis here: Profit is generated by relocating money so that it serves the priorities of communities. As an economist, I can also define values-based banking in more technical terms: A values-based bank uses deposits from customers to provide loans to the real economy, not the financial (speculative) economy.
When you look at the balance sheet of a values-based bank in comparison to a mainstream bank, the ratio of loans to deposits is a lot higher. These ratios are between 70% and 80% at a values-based bank. It means we donвt use our clientsв money for anything other than investing in positive impact and of course meeting our reserve requirements, and complying with banking regulations.
So the majority of the balance sheet for values-based banks goes into loans: loans to the real economy. Mainstream banks on the other hand в especially the big systemic banks that are often described as too big to fail в have a loan-to-deposit ratio of between 40% and 50 %.
In effect, they receive deposits from their clients and only devolve less than half of it to the real economy. The rest goes into the stock exchange market, industrial shares, or other financial investments. This is speculative and we donвt think this is the right way to approach banking.
Banks play an important role in society.
By assisting customers with financing, investments, secure payments and asset management, we support economic development and international trade and contribute to financial security. By sharing expert knowledge, we help households, entrepreneurs and companies make well-grounded decisions so that they can achieve their plans and ambitions.
This creates value for customers encourages customer loyalty, and by extension, long-term shareholder value. We support future generations. That is what permeates throughout our sponsoring activities. We enter collaborations that highlight SEBds role as corporate citizen in the countries where we are active and in areas where we have a heritage of strong commitment.
- Autor: telfild
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