Yolanda Díaz, Vice President of the Government and Minister of Labour, after listening to social entities, launched a royal decree to promote ethical finance. The rule will come into force next spring once the reports from other departments and the Council of State have been collected. The fundamental aim is to “prioritize positive social and environmental impact over maximizing economic benefit” and “promote equitable financial inclusion”.
The Royal Decree establishes the criteria that define ethical finance entities, regardless of their legal form: allocate 75% of profits to strengthening the assets of the entity itself and allocate at least 20% of loans to non-profit organizations. Ethical finance must also adopt a democratic and participatory organizational model and exclude the financing of the armaments industry, gambling activities and fossil fuels.
The ethical bank is not a utopia. The Royal Decree is inspired by European regulation (Regulation on the disclosure of information relating to the sustainability of financial services, SFDR, 2019) and recent laws of several countries (France, Italy, United Kingdom, Netherlands, Belgium and Lithuania).
The Seventh Report on Ethical Finance in Europe, Beyond the advantagewith data going back to 2022, it provides relevant indicators. Ethical banks have greater capital strength, with 23.3% of core capital, higher than that of significant large banks, which is 17.2%. Furthermore, ethical bodies dedicate a greater share of their resources to businesses and families than large banks. This explains why ethical banks have a higher percentage of bad loans (5.7%) than significant banks (3.5%). The key lies in the different way of managing defaults: ethicists try to resolve these cases in a responsible and personalized way, while big banks sell them at large discounts to hedge funds without taking into account the rights of debtors.
With this initiative, the Government seeks to strengthen the financial institutions of the social economy by strengthening their visibility and legal security. It’s important. Clara E. Mattei, professor of Economics at the University of Tulsa (USA), highlights in The order of Capital (Captain Swing) the flourishing of cooperatives in Italy in the years 1919 and 1920, thanks to the support of the State.
Economist Carlos Martín Urriza, Sumar’s deputy in Congress, explains the background of the issue: “Banks operate with a very important public concession: they can create money from nothing and citizens receive nothing in return. We have also lost the free payment platform. Previously you could have a current account without costs. Now there is only the free basic account for vulnerable groups. The financial sector is the only one in which the customer must adapt to his interests. There should be more onerous conditions for fossil financing than for the green one. those.” Government action is decisive for the existence of decent finances.
