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Archbishop calls for ‘culture’ change at financial institutions

Thursday 3rd October 2013

The Archbishop of Canterbury called for a change in “culture” at financial institutions during a meeting in the House of Lords on Wednesday of last week.

Archbishop Justin gave the keynote address at a roundtable meeting organised by the Islamic Finance Council UK and supported by the Arab Finance Forum and the Cambridge Interfaith Programme.

Archbishop Justin said: ‘The big area that has to change in our financial services structures is not around leverage and levels of debt in financial institutions – although they are crucial and they must change – but more fundamentally, even than that, is the issue of culture. Culture is an area that cannot be legislated, it can only be changed by a transformation in the spirit of society which leads to a sense of what is right and wrong.”

Inspired by “the grace and generosity of God”, an ethical finance system should have “generosity at its heart”, Archbishop Justin said. “There has to be space for gift, for something that is not expecting return, for something that is simply given.” Without this, the financial system risked “drifting into pure amorality”.

Read transcript below:

It is very good to be with you this afternoon and to take part in this conversation about ethical finance. As you may know, matters of finance are fairly close to my own heart, and I’m particularly grateful for the opportunities I’ve had in recent months, through the Parliamentary Banking Standards Commission, to be involved in looking at ethical perspectives, particularly in the financial and banking area. . .  

One of the more striking comments was when someone [giving evidence to the Commission] said: ‘Well, there can’t be any incentive for people to mis-sell products in our branches because the people who were doing the selling were on £15,000 or £20,000 a year and they were only getting bonuses of 10 per cent; and who would ever mis-sell something for £2,000 a year? The answer, of course, is anyone on £15,000 or £20,000 a year. It showed a disconnect between the world of finance and the rest of the world that was quite staggering. A chief executive [from a global bank] said to me the other day: ‘We’ve cut right bank on remuneration. Do you know, some of our senior executives are down to £3 million a year?’ Right.

So we are dealing with something that, [when] I was very active in the financial world in the 80s, was just beginning, particularly around the time of Big Bang. And that process of disconnectedness has extended itself very rapidly. I have also spent quite a lot of time with Muslim friends of mine discussing some of these issues. One in particular, the governor of the Central Bank of Nigeria, Governor Sanusi, who is one of the most remarkable philosophers, economist, and Islamic lawyers active today anywhere in the world. And his capacity to sort out the Nigerian banking system after its crisis of 2009, which was done by early 2010. . . I’d better not end that sentence, it might get me into trouble with people here, but he did it quickly and effectively.

Questions of finance are not abstract questions. When I was Bishop of Durham, I came across someone on a local public housing estate, a man in his late 20s with a partner and two children. He’d lost his job about 18 months earlier as a result of the recession. He was a painter-decorator by trade and he wanted to start up on his own and be able to earn enough money to look after his family. He was someone with real get up and go. It took him 18 months to raise the money to set up his own business, which he’d done. And in the first three months of his new business he’d paid off his finance, and had eight months backlog of orders and was doing very nicely. It’s all a pretty bog standard story until you discover how much he needed. To set up his business, he needed £200. £200 – and it took him 18 months to raise it. He came from a small family, so there was not family support; and there was no bank or financial institution; the credit union had disappeared. There was no means of him raising £200 to buy ladders, paint and brushes. To me that says all we need to know about the complete failure of the financial system in this country to reach to the parts that an effective financial system should reach, and its ineffectiveness in providing financial access. The problem of financial exclusion is at the heart of the deeply growing divide in our society between the south and the north generally, but, in more specific terms, between our richer and poorer areas. Even people with real energy and determination struggle hugely. And those who don’t have quite that amount of initiative and entrepreneurial spirit are basically lost.

So where do we start in terms of theological principles when we talk about a fair and just, ethical finance system? I want to start by saying that, as a Christian, my faith and the way that I see the world is obviously shaped by my belief in Jesus Christ as the incarnate Son of God; and that is testified to by the scriptures that speak of God’s relationship with His people throughout the millennia, and by the tradition that the Church, at its best, has demonstrated since the life and death and resurrection of Jesus Christ. And we are called as Christians to use our reason in the application of the witness of the scriptures and of the tradition that we inherit.

And that picks up a number of very key theological points that guide our understanding of an ethical finance system. The first of them is grace and generosity. At the heart of Christian belief is the idea that God demonstrated his love for all human beings by offering them hope of eternal life and a relationship with Him, without their deserving, through sheer, underserved love, through what is known as grace – without merit, without any expectation of return or reward. It was a covenantal, not a contractual, offer. And grace leads to generosity. So an ethical finance system will have at its heart generosity. Pope Benedict XIV, in his last encyclical, pointed this out when he talked about the principle of gratuity as being one that had to be in any ethical finance system globally. There had to be space for gift, for something that is not expecting return, for something that is simply given. And a system that does not have space for gift is a system that will in the end drift into pure amorality, into mere dealing with the strong because they’re the only ones who can deal with the contract.

Secondly, as a theological point, the incarnation –  the life, the coming and being in human form of God, in Jesus Christ – speaks of the need for a radical re-centering of what we think of as essential in life. We have to move from the material to the eternal. We can’t simply be stuck with what we can see, touch, measure – particularly when it comes to finance. . . The danger in finance is we think – and this came out in 2008 in particular – that because you have a formula that tells you a number at the end of it, that that is the answer. Black-Scholes need only be one example, in terms of derivative products. The bell curve, the absence of awareness, of Black Swans, of the long-tail risk. The reality that sometimes everything correlates in exactly the wrong way at exactly the wrong time, and none of our calculations enable us to build models that will deal with it. All this is utterly predictable from within a Christian theological framework, because it says humans are fallible, therefore they need salvation. It says that the material is not the ultimate value.

Thirdly, Christians live with the shadow over them, not only of their own sinfulness and God’s grace and salvation, but also with the example of the first Christians in the earliest days of the Church where all things were held in common. If, as a Christian, that doesn’t leave you feeling ever so slightly guilty, particularly for those of us who live in tiny little houses just on the other side of the river from here, then you really aren’t thinking very clearly at all.

We need to think about what it means to have an economy, which is what the early Christians formed, in which all is held together. And in case you think this is myth in the earliest days of our scriptures, in mid-August my wife and I were visiting the church in Mexico and we were up in northern Mexico, and because it’s a minority church there, it tends to deal with people that no one else really notices; and they don’t pay their clergy there, because they’ve got no money, so their clergy all have to earn their own living; and one of the clergy is a psychologist, and his bishop said to him: ‘I want you to go and work with this community right out in the sticks, as well as your present parish and your full-time job.’ And the clergyman said to me he was sure that when he went there they would kill him; it was a very wild area. . . And he basically set up something where they held everything in common. They’d set up central feeding in the community, and they fed the young and the old and those who were ill. They’d set up a system where they built each other’s houses, they helped each other get to work, they put money into a common fund across the whole community. It was really the church which, in our better days, we would all like see. So it’s not just history, and that is an example which challenges how we understand the flow of finance.

Fourthly, the incarnation of Jesus Christ and the love of God, the grace of God, speaks to us of the dignity of the human being – that human beings are never simply to be treated as means to an end, that they are ends of love in themselves; and that we have to have a financial system that considers them as ends, not as mere resources.

Fifthly, there is the purposefulness that comes with the incarnation and through the gift of the Holy Spirit at the Day of Pentecost under which is the theological principle that God gives purpose and calling to all those who will obey him. Purposefulness and transformative love and grace to be demonstrated in the way we live. . .

And finally, the incarnation points us to the principle of service, that all our acts should exist for service, not simply for our own benefit. So, for example, whilst the 16th-century Reformer John Calvin recognised that money could have a price, he remained clear that no one should take interest from the poor because that was a form of seizure, not service.

To take another practical example for today, one that took me by surprise a few of months ago, is that around the hunt the payday lenders, the high interest lenders. I made a casual remark in the course of an interview. . . and people picked up strongly on both the usurious nature of the interest rates. I know it’s a little rude, but frankly since Moses, 5400 per cent a year has been considered a little over the top. . . If I just take the New Testament period, that’s always been considered a little over the top.

Let me take another point that is about the dignity of the human being. With most companies, when you enter into a short-term loan with them, you’re entering into a loan that consents to a CPA [Continuous Payment Authority] which means that their systems can go into your bank account, if you are overdue, and seize any money that is in your bank account without your consent. And with most of these lenders, their systems will go into your bank account roughly every six to twelve hours. So move to the day of Universal Credit being paid directly into your bank account at the beginning of the month to cover your rent and your food. You are overdue with a loan to one of these companies, and before you’ve paid your rent or your food, instantly your bank account is empty. Now let’s be clear: in the Jewish Scriptures, in the Old Testament as we call it, it is clear that whatever you take as security, you don’t take cloak and bed, because those are basic essentials. Today, the equivalent would be food and shelter. These are things you must not seize. And in listening to 12 months of evidence on the Banking Standards Commission, underlying all this was the sense that we had lost of the intrinsic faithfulness of God, of the principle of gratuity and of money being as much of a spiritual process as it is a material process.

Where does that fit in to an inter-religious discussion and to practical solutions? First of all, the big area that has to change in our financial services structures is not around even crucial areas around leverage and levels of debt in financial institutions – although they are crucial and they must change. More fundamental even than that is the issue of culture. And that is an area that cannot be legislated; it can only be changed by a change in the spirit of society which leads to a sense of what is right and wrong. And that is where the inter-faith discussions come in. The lively presentation of the intrinsic principles that we each have, and where they overlap, that we have together, sets a tone which one hopes over time will begin to permeate and self-correct into the way that our banking system works. In practical terms, from a Christian point of view, there are a number of key things. CPAs must go. I mean, that’s a very simple statement. You cannot take everything someone has.

Secondly, because of the dignity of the human being, we  must have a financial system that abolishes financial exclusion. That brings us back to credit unions, to local finance where people are looked in the eye and where there’s a sense of local accountability, almost to micro-finance. £200, in many parts of the world outside the United Kingdom, would be considered a micro-loan, even in quite poor countries.

Thirdly, we have to have a financial system that has within it the concept of mercy and forgiveness. Our bankruptcy law has changed in the last 20 years in a way that improves that and gives some hope of redemption in its broader sense as well as repayment in its narrow sense. And I think one of the key things that we can hope for this afternoon is to address a range of concerns and to see where, from common principles, we can encourage regulation and law, competence and culture, and awareness and access as the three points of a great triangle to tackle some of the problems of our financial services system.

Thank you very much.


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