Last month, the chief executive of Barclays, Bob Diamond, gave the inaugural BBC Today Business Lecture. Banks, he said, must be better citizens if they are to win back the public's trust. They have to focus on the interests of the customers, clients and communities that they serve. Banks, he explained, have a vital role to play in creating jobs and economic growth. But they needed to restore public trust: no taxpayer money should ever again be put at risk to rescue a failed or failing bank.
Also last month, we learned that Barclays have teamed up with Credit Suisse, UBS and UniCredit, with the support of the University of Zurich, to form the Thun Group and develop a practical application guide to operationalising the UN Guiding Principles on human rights and business in universal banks.
At the same time a Strategic Review of the Equator Principles (EP) is under way and is addressing, among other things, the scope of the Principles, climate change, reporting and transparency and proposals on how to integrate the new IFC Performance Standards language on social risks, stakeholder engagement and human rights into EP III.
The potential for banks to have a positive or negative impact on human rights has long been recognised. But the current global economic downturn, with its huge impact on the economic rights of millions of people, and the fact that the banking sector has been seen by many to be largely responsible for triggering it, has broadened the debate and given corporate responsibility, when applied to banks, a whole new meaning.
Do the tools exist to ensure that Bob Diamond's laudable aspirations can be realised? The Equator Principles, in their current form, are clearly not designed to prevent banks from having major adverse impacts on human rights at a global level by engaging in irresponsible operations in financial markets. While the UN Guiding Principles make it clear that businesses should avoid causing or contributing to adverse human rights impacts through their own activities, developing a due diligence approach that covers the whole range of ways in which banks impact on human rights, not to mention the provision of remediation to those affected, is a mind-boggling challenge. So we wish the Thun Group well!
As for States, they have to decide to what extent they can rely on banks to address these issues themselves, through codes of conduct and such like, and to what extent new or amended regulation will be required. It seems inevitable that action will be needed on both fronts. Bob Diamond said in his speech that strong banks wanted strong regulation. However, in the UK at least, the response of much of the banking sector to the recommendations in the Independent Commission on Banking report suggests that there is still some way to go before the sector, as a whole, is ready to face up fully to the challenge.
By Graham Minter