Who to bank with in the UK?

Who to bank with? This is a difficult question nowadays in the UK for the ethical consumer. The Co-operative Bank (henceforth the Co-op) claims to be the only ethical high-street bank in the UK and as we shall see, that is not really true; whilst it is better than other mainstream choices, criticisms can be made and Triodos Bank is the better option.

ETHICALITY

Is the Co-op ethically better than most other high street banks? Yes it actually is, since it at least does have an ethical policy which precludes investing in the "bad stuff" like alcohol, tobacco, weapons and gambling whereas in contrast, pretty much all other banks of course would gladly welcome all such custom. The "Big Four" are Barclays, HSBC, Lloyds and Natwest and they invest in whatever makes them money, no matter how bloody their hands get. The Co-op became famous for being the only bank not investing in apartheid South Africa, whilst banks such as Barclays propped up the regime. However, it's not very hard to be better than competitors with no ethical policy at all and the Co-op is still pretty rubbish, as this quote shows:

In 2019, 223 business applications were referred to our specialist team for additional screening. As a result, four potential customers did not meet the ethical expectations set out in our customer-led Ethical Policy. As a result, we decided not to accept them as Co-operative Bank customers.

This is taken from their Ethical Screening page and shows that in 2019 out of 223 shady applications, just 4 were rejected.

HOW IT WENT WRONG

Things went wrong for the Co-op twenty years ago, when it acquired the Britannia Bank under false pretences since it was run by an arrogant, out of touch board of directors. This led to the Co-op nearly collapsing in 2013 through mismanagement. Until this point it had been wholly owned by the Co-operative Group which also owns the supermarkets, insurance and the funeral services. The Co-operative Group is actually a co-operative by the way, whereas the Co-op bank never was. It is important to note that for the Co-op, being ethical is basically just a "unique selling point". It doesn't treat its staff ethically, it doesn't treat its customers ethically, it's still a hard-nosed exploitative bank. Its ethics are branding.

Anyhow, in 2013 the Co-op Group had to sell up or face collapse, so US hedge funds stepped their way in. By 2017, the bank became 100% owned by these funds, which have names like Anchorage Illiquid Opportunities Offshore Master, SP Coop Investments, Goldentree Asset Management Lux S.A.R.L. and Cyrus Opportunities Master Fund II.

ALTERNATIVES

It's not hard to find better banking options with a quick search. Nationwide get good feedback. There's the new app-based banks such as Starling and Revolut. There's also Charity Bank, Engage, Handelsbanken and Reliance. However, there's only one real option here for me and that's Triodos Bank. Triodos is really amazing. They have a stringent ethical policy and they are routinely voted the number one ethical option (eg Good with Money); Ethical Consumer said it is "one of the most ethical companies".

The only downside for me was the £3 monthly charge for the current account, which I must admit I resented at first, but now I realise that Triodos are simply being upfront about their need to pay their costs, whereas all other banks get their running costs by overcharging people for things like getting overdrawn. I don't get tend to get overdrawn so I didn't see why I should pay, but then the penny dropped, and I realised by joining Triodos and paying £3 a month I am actually making a small step forward in reforming the current financial system which is designed to make money out of the poor and financially illiterate.

CONCLUSION

To sum up then, the Co-op may pedantically be the best ESG high street bank in the UK, but that's only because the others are so appalling. The best option is clearly Triodos, which is basically high street in that they now offer current accounts (which has a card that can be used at any ATM in the UK). Triodos may not have high street offices, but when did you last go into your bank anyway? Whilst the Co-op are ethical for branding reasons, Triodos are really ethical and last but not least, it isn't owned by US hedge funds!

So what to do as an ethical investor? I must confess I have stuck my head in the sand purely because of a misplaced loyalty to the bank I joined when I became an adult. I should have got out of Co-op in 2013 already, but the Triodos Bank did not at that point have a current account in the UK. It now does and I shall be switching as soon as possible.

The Current Account Switch Guarantee will help me do that and hopefully make the process as painless as possible.