Principles for responsible banking

Responsible banking: The upside to being upstanding

When people think of banks, they think about money. Can I get a loan? Can I get more credit? Is my money safe? But banks are much more than a trusted place to store and borrow cash. They are the gatekeepers of the financial system and have enormous influence on society. Banks can strengthen or hobble individual businesses and whole communities alike by supporting or limiting their access to funding. And they can accelerate or slow the economy based on the sum of the lending decisions they make. 

Banks’ role in society positions them as a front-line guardian of basic human rights. As “duty-bearers” on human rights, banks have a disproportionate responsibility in society. For instance, laws require banks to treat customers fairly and promote financial health and access. Banks need to evaluate the beneficiaries of their business as worthy recipients, lest their access to funding be used for illicit purposes. And they have a moral obligation to keep out of the market financial instruments and service offerings that can perpetuate social inequities. 

By being more proactive, banks can accrue measurable financial benefits, from managing risks better to creating new sources of value to protecting reputations and increasing brand value.

Human rights risks related to banking

In addition to human rights risks faced by all organizations, banks face their own unique set of risks they need to manage across four major groups of rights holders who are impacted by them: employees, suppliers, customers, and communities.

Since the Universal Declaration of Human Rights (UDHR) was published more than seven decades ago, regulators around the world have enacted a broad sweep of regulations designed to protect human rights in select geographies and sectors. Today, banks and other financial services firms are governed by rules seeking to guarantee equal access to credit and consideration when buying a home or applying for other loans, protect consumers’ privacy, and provide basic banking services in low- and moderate-income communities, among other objectives. 

But perhaps the biggest prod for change is coming from the market itself. Institutional shareholders and customers are homing in on companies’ environmental, social, and governance (ESG) activities, paying increasing attention to what companies are doing under the “S” pillar. As part of this appraisal, banks are coming under heavy scrutiny given their gatekeeping role in society. 

From concept to action

Addressing human rights within financial services requires turning abstract concepts into measurable observations and related actions. Three concepts come into play when developing a human rights strategy and acting on it: salience, leverage, and remediation. Each concept is tied to a definite step that banks can consider as they develop a human rights strategy and operationalize it.

Advancing ESG in banking

As banks reevaluate their performance in respecting and protecting human rights, they have an opportunity to use human rights as a lens through which to advance their business agendas. The end goal isn’t simply staying on the right side of the law and minimizing related penalties. It’s much more expansive than that: Here is a chance to fundamentally change the relationship between banks and their employees, customers, shareholders, and other partners in the community and build and sustain their trust. 

Banks that get this right will not only be recognized for it—they will attract new customers, new employees, and new business partners as well through the process. The stakes couldn’t be any higher—and not just for the banks. 

As a longtime trusted adviser of the banking industry, Deloitte can help your organization develop and execute such a plan and start connecting the dots between your social and financial performance. 

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