Ranking the Banks
Ranking the Banks
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JPMorgan Chase announces a trading loss on its own accounts of somewhere between $2 and $9 billion from a derivatives trade that spiralled out of control; Barclay’s admits to manipulating the LIBOR interbank lending rate; the attorney general of Massachusetts brings a suit against five major U.S. banks for fraudulent foreclosure practices. These are just a few of the spring 2012 headlines involving the banking sector.
ICCR’s financial services group has been in dialogue with the nation’s largest banks, regulatory agencies and financial policy experts for close to 40 years, calling for increased industry transparency and oversight to avoid the next looming financial meltdown. While progress has been made on several fronts, it is difficult not to despair at the seeming pervasiveness and intractability of the problems facing the industry.
“What is frustrating for many of us is the knowledge that the vast majority of these problems can be avoided by adopting the appropriate risk management safeguards and the requisite checks and balances,” observed Rev. Séamus Finn of the Missionary Oblates of Mary Immaculate. “With each new scandal we think ‘maybe this time they will get it’, and then we open the morning paper to see that we still have work to do. We see the need for increased oversight, and for tools to help us more effectively communicate and realize our objectives: a stable, reliable and trustworthy financial system.”
This spring the group decided to undertake a study of major U.S. banks that would give them a snapshot of performance and achievement on a variety of issues that have been on the agenda over the long course of their engagements. Partnering with fellow ICCR member Sustainalytics, an international, independent provider of ESG research, the group sent questionnaires to the seven largest U.S. banks: Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Wells Fargo.
With the responses from the banks, they intend to draft a scorecard and an analysis of the banks’ performance in the following four major areas:
- Risk Management
- Investment and Lending Practices
- Executive Compensation
- Lobbying/Political Contributions
“After nearly 40 years of shareholder engagement, we felt it was important to conduct a full review in order to assess our progress on these issues. Understanding where the banks stand, both independently and relative to one another on the key performance indicators we’ve identified, will prove invaluable to our engagements going forward,” said Sr. Pat Daly of the Tri-State Coalition for Responsible Investment.