• Thu. Jun 13th, 2024

Banks Under Scrutiny for Establishing Personal Social Credit System, Sparks Debate on Discrimination

Jul 31, 2023

Major Banks Accused of Shutting Accounts Based on Political and Religious Views, UK Takes Action While US Remains Divided

Large money-center banks are facing criticism as accusations arise of their involvement in building a system of personal social credit scores, leading to claims of discrimination based on political and religious beliefs. Recent revelations surrounding British banks, Barclays and Coutts, have ignited a debate on whether such practices could pave the way for a broader social credit system encompassing other aspects like environmental behavior and gun control.

This week, Barclays joined the list of banks accused of closing accounts due to political or religious reasons. In April, Coutts, a private bank owned by British Bank NatWest, was also alleged to have closed the accounts and disclosed personal information of Nigel Farage, a prominent Brexit advocate and supporter of former U.S. President Donald Trump’s policies.

Critics argue that many of America’s largest banks are following the same path as their UK counterparts, screening customers based on political and social criteria and penalizing those who do not comply. Justin Haskins, director at the Heartland Institute, expressed concern over the growing evidence of discrimination against customers due to their ideological, social, cultural, religious, or political views, using various environmental, social, and governance (ESG) policies and frameworks.

In contrast to the United States, where regulators have taken no action, UK ministers have stepped in to defend their citizens against political discrimination. The economic secretary of the UK, Andrew Griffith, successfully urged major banks to commit to non-discrimination principles based on lawful expression. Furthermore, laws are being drafted to ban UK banks from discriminating against customers on political or religious grounds. UK Treasury Minister Baroness Penn emphasized the fundamental right to lawful freedom of speech and voiced concern over any actions that undermine trust in banking and financial systems.

As part of the new UK regulations, banks that close customer accounts will be required to provide a reason, and customers will have the right to appeal the bank’s decision. Banks persisting in discrimination may risk losing their licenses. The revelations have prompted resignations from top executives at British banks, such as NatWest Chief Executive Alison Rose and Coutts CEO Peter Flavel.

In the United States, allegations of political and religious discrimination have also been raised against JPMorgan Chase, America’s largest bank. A shareholder action brought against the bank by David Bahnsen, claiming closure of accounts for political reasons, garnered considerable media attention and has sparked debates about the potential impact on the bank’s reputation.

Experts warn that bank discrimination could extend beyond political and religious views and encompass other controversial issues like environmental behavior and gun control. Policies like “reputational risk” or “politically exposed person” leave room for broad interpretation, raising concerns that banks might target political opponents or unpopular viewpoints.

While some argue that banks, as private companies, have the right to choose their customers, others challenge this stance, emphasizing the critical role of financial services in modern society and the public trust banks hold, given their reliance on government bailouts and public benefits.

As the debate on personal social credit scores continues, the actions taken by UK ministers contrast with the US, where the issue remains divisive. Concerns are mounting over the potential consequences of bank discrimination and the need for a balanced approach to safeguard individual freedoms while ensuring responsible financial practices.

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