ORIGINAL FRENCH ARTICLE: Denis Durand : « Pour changer le comportement des banques, il faut y prendre le pouvoir »
by Julia Hamlaoui
Translated Wednesday 4 January 2017, by
In this interview with L’Humanité newspaper, the chief economist of the French communist party (PCF) Denis Durand argues that replacing the criteria of profitability that guides banks today by that of social effectiveness implies not only legislation such as nationalization, but also underpinning from social movements.
On 1 January, several French banks increased their charges by an average of 13%, despite generating large profits. The banks say the increases are to compensate for the lower margins resulting from low interest rates, but the issue has highlighted once again the need to make these financial institutions function for society not private profit.
Bank account charges have increased, on average, by 13%. Banks, justify this by pointing to low interest rates. Is this a valid argument?
Denis Durand: It is true that interest rates are generally very low today. [Bank] margins are therefore necessarily lower. Hence their argument, even if these low rates do not benefit everyone: for small or medium sized enterprises (SMEs) or personal loans, they are still very high. And in fact for more than twenty years bank income from margins on interest rates has been falling. Commissions, account charges and purely financial operations are today a very big part of their profits. At the same time, banks refuse to recognize that maintaining an account, like many other parts of their business, is a genuine public service. Everyone should have access to them, so these increases are unacceptable.
With the increase in income from the financial markets, is there again a risk of crisis?
Denis Durand: The barrel of gunpowder, which has not yet exploded, is three or four times larger than in 2007. The risks that appear in the balance sheets of financial market operators - banks, insurance companies, pension funds , investment funds, multinationals... - are bigger because more money is in circulation.
Beyond the risk of crisis, are these types of activity harmful?
Denis Durand: As a consumer, one is justifiably very sensitive to the increase in bank charges, but the [other] activities of the banks are much more significant to us, as workers and citizens. When an SME closes its doors, it is always because a bank has refused to finance it. When a local area fails to develop, it is because a request for credit has been rejected. Without the banks, there would be no tax evasion; they are the mainspring of it.
How could banks play a different role?
Denis Durand: It’s about transforming them. Société Générale and BNP, which are the last major private banking networks in France, must become public but this is not enough. Public or mutual networks, such as Crédit Agricole or the Banques populaires, behave exactly like private banks. It requires both nationalization or mutualisation, the creation of a public banking pole, and a change in the distribution of the powers in these institutions to force them to behave differently. Social pressure must be taken into account in the allocation of financing; rather than profitability for private capital criteria for social efficiency must be introduced. This also applies to the central bank. A different monetary policy is necessary in France but also at a European level. We ought to demand that credit that serves to create jobs or support public services be refinanced by the European Central Bank (ECB) on the favourable terms it now offers to financial markets, that is, negative interest rates. The behaviour of banks is a political issue that will not be solved solely by regulatory decisions. This also implies altering the balance of forces through struggle.