Information Transparency as a Differentiation Factor of Ethical Banking in Europe: A Radical Affinity Index Approach

This paper seeks to analyze the principal differences between ethical banking and the rest of funding organizations—banks, saving entities, credit cooperatives. With this aim, the paper first defines the essential characteristics of ethical banking—maximum social participation, efficient and professional management, transparency as a fundamental value, the existence of an ethical code, the inversion of assets in projects with an abiding social value and global measure. Furthermore, with the aim of providing the contrast among the funding organizations, the paper proposes an index, `Radical Affinity Index', which is focused essentially on the responsibility of lenders with regard to the decisions on the final use of funds. Once obtained, the index makes it possible to compare the classification of banking groups metrically. Therefore, the paper used a part of the index—transparency—as the first differential factor of ethical banking, to evaluate the hypothesis—there are significant differences in informative transparency between ethical banking and traditional banking.

Ethical banking is a topical subject. The awarding of the Nobel Peace Prize to Muhammad Yunus, founder of Grameen Bank, the greatest exponent of the ethical banking concept, has taken this topic to the front page. However, we have to emphasize that, on the one hand, at the European level, there exist entities such as Triodos Bank (Holland), Oekobank (Germany) or ABS (Switzerland) from the 1980s (Ballesteros, 2003), and on the other hand, at the state level, during this same period, the first attempt at creating an alternative banking, the Ethical and Ecological Banking Association (ABSE), was not successful for different reasons and has to be abandoned.

After an important gap which lasted for more than ten years, with the dawn of the new century, the interest in developing ethical banking in Spain has reemerged with great strength. Among the different initiatives, we can mention the creation of the Financial Tool Web (RUFAS), the Economic Solidarity Foundation (REAS Euskalherria), the Association for the Ethical and Social Support Banking, FETS (Financament Ëtic i Solidari) the Trust project and the FIARE. The two last projects have introduced the Triodos Bank and the Italian Ethical Bank, respectively.