Formation of approaches to the functioning of the bank in the context of sustainable development
The world community is unanimous about the need to make changes in the functioning of banks and an understanding of their role in the financial market. So, according to V.V. Vysokova, Chairman of the Board of Directors of the Center-Invest Bank, “the old model of the banking business, based on the use of temporarily idle funds circulating in the settlement system, has exhausted itself”. Moreover, domestic economists consider the inevitable transition to a new model of banking business, in which the bank’s client will play a different role.
Over the past few decades, a group of banks that are members of the Global Alliance for Value-Based Banking (GABV) have shaped the principles of banking in the context of sustainable development:
“Three-dimensional approach” is the essence of this model. This approach is an activity based on three values - income, customers and the environment.
Interaction with the regions in which banks operate, serving the real economy and the creation of new enterprises in order to meet the needs.
Long-term relationships with customers and understanding of their business activities and the risks associated with it.
The pursuit of long-term, self-sustaining and resilient activity.
Transparency and openness of management
Banks, guided by these principles, strive to provide the client with the necessary set of banking products and services for the real economy in the long term, while at the same time working with an awareness of the need to develop the economy and the environmental needs of society.
Taking into account these principles, the main approaches to banking activities in the context of sustainable development and the structure of the bank’s work at the present stage of development can be formed.
The most important component of the approaches presented in Figure 1 is financial sustainability, which should be based on maintaining the bank’s position in the region, focusing on long-term profit and long-term relationships with customers and employees, increasing profitability, stress-resilience and readiness to work in changing market conditions, and on the anti-corruption orientation and openness of the bank’s activities with a focus on asset management, settlements and lending. Achieving financial sustainability is possible by:
Avoiding unreasonably “bloated” loan reserves and operational risks.
The agreed structure of assets and liabilities in terms of volumes, terms, risks, returns and currencies.
Optimize risk management activities to provide sustainable buffers and boundaries for investing in better services and products for customers.
Works in open, stable and fair markets.
Analyzing social sustainability in the framework of the proposed approaches, it should be noted that the bank should promote social development in the course of all its activities, within the structure of the bank and through the management of products and services. This approach is implemented by active promotion of human rights, fair working conditions, cultural diversity and gender equality, in other words, the bank should:
Contribute to improving the reputation as a good employer in the labor market.
Strengthen human rights and working conditions activities with an emphasis on cash management and lending.
Promote issues of cultural diversity and tolerance in society through banking operations with customers and shareholders.
Attach to the principles of sustainability through educational trainings and courses that should be mandatory for bank employees and voluntary for bank customers in the region of presence.
The Bank, which promotes the establishment of environmentally sustainable activities in its operations, implements a sound policy of managing limited natural resources and adheres to environmental standards. Promoting environmental sustainability is possible through the creation of banking products and services in the field of energy efficiency, as well as the use of energy efficiency principles in our activities and the desire to moderately reduce the consumption of natural resources.
The components of the bank functioning described and discussed above in the context of sustainable development should be focused on customers, employees, shareholders, society and the planet, as well as embedded in the culture of management and operation of the bank and be reflected in the annual reports and regulatory documents of a commercial bank.
The principles laid down in the activities of banks operating within the framework of the concept of sustainable development provide a long-term and sustainably profitable banking business and suggest the formation of a new, solid model of banking. The vital role that these banks play in the development of the real sector of the economy and their activities aimed at solving environmental problems should be taken into account for the restructuring of the financial system.