European Answers to the Financial Crisis: Social Banking and Social Finance

From 2007 to 2010, a financial and economic crisis gripped the United States, Europe and the world. 7 million Americans and 2 million Europeans lost their jobs, and 10 million were pushed below the poverty line. Thousands of families lost their homes, and many lost their savings. A global recovery from the effects of the crisis will take years.

As a result of the crisis, social banking and social finance have become important trends among bank customers in Europe. In fact, European social banks are the big winners of the crisis, growing by more than 20% per year and doubling their assets between 2007 and 2010. The crisis transformed social banks from niche institutions to large, publicly visible players. This success is due to the conviction of a growing number of bank customers in Europe that social banking is a less speculative and more responsible, ethical, and community-oriented way to deal with money than traditional banking. In the aftermath of the crisis, many see social banking as less egoistic and more caring for the overall progress of society than mainstream banking. Thus, social banking may provide important lessons for the banking and finance sector as a whole, in order to avoid further crises in the future.

In order to see what can be learned from social banking, let us first take a look at what social banking is; second, review the most important social banks today; and third, examine lessons from the success of social banks.