Responsible finance - Finance for all: Do you know what responsible lending is?

23/09/2020

The theme for this year’s Financial Education Day, which will be held on 5 October, is “Responsible finance - Finance for all”. But how is that idea expressed in the relationship between customers and banks? It is expressed in the need for all of us to manage our finances responsibly. When it comes to taking out a loan or applying for credit, that responsibility falls on all of us, both customers and banks.

In this first post, we will focus on the role played by banks in promoting responsible finance among their customers when they decide to grant them credit. In future posts, we will also talk about customer responsibility.

You should know that the need for banks to be responsible is not merely symbolic. There is a legal framework containing specific obligations which translate into tangible requirements at all stages of their relationship with customers:

• When creating credit products, banks have to make sure their design and marketing serve the interests and goals of the customers at which they are aimed.
• When marketing these products, banks should act honestly, fairly and professionally, that is, providing you with full and accurate information on the products you are interested in, taking into account your personal and financial situation, as well as your preferences and goals. In other words, they must try to offer you what you want and explain it well.
• When granting a loan or credit, banks should carry out a thorough and prudent assessment of your creditworthiness and that of possible guarantors and collateral of the transaction. The bank’s decision should preferably be based on your ability to meet the scheduled payments, not only on the expected value of the collateral you provide. It is an important commitment, and it is up to your bank to decide whether you will be able to meet it. But don’t forget that taking it on is your responsibility.
• In the ongoing assistance provided by their sales departments, banks must make sure that sales staff have proper training and skills, and that they can clarify any doubts that you may have. Transparency does not end when you sign the contract: it must continue throughout its entire duration.