Bank Lobbying

Differences in Lobbying Behaviour of Traditional and Ethical Banks

Fabian Hartl (11195800) June 23, 2017 Master Thesis Political Science – Political Economy Research Project ‘Political Economy of Financial Crises’

Supervisor: Dhr. Dr. J.G.W. (Jasper) Blom Second Reader: Dhr. Dr. M.C. (Marcel) Hanegraaff Table of Contents

Acronyms ...... 2

1. Introduction ...... 3

2. Literature Review & Theoretical Framework ...... 7 2.1 Literature Review: Bank Lobbying ...... 7 2.2 Theoretical Framework: Bank Lobbying as a Function of Two Factors ...... 9 Organizational Characteristics ...... 9 Overall Approach to Banking ...... 11

3. Conceptual Framework ...... 12 3.1 Definitions...... 12 Lobbying ...... 12 Traditional vs. Ethical Banks ...... 12

4. Methodology ...... 15

5. Data Analysis ...... 17 5.1 Traditional Banks ...... 17 ING Bank ...... 17 Rabobank ...... 24 5.2 Ethical Banks ...... 29 Triodos Bank ...... 29 ASN Bank ...... 35

6. Comparison of Traditional & Ethical Bank Lobbying ...... 40

7. Conclusion ...... 48

Bibliography ...... 50

Appendix:...... 61

1 Acronyms

BBA British Banking Association BCBS Basel Committee on Banking Supervision BIS Bank of International Settlements BVPA De Beroepsvereniging voor Public Affairs (Dutch Association for Public Affairs) CSR Corporate Social Responsibility NVB Nederlandse Vereniging van Banken (Dutch Banking Association) DUFAS Dutch Fund and Asset Management Association EACB European Association of Cooperative Banks EBA Euro Banking Association EC European Commission EDIS European Deposit Insurance Scheme EP European Parliament ESG Environmental, Social and Governance EU European Union FeBelFin Belgian Banking Association GABV Global Alliance for Banking on Values GRI The Global Reporting Initiative IMF International Monetary Fund NGO Non-Governmental Organisation OECD Organisation for Economic Co-operation and Development SDGs Sustainable Development Goals SIF Social Investment Forum SRM Single Resolution Mechanism SSM Supervisory Mechanism UN United Nations UNEP United Nations Environment Programme

2 1. Introduction

The global financial crisis that started in 2007 was the result of a range of problems. In particular, widespread regulatory failure is widely regarded as one of the important causes of the crisis (BIS 2008; IMF 2009). Notably, financial industry actors have been greatly involved in weakening national and international financial regulation (Chalmers 2017). Indeed, regulatory failure is frequently attributed to excessive lobbying and undue influence of financial industry actors (Igan et al. 2009; Mattli & Woods 2009). As a result, the recent global financial crisis has given rise to many new regulations in the banking industry on both national and international level. However, bank lobbying is often linked to weakened banking regulations, especially in the run-up to the financial crisis. It is therefore not surprising that the term lobbying sometimes has a negative connotation for the wider public. Nevertheless, the financial sector is complex and thus lobbying by banks has the potential to provide policy-makers with valuable knowledge and expertise. Hence, bank lobbying can serve the public interest by promoting and ensuring the financial stability of the economy through domestic and global financial regulations. However, without transparency and accountability of the lobbying activities as well as the legislative decision-making processes, bank lobbying can also harm the public interest. Despite growing interest of scholars in bank lobbying activities following the recent global financial crisis as well as concerns about privileged access to legislators and undue influence over the financial legislative process, little research had focused on the determinants of bank lobbying. Little is known what factors explain why some banks decide to lobby financial regulation in order to shape regulatory outcomes while others do not (Chalmers 2017). In particular, research had primarily focused on lobbying efforts of certain kinds of banks. Especially traditional banks are the main focus of research on bank lobbying. Traditional banks offer a broad range of products and services and therefore play an important role as an intermediary in the financial system. In contrast to lobbying by traditional banks, the lobbying behaviour of ethical banks has not been analysed yet. Ethical banks, at their core, are concerned with the social and environmental impacts of their products and services. Nevertheless, environmentally and socially conscious business practices alone do not distinguish ethical banks from traditional banks. Similarly, both types of banks are regulated by the same authorities and they have to follow the same rules and regulations. So far, no study has yet been undertaken to explain possible differences in

3 lobbying behaviour of traditional and ethical banks. In order to fill this gap in scholarly research, this master thesis seeks to answer the following research question:

What factors explain differences in lobbying behaviour of traditional and ethical banks?

The research question of this research project cannot be answered all at once. Therefore, the following sub-research questions will allow this study to answer the main research question in a step-by-step manner:

1. What are traditional and ethical banks lobbying for? 2. How do traditional and ethical banks lobby? 3. Why do traditional and ethical banks lobby?

Regarding the first sub-question, asking ‘what’ traditional and ethical banks are lobbying for enables one to gather specific information about a bank’s lobbying position(s). For example, one can assume that ethical banks actively contribute to the development of a socially and environmentally responsible and sustainable banking sector. By contrast, traditional banks are expected to lobby for keeping the status quo or perhaps for weakened banking regulations. Regarding the second sub-question, asking ‘how’ traditional and ethical banks lobby enables one to better understand how the banks are internally organised as well as the way they lobby. For instance, some banks may not have a particular strategy on lobbying including on legislative processes. In addition, lobbying transparency might be part of ethicalness and thus different to the transparency level of traditional banks. Consequently, finding out ‘how’ a bank organises its lobbying activities plays an integral part in understanding possible differences in lobbying behaviour of traditional and ethical banks. Regarding the third sub-question, asking ‘why’ traditional and ethical banks lobby helps one to better understand the necessary differences that explain the lobbying activities of banks. This sub-question plays an important empirical part of the research project because it examines the motives for lobbying as stated by the banks. Advancing a novel theoretical framework, this thesis claims that the decision to pursue lobbying activities is a function of two factors: banks’ organizational characteristics and banks’ overall approach to banking. Factors that explain differences in lobbying behaviour of traditional and ethical banks are therefore two-fold. Firstly, organizational

4 characteristics, like financial resources and international banking activity, impact a bank’s decision to lobby. Secondly, banks’ overall approach to banking, like strategy, mission, purpose or business model, impact banks’ decision to pursue lobbying activities. The research project tests these propositions by comparing the lobbying behaviour of two traditional banks (ING Bank and Rabobank) and two ethical banks (Triodos Bank and ASN Bank) in the Netherlands. The reason for choosing banks only in the Netherlands will help to keep the context constant considering different banking as well as lobbying regulations abroad and the rather small banking landscape in the Netherlands. Analysing banks only in the Netherlands also allows one to identify the factors behind the banking sector’s lobbying efforts more carefully. In terms of the societal relevance, this study touches upon the role and influence of banks and thus the democratic legitimacy and the quality of the policy-making process in financial regulation. For instance, a report by SOMO1 (2016) examines how lobbying works in the banking sector in the Netherlands. The report analyses the “decision-making processes for new or reviewed financial laws and related interactions between the Dutch Ministry of Finance and six Dutch banks: ABN AMRO, ING, Rabobank, Triodos Bank, SNS Bank and its subsidiary ASN Bank (SOMO 2016: 7).” SOMO concludes that there is a risk of regulatory capture of financial legislative processes because indirect influence and impacts of banks’ lobbying activities. Not only customers but society as a whole expect banks to provide products and services that serve, rather than harm, the common good. After all, business operations by banks may have positive or negative social and environmental impacts. Hence, this research project also helps critical customers to choose a bank with a lobbying behaviour according to their preferences. In terms of the theoretical relevance of this study, little is known what factors explain why some banks lobby financial regulation in order to shape regulatory outcomes while others do not. Since the recent global financial crisis, scholars have examined banks’ lobbying efforts in both the national and international financial policy-making process (Chalmers 2017). However, lobbying activities of ethical banks have not been analysed yet. This thesis is organised as follows. After introducing the research project, it provides an overview of the literature on bank lobbying. Following this, the thesis establishes a novel theoretical framework in order to examine factors that explain differences in lobbying

1 “The Centre for Research on Multinational Corporations (SOMO) is an independent, not-for-profit research and network organisation working on social, ecological and economic issues related to sustainable development. The organisation has been investigating multinational corporations and the consequences of their activities for people and the environment around the world since 1973 (SOMO 2016: 2).”

5 behaviour of traditional and ethical banks in the Netherlands. Conceptual issues such as the definitions of lobbying as well as ethical and traditional banks and their operationalization are also discussed. The methodology section elaborates on how the data is collected and how it is analysed before proceeding with the data analysis. Firstly, the data analysis examines the lobbying behaviour of two traditional banks (ING Bank and Rabobank). Secondly, it examines the lobbying behaviour of two ethical banks (Triodos Bank and ASN Bank) in the Netherlands. After examining the lobbying behaviour of the four Dutch banks, the thesis compares the lobbying behaviour of traditional and ethical banks in a comparative analysis in order to answer the research question. Last but not least, the findings of the research project are summarised and discussed in the concluding section.

6 2. Literature Review & Theoretical Framework 2.1 Literature Review: Bank Lobbying

The literature review and the theoretical framework section provide insights and explanations regarding bank lobbying. This section is organised as follows. First, a literature review on bank lobbying identifies significant literature currently published. The purpose of the literature review is not only to provide a context and a justification for the research undertaken. Rather, the literature review works towards establishing a novel theoretical framework. Hence, the second part of this section establishes a theoretical framework that explains possible differences in lobbying behaviour of traditional and ethical banks. In doing so, the research project is extending existing theoretical frameworks in order to examine factors that explain differences in lobbying behaviour. In the field of bank lobbying there is already considerable research focusing on the influence of bank lobbying on financial regulation (Chalmers 2017; Pagliari & Young 2014; Baker 2013; Hellwig 2010; Lall 2012). Chalmers (2017) examines the determinants of bank lobbying in the Basel Committee on Banking Supervision (BCBS) for the period 2010–2014 during which the Basel III Accord was negotiated. The author explains the decision to lobby the BCBS as a function of two factors. These two factors are bank organizational characteristics and domestic banking regulations. First, organizational characteristics, like financial resources as well as international banking activity, both impact banks’ decision to lobby the BCBS. Second, domestic banking regulations, like strict regulatory oversight mechanisms, have an impact on banks’ decision to lobby in two ways. First, stringent domestic banking regulations lead to concerns about competitiveness and therefore banks seek to level the regulatory playing field with other international banks. Second, adjustment costs between existing domestic banking regulations and proposed international banking regulations impose financial costs on banks (Chalmers 2017: 3). The author’s main findings demonstrate that banks which have greater financial resources and are internationally active tend to be more likely to lobby the BCBS. In addition, banks that face tougher domestic banking regulations are more likely to lobby the BCBS than banks facing less tough domestic regulations. At the same time, however, there is little evidence that banks decide to lobby the BCBS because of adjustment costs. Chalmers’ findings “suggest that international bank lobbying follows patterns of regulatory ‘trading up’ or a race- to-the-top (Chalmers 2017: 4).” In other words, banks level the regulatory playing field with international competitors by lobbying the BCBS to ensure that the same strict banking regulations they face at home are

7 also applied internationally. Overall, the article provides insights into both the capacity as well as the motivations of banks to lobby (Chalmers 2017: 22 – 23). Nonetheless, the article does not make a distinction between traditional and ethical banks. A study with similar findings was conducted by Brandon and Padovani who study the relationship between banks’ lobbying activities, their size, financial strength, and sources of income (Brandon & Padovani 2011). The authors also explore whether the announcement of the financial regulatory reform by President Barack Obama in 2009 following the financial crisis led to more bank lobbying. Whereas Chalmers (2017) employs a large-n study of 33.000 banks worldwide and examines the determinants of bank lobbying in the BCBS for the period 2010–2014, Brandon & Padovani (2011) construct their sample by using the top 50 banks holding companies (BHCs)2 in terms of USD nominal value of total assets as declared in 2010 and run a sample period running from 2001: Q1 to 2010: Q3. Both studies conclude that banks are more likely to lobby when they are larger (Chalmers 2017; Brandon & Padovani 2011). In addition, Brandon and Padovani find that banks are more likely to lobby when they “have more vulnerable balance sheets, are less creditworthy, and have more diversified business profiles (Brandon & Padovani 2011: 31).” Furthermore, diversified banks mainly “engaged in non-traditional businesses, e.g. securitization and trading, or in highly regulated businesses, e.g. insurance, hire more lobbyists and spend larger amounts on lobbying (ibid.).” Indeed, diversified business profiles play an important role when making a distinction between traditional and ethical banks because business profiles vary across bank types. Finally, the announcement of the financial regulatory reform by President Barack Obama in 2009 led to increased lobbying activities of banks with higher trading revenues (Brandon & Padovani 2011: 31). Overall, both studies explain bank lobbying based on organizational characteristics, e.g. size and financial strength, with an institutional explanation related to financial regulatory reform in the US (Brandon & Padovani 2011) and domestic banking regulations (Chalmers 2017). Last but not least, it has been researched how the advocacy efforts of financial industry groups have changed since the financial crisis (Young 2013); and the impact of lobbying strategies on financial regulation and so-called regulatory capture (Baker 2010; Carpenter and Moss 2014; Claessens et al. 2008). In conclusion, a study which analyses

2 “The Bank Holding Company Act of 1956 broadly defines a BHC as “a company that owns and/or controls one or more US banks or one that owns, or has controlling interest in, one or more banks (www.ffeic.com)” (Brandon & Padovani 2011: 10).”

8 factors that explain possible differences in lobbying behaviour of traditional and ethical banks has not been undertaken yet.

2.2 Theoretical Framework: Bank Lobbying as a Function of Two Factors

In order to analyse factors that explain differences in lobbying behaviour of traditional and ethical banks in the Netherlands, this section advances a novel theoretical framework. A theoretical framework that explains the lobbying behaviour of ethical banks has not been established yet. Hence, the theoretical contribution of this research project is extending existing theoretical frameworks in order to explain possible differences in lobbying behaviour of traditional and ethical banks. In advancing a novel theoretical framework, this thesis explains the decision to pursue lobbying activities as a function of two factors: bank organizational characteristics and overall approach to banking. “First, organizational characteristics, like financial resources and international banking activity, reflect a bank’s capacity to overcome collective action problems to lobby (Chalmers 2017: 3).” Second, a bank’s overall approach to banking, like strategy, mission, vision, purpose, or business model, impacts a bank’s decision to pursue lobbying activities in terms of levelling the regulatory playing field with competitors. Together, these factors provide insight into both the capacity of traditional and ethical banks to lobby as well as their underlying motives for doing so.

Organizational Characteristics

In order to better understand determinants of bank lobbying, it is necessary to examine banks’ organizational characteristics. Firstly, organizational characteristics refer to financial resources and secondly, to international banking activity (Chalmers 2017: 5-6). Accordingly, a prominent explanation for bank lobbying is related to banks’ resources (Brandon & Padovani 2011). Subsequently, there are various ways through which resources can influence lobby success. Indeed, superior wealth and other material resources have the potential to translate into significant political lobbying power for banks (Baker 2010; Johnson and Kwak 2010). Despite that, financial resources play a crucial role when it comes to information procurement. With regard to influencing financial regulation, informational advantages can

9 be crucial for banks (Porter 2009; Underhill, Blom, and Mügge 2010). Advantages in information, like technical and policy-relevant information, as a result of superior resources is “the currency of influence for global financial governance (Chalmers 2017: 6).” According to Griffith-Jones and Persaud (2008), financial resources enable banks to pay for services and studies from experts. The information and expertise from experts, in turn, are crucial for policy-makers and supervisors to “become persuaded of the banker’s position (Griffith-Jones and Persaud 2008: 266).” According to Chalmers (2017), material resources are also important for banks if they want to lobby at the international level because considerable resources help banks to overcome collective action problems and lobby at the international level (Chalmers 2017; Stigler 1971). Indeed, banks with superior financial resources can “expand the scope and sophistication of their lobbying efforts and develop new strategies to lobby (Chalmers 2017: 6)” at both the national and international levels. In sum, financial resources are important for financing strategies and activities related to lobbying (Igan et al. 2009). A second factor related to organizational characteristics explaining a bank’s decision to lobby is international banking activity. After all, internationally active banks are affected by international banking rules. Indeed, empirical research shows that international banks are the most active and influential in lobbying the BCBS (Blom 2011). It is therefore not surprising that the Basel II and Basel III Accords reflected the interests of banks with greater international scope (Caessens et al. 2008; Lall 2012). More importantly, research also shows that while internationally active banks are more likely to lobby at the international level, nationally-oriented banks lobby through national channels and bank associations (Goldbach 2015). Industry associations often represent a number of individual banks. Some of the members, however, may not be involved in the decision-making process of the lobbying activities. Theses members free-ride on the lobbying efforts because lobbying via industry associations lowers the costs and can even be more influential. Since the focus of this thesis lies on banks in the Netherlands, national channels like the Nederlandse Vereniging van Banken (NVB) will be examined as well. Nonetheless, organizational characteristics only explain the capacity of traditional and ethical banks to lobby (Chalmers 2017). Subsequently, the following section focuses on banks’ overall approach to banking because it can tell us about their reasons or motives to lobby.

10 Overall Approach to Banking

A more complete picture of factors explaining differences in lobbying behaviour of traditional and ethical banks requires a consideration of a second factor, namely banks’ overall approach to banking. In advancing a theoretical framework that explains differences in lobbying behaviour of traditional and ethical banks, it is crucial to take into account other factors than banks’ resources considering the size as well as structure of traditional and ethical banks. In particular, a bank’s overall approach to banking, like strategy, mission or business model, impacts a bank’s decision to pursue lobbying activities in terms of levelling the regulatory playing field with competitors. A bank’s approach to banking may or may not require it to influence the formulation or implementation of policy or regulation because the bank is simply not affected by it due to its business model, strategy or mission. For instance, Brandon and Padovani show that sources of income play an important role for a bank’s decision to lobby (Brandon & Padovani 2011). This can affect bank lobbying in two ways. First, banks can make an explicit choice not to engage in lobbying activities or they are simply not interested in influencing industry wide regulations because they are not affected by them. These banks may follow strict environmentally and socially conscious business practices and therefore they are not affected by a rise in regulations that deal with moral topics. In addition, a bank’s overall approach to banking may result in the conviction not to engage in lobbying activities with policy-makers and supervisors. In terms of levelling the regulatory playing field with competitors, the literature review already pointed out that domestic banking regulations, like strict regulatory oversight mechanisms, motivate banks to lobby at the international level (Chalmers 2017). However, the thesis at hand does not employ a large-n quantitative analysis of banks worldwide. Rather, it focuses on ethical and traditional banks in the Netherlands only. Logically, all banks in the Netherlands face the same domestic banking regulation. As a result, the Dutch banking regulation is considered a factor that motivates banks in the Netherlands seek to level the regulatory playing field with other banks.

11 3. Conceptual Framework 3.1 Definitions

Lobbying

Among scholars and practitioners alike the term lobbying has many different definitions, meanings and explanations. Recognising the complexity of the term lobbying is crucial when examining lobbying activities. According to Baumgartner and Leech the “word ’lobbying’ has seldom been used the same way twice by those studying the topic (Baumgartner and Leech 1998: 3).” In addition, one would expect that there is a consensus on what the term lobbying means because the term is well known and much invoked by the wider public. According to the Organisation for Economic Co-operation and Development (OECD) however, there is no such consensus (OECD 2012: 22). This thesis follows the definition of the European Commission (EC) because it defines the term lobbying in a neutral way. Accordingly, the EC states that “lobbying means all activities carried out with the objective of influencing the policy formulation and decision- making processes (European Commission 2006: 5)” of governmental institutions. The Commission provides a general definition of the term according to which lobbying is not necessarily a good or a bad phenomenon. Similar to the definition of the EC, the Dutch Association for Public Affairs (BVPA) defines lobbying as “all legal actions undertaken to influence the (political and official) decision-making process (SOMO 2013: 11).” Overall, the term lobbying has not only a negative connotation for the wider public but also for some scholars. Amy Hillman et al., for instance, define lobbying as “attempts to shape government policy in ways favourable to the firm (Hillman et al. 2004: 838).” Last but not least, it is important to mention that there are formal and informal ways through which banks can lobby (Pagliari and Young 2014).

Traditional vs. Ethical Banks

This section addresses the conceptualisation as well as the operationalization of ethical versus traditional banks. When talking about ethical banking, practitioners and scholars often refer to external banking ethics as opposed to internal banking ethics. According to Jeucken & Bouma (1999) internal ethics are related to processes within banks (e.g. in-house ecology and

12 equal opportunities), whereas external banking ethics are concerned with the banks’ business practices (e.g. products and services) (Jeucken & Bouma 1999). Nonetheless, the banking industry compared to other industry sectors does not incur the same burden of energy or water consumption in terms of internal ethics. Consequently, external ethics play a primary role in addressing the conceptualisation of ethical versus traditional banks because external ethics are concerned with the wider implications of banking activities. There are a number of challenges when creating a precise definition that distinguishes exactly what it is that sets an ethical bank apart from a traditional bank. In particular, there are two issues that need to be addressed. Firstly, measuring and qualifying ethical banking practices and policies. Secondly, voluntary industry or corporate codes, such as the United Nations Environment Programme (UNEP) or the UN Global Compact. Regarding the first issue, there is a number of banks claiming to apply environmental and social standards to their businesses. For instance, who they loan to or invest in to support sustainable development. However, simply applying social and environmental standards to banking activities does not make a bank ethical. Indeed, claiming to be an ‘ethical’ bank is a matter of perspective. In other words, judging what is ethical is subjective in nature. Consequently, claiming to be an ethical bank requires a systematic and balanced approach to determine what is ethical. Regarding the second issue, many banks join voluntary initiatives, such as the UN Global Compact, to support UN goals by adopting sustainable and socially responsible policies. However, Cowton and Thompson (2000) examine practices and policies of banks which have signed a voluntary industry code promulgated by UNEP and find no significant differences between signatories and non-signatories (Cowton and Thompson 2000). This is not surprising because many of the voluntary industry codes of conduct are not legally binding. In order to operationalise the concept of ethical banks, it is deemed necessary to benchmark banks against one another to track their environmental, social and governance (ESG) performance. For this research project, benchmarking Dutch banks on their ESG performance is considered a reliable way to distinguish ethical banks from traditional banks. The Fair Finance Guide International and its local guide “The Dutch Fair Bank Guide” (Eerlijke Bankwijzer3) “is a web-based tool that enables bank clients and policy holders to make their bank more socially responsible, fair, and sustainable by benchmarking it on several themes (Fair Finance Guide International 2017).” The Eerlijke Bankwijzer exactly

3 http://eerlijkegeldwijzer.nl/bankwijzer/ (accessed 18 May 2017).

13 does so by benchmarking ten Dutch banks4 against nine topics and ten sectors related to environmental and social issues as well as two aspects of corporate governance (see Appendix A for detailed information on the topics, sectors, and aspects). The Eerlijke Bankwijzer was launched in January 2009 by six organisations: Amnesty International, Dierenbescherming (Dutch Society for the Protection of Animals), FNV (Dutch labour union), Milieudefensie (Friends of the Earth Netherlands), Oxfam Novib, and PAX. The Bankwijzer aims at helping critical consumers to look into the performance of Dutch banks when it comes to issues such as climate change, human rights, and transparency. In conclusion, the Ethical Bank Indicator serves as a tool to distinguish ethical banks from traditional banks. The benchmark of the Dutch Fair Bank Guide concludes that Triodos and ASN Bank have the best overall scores. In addition, ASN Bank and Triodos are the only banks not active in the oil & gas sector (see Appendix A). AEGON and Delta Lloyd Group scored comparatively low in the Bankwijzer, however, they are not considered as traditional banks in this analysis because they are providers of life insurance, pensions and/or asset management. The latest Eerlijke Bankwijzer report was published in December 2016 and thus serves as the basis for the operationalization at hand (Eerlijke Geldwijzer 2017)5.

4 The ten Dutch banks, insurance companies, pension funds, and asset managers are: ABN Amro, Aegon, ASN Bank, Delta Lloyd, ING Group, NIBC, Rabobank Group, SNS Bank N.V., Triodos Bank, and Van Lanschot (Eerlijke Bankwijzer 2017). 5 The methodology for the assessment of responsible investment and financing policies of financial institutions is available at http://fairfinanceguide.se/media/373411/ffg-methodology-2016.pdf (accessed 18 June 2017).

14 4. Methodology

This section elaborates on the methodology of this research project. It is organised as follows. First, it focuses on the qualitative approach the research project. In doing so, it points out the difficulties encountered in data collection and how they were solved. Finally, it outlines the advantages and limitations of the approach taken. The research is undertaken as qualitative research. One of the primary objectives of this research project is to find out differences in lobbying behaviour by conducting semi- structured interviews with two traditional and two ethical banks as well as industry associations. After all, document analysis is often used in combination with interviews as a means of triangulation. Indeed, triangulating data “helps the researcher guard against the accusation that a study’s findings are simply an artifact of a single method, a single source, or a single investigator’s bias (Bowen 2009: 28).” Unfortunately, all banks and industry associations which were contacted for this research project declined to give interviews. The reasons for declining the interview requests were manifold. As the reasons for declining the interview requests, most of the banks referred to the amount of interview requests they receive or to the busy schedules of the people involved in activities related to lobbying. One of the industry associations even claimed that it has no knowledge on the topic of this research project. Consequently, the declined interview requests affected the course of this research project in many ways. Semi-structured interviews were planned because they are flexible, interactive, allow for deeper understanding of lobbying behaviour, and a greater exploration of lobbying activities. Moreover, interviews with traditional and ethical banks would have allowed for the production of data and insights that would perhaps be less accessible without the interaction found in a group. Overall, this qualitative approach tends to be holistic, meaning that it strives for an understanding of the 'whole', rather than just an understanding of a part of the lobbying behaviour of ethical and traditional banks. Subsequently, one of the advantages of this approach is that a qualitative research approach is not as dependent upon sample sizes as a quantitative approach. Nonetheless, triangulating the data was not possible since the banks and industry associations declined to give interviews. Hence, one of the limitations of the approach taken is that examining information through different methods was not possible. Moreover, the degree of transparency regarding lobbying activities of banks is often criticised. As a result, one needs to bear in mind the existence and accessibility of documents that focus on lobbying behaviour. Due to the lack of transparency by banks, the data that is

15 useful for this project are all sorts of documents, reports and publications provided by banks or other organizations and institutes. Documents are used for systematic evaluation as part this project take a variety of forms. The types of documents were expanded in order to compensate for the interviews because documents of all types can be relevant for the research problem. The documents include minutes of meetings, position papers, viewpoints, (consultation) documents, annual reports, corporate websites, newspapers, press releases, bank documents and various public records (Bowen 2009). A particular focus of the analysis for each bank lies on the latest publicly available information on lobbying, i.e. 1Q2017, FY2016 and FY2015, because it can best provide a picture of the current state of affairs. Put simply, any document that yields information about activities related to bank lobbying is used for this study.

16 5. Data Analysis

The data analysis section provides in-depth insight into and explanations regarding the lobbying behaviour of two traditional banks (ING Bank and Rabobank) as well as two ethical banks (Triodos Bank and ASN Bank). In doing so, it applies the theoretical framework that explains differences in lobbying behaviour of traditional and ethical banks. In particular, the theoretical framework explains the decision to pursue lobbying activities as a function of two factors: bank organizational characteristics and overall approach to banking. In order to systematically elaborate on the two factors, the data analysis seeks to answer the following sub-research questions for each bank:

1. What is Bank X lobbying for? 2. How does Bank X lobby? 3. Why does Bank X lobby?

The data analysis is structured as follows. The first part focuses on traditional banks and examines the lobbying behaviour of ING Bank and Rabobank. The second part focuses on ethical banks and examines the lobbying behaviour of Triodos Bank and ASN Bank. Before answering the sub-research questions for each bank, a general introduction of each bank is provided. Following the data analysis, the lobbying behaviour of traditional and ethical banks in the Netherlands is compared in a comparative analysis.

5.1 Traditional Banks

ING Bank

ING Group N.V. (hereinafter ‘ING Bank’, ‘ING Group’ or ‘the Bank’) is a global financial institution that is based in Amsterdam, the Netherlands. ING Bank offers banking services to a broad range of customers, such as individuals, small and medium sized enterprises, large corporations, institutions, and governments. ING Bank has a strong focus on the European Union where it operates in 17 countries and serves 29 million customers. In 1Q2017, the bank had more than 51.000 employees offering retail and wholesale banking services to 36.1

17 million customers in over 40 countries worldwide. Overall, the bank had total assets of 845 in Euro billion at the end of FY2016 (ING Group 2017; 2017a). ING Bank does not explicitly publish its budget for lobbying. According to the Bank, the overall expenditure for activities related to lobbying is not known within ING Group (SOMO 2016a: 4-5). The Bank states several reasons for not knowing its lobbying budget. Firstly, the lobbying budget would include salaries as well as operational expenditures of staff members involved in lobbying. Secondly, it would include membership fees for industry associations. In practice, ING Bank allocates a specific budget to the different divisions within the bank. The expenditures for lobbying activities by staff members or experts are put in the budget of the respective divisions. Nonetheless, the bank published two figures related to lobbying. First, the bank states in the EU Transparency Register6 that the annual costs related to activities covered by the Register are estimated at 400.000 € - 499.000 € in FY2016 (EU Transparency Register 2017). According to ING staff interviewed by SOMO in July 2016, this figure is “a rough calculation based on the ING in-house lobbyists7 involved (SOMO 2016a: 5).” The second figure published by ING Group refers to its annual contribution to the NVB8. According to ING Bank, the contribution is estimated at € 3 million. However, ING Group does not consider membership fees for industry associations as lobbying expenses because the bank engages in them for many other reasons than only lobbying (SOMO 2016a: 4-5). Nevertheless, these figures demonstrate that ING Group spends a considerable amount of money for its activities related to lobbying. In terms of ING Group’s strategy, the bank states that its focus is on becoming the primary bank for more customers. ING Group’s purpose is to “empower people to stay a step ahead in life and in business (ING Group 2017a: 19).” ING Group has a strategy which supports the bank to fulfil that purpose as well as to “achieve financial and commercial success and create value for all our stakeholders (ING Group 2017a: 19).” At the core of ING Bank’s strategy is its customer promise: “to be clear and easy, available anytime and anywhere, to empower our customers and to keep getting better (ING Group 2017a: 5).” ING Group’s overall approach to banking can therefore be described as one of a traditional and global financial institution that is offering a wide range of banking services.

6 The EU Transparency Register is “a voluntary system of registration for entities seeking to directly or indirectly influence the EU decision-making process (Bauer, Thiel & Mańko 2014: 1). 7 The term “in-house” lobbyists refers to “full-time employees of corporations who were engaged in “government relations” on behalf of their firms, and comparable employees of interest groups (OECD 2009: 51).” 8 NVB does not publish the contributions that it receives from its members.

18 What is ING Bank lobbying for?

ING Bank states that it is actively involved in influencing and shaping the outcomes of financial regulation and public policy in all countries where the bank is doing business. The Bank’s positions on current regulatory and policy developments are publicly available in the ING Group Annual Reports as well as on the homepage of the Bank. Overall, ING Bank lobbies for the proper functioning of European financial markets as well as for a coordinated approach to banking supervision. ING Bank has published so-called viewpoints on the following six regulatory and policy developments9:

1. Banking Union needs a European Deposit Guarantee Scheme (ING Group 2016a); 2. ING Viewpoint on EU Retail Financial Services (ING Group 2016b); 3. ING Viewpoint on macroprudential policy in the Banking Union (ING Group 2016c); 4. A European digital single market for retail financial services (ING Group 2016d); 5. ING Viewpoint on Capital Markets Union (ING Group 2016e); and 6. The importance of risk sensitive capital for Europe” (ING Group 2017b).

Because of confidential and competitive reasons, ING Bank does “not publish information about all individual contacts or standpoints on financial supervisory and regulatory matters (ING Group n.d.).” First, ING supports the progress on regulatory initiatives, such as the European Banking Union, which aims at harmonising and strengthening the supervision of EU banks. Currently, the banking union has two pillars: The Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM). The third pillar, a European Deposit Insurance Scheme (EDIS) with the purpose of protecting retail deposits in the banking union, is currently under discussion. The SSM can be described as the system of banking supervision in the euro area, while the purpose of the SRM is to ensure an orderly resolution process for failing banks with minimal costs for taxpayers. ING states it that remains a supporter of the already existing SSM and SRM. However, the bank complains that the third pillar, namely the EDIS, “is progressing at a much slower pace than the first two pillars (ING Group 2017: 8).” ING Bank therefore lobbies for a faster implementation of the European Commission

9 ING viewpoints from Feb 22, 2016 until and including Jan 19, 2017. Available at https://www.ing.com/ING-in-Society/Sustainability/Stakeholder-engagement/Regulation-and- Supervision.htm (accessed 16 May 2017).

19 (EC) proposal (ING Group 2016a). Second, ING Bank supports the EC’s efforts to further enhance the European market for retail financial services. The EU Directive on Payment Services (PSD) aims at creating a European single market for retail financial services, such as payment initiation services and account information services (ING Group 2016b). This viewpoint is in line with ING’s customer promise which states that the Bank wants to be available anytime and anywhere. With regard to the third viewpoint on macroprudential policy in the Banking Union, ING calls for a mandate to be given to the ECB. Put simply, macroprudential policy seeks to prevent and mitigate systemic risk. The ECB, as the Eurozone’s banking supervisor, should play a vital role in harmonising and overseeing criteria for macroprudential policy (ING Group 2016c). For ING Bank, it is important that the EU establishes a level playing field between competing banks. Fourth, ING supports the idea of a European digital single market for retail financial services. As a large online retail bank, ING lobbies for a common legal framework which aims to increase the advantages of digitalisation. Subsequently, ING bank is in favour of the EC’s Digital Single Market strategy (DSM). The overall aim of the strategy is to increase opportunities in the digital economy for all industry sectors (ING Group 2016d). Fifth, the Bank focuses on the Capital Markets Union which aims at mobilising capital for businesses and investors in Europe. It plays a crucial role in the investment plan of the Juncker Commission. ING Bank states that it “strongly supports the objectives of the European Commission for more integrated capital markets (ING Group 2016e). Last but not least, ING published its viewpoint on risk sensitive capital for Europe. Although ING bank supports initiatives to address undue risk variability, the bank considers the BCBS’ proposals regarding risk-weighted assets too stringent. ING Bank therefore does not support a standardized approach to risk sensitivity because it reduces economic potential. Rather, the bank supports “a regulatory capital framework that is sensitive to actual risks (ING Group 2017b).” Overall, the various viewpoints of ING Bank demonstrate that the bank seeks to find the right balance between business interests and consumer protection as well as innovation to allow the bank “to compete in the new competitive environment (ING Group 2017: 9).”

How does ING Bank lobby?

This section elaborates on how ING Bank pursues lobbying activities. As of 1 January 2016, ING Bank has a Regulatory and International Affairs department. The corporate staff

20 department was formed to analyse regulatory developments, research potential effects of proposed regulations, and support the bank in formulating its standpoints and strategies both at the national as well as international level (ING Group 2016). Nonetheless, the Regulatory and International Affairs department does not take the final responsibility of ING’s lobbying positions. Eventually, the Management Board Banking has the final responsibility on lobby positions and activities. In particular, the Regulatory and International Affairs department has three objectives as outlined on the homepage of ING Bank:

1. “Influencing regulatory developments for an outcome compatible with the interests of ING’s business, its stakeholders and the banking industry as a whole. For this purpose, it analyses relevant proposed regulation and developments in ING’s relevant constituencies, researches their potential effects on the company and its stakeholders, and supports ING’s businesses in formulating their standpoint and strategy. 2. Coordinating ING’s engagement with its banking supervisors, notably the European Central Bank (ECB) as its main supervisor. 3. Maintaining the company’s dialogue on financial regulation and supervision with politicians, government authorities, industry associations, civil society organisations, think tanks and academics, and supporting the company’s efforts to enhance international business opportunities for its customers through joint public-private partnerships (ING Group n.d.).”

The department also receives support from other bank division to fulfil its objectives. In July 2016, the department employed 17 ING staff members in total and some of them specifically deal with national or international affairs. In total, three out of the seventeen staff members are directly involved in lobbying (SOMO 2016a: 4). Within the Netherlands, one of the three staff members is registered in the lobbying register of the House of Representatives10 in The Hague (Tweede Kamer der Staten-Generaal 2017). On EU level, two of the three staff members are directly involved in lobbying. These two staff members are in charge of EU relations and thus registered in the EU Transparency Register (EU Transparency Register 2017). On the international level, ING subsidiaries abroad engaging in lobbying activities domestically are not part of the corporate department. After all, ING’s subsidiaries and the respective industry associations abroad often face different challenges and interests.

10 It is only possible to register one individual per company in the lobbying register of the House of Representatives of the Netherlands. The latest lobby register as of 21 April 2017 is available at https://www.tweedekamer.nl/sites/default/files/atoms/files/lobbyistenregister_21april2017.pdf (accessed 19 May 2017).

21 Consequently, the Regulatory and International Affairs department also aligns the bank’s positions on various regulatory and policy developments at group level. Once ING’s positions and standpoints are developed, the department communicates and advocates them with the stakeholders of the bank through various ways and channels. Firstly, the department organises information, and discussion sessions, and roundtable sessions in order to engage with its stakeholders. Secondly, the bank is a member of various banking industry associations to exchange information and views about financial regulatory issues. Thirdly and most importantly, the department, through ING’s in-house lobbyists, as well as ING’s CEO and members of the board maintain direct relationships with both national and international regulators and supervisors (SOMO 2016a). The next section elaborates on how ING Bank undertakes lobbying activities as well as interacts with regulators and supervisors in more detail. The starting point for every ING viewpoint on regulatory and policy issues as outlined in the objectives of the Regulatory and International Affairs department is two-fold. First, the department assesses the interests of ING’s stakeholders with regard to regulatory and supervisory developments. Second, the department assesses what impact the proposal or initiative might have on the bank and its stakeholders. In sum, they serve as a guideline in determining the Bank’s lobbying positions and strategies. Next to this, ING has set up two internal steering committees to adequately and systematically respond to regulatory developments. One of the committees is dealing with supervision and prudential regulation. The other committee is dealing with business conduct regulation (ING Group 2017a: 17). Both steering committees consist of ING staff members and the board member responsible for that issue (SOMO 2016a: 3). In addition, these assessments and positions are also prepared with corporate staff members from different departments as well as external stakeholders based on their field of expertise and depending on the subject. Furthermore, a stress testing process of ING Bank identifies adversarial impacts or effects for the bank. Depending on the outcome of the stress test, mitigating actions may be proposed. For instance, mitigating actions may include “lobbying campaigns with regulators or other authorities (ING Bank 2016: 272).” The lobbying positions of ING can take the form of suggestions or amendments to proposed regulations. Finally, the positions are given to the Management Board Banking as an advice. The Management Board Banking then decides on how to further proceed with the position(s). In addition, ING viewpoints or consultation papers can also be signed off by the head of the respective business division dealing with the issue. However, this is only possible under strong coordination and consultation with the

22 Management Board Banking because it is responsible for ING’ lobbying positions at all times. Before communicating official ING positions externally, the ING Supervisory Board needs to be consulted. The viewpoints communicated by the chairman or the members of the Executive Board, which is responsible for day-to-day management of the business, express the position of ING Group11 (SOMO 2016a: 3). In conclusion, ING Bank did not publish information “about which regulatory authorities or legislators were contacted on which financial legislative proposals and in what way (e.g. letters, meetings, etc.) in 2016 (SOMO 2016a: 5-6).” The following section focuses on ING’s involvement in business and industry associations because they can play a pivotal role in shaping regulatory outcomes. ING Bank is a member of a number of business and industry associations around the world12. According to ING, these associations have “a clear focus on supporting the interests of the financial industry and/or strengthening its regulatory and supervisory framework, whereas others serve the interests of ING’s customers or society at large (ING Group n.d.).” Industry associations often receive standpoints from many other members or perhaps competitors. ING therefore states that the viewpoints of some industry associations do not necessarily reflect the positions taken by ING. Within the Netherlands, ING Bank is a member of NVB. As an important industry association NVB holds meetings to discuss and prepare positions for its members. ING corporate staff as well as members of the ING Regulatory and International Affairs department participate in these meetings. The board of NVB takes the final decision on issues related to regulation and supervision. ING Bank has two members on this board, namely the CEO and the CFO of ING Group (NVB 2017). Again, the ING Regulatory and International Affairs department provides assistance to the bank’s members on the NVB board in preparing for the meetings.

Why does ING Bank lobby?

This section elaborates on why ING Bank pursues lobbying activities. In doing so, it examines the reasons or motives for lobbying activities as provided by the Bank. The three objectives of the ING Regulatory and International Affairs department as outlined in the

11 More information on ING Group’s Management structure is available at https://www.ing.com/About- us/Corporate-Governance/Management-structure.htm (accessed 17 May 2017). 12 An overview of ING’s most relevant memberships is available at https://www.ing.com/ING-in- Society/Sustainability/Stakeholder-engagement/Regulation-and-Supervision.htm (accessed 18 May 2017).

23 previous section partly answer the question of why the ING Bank lobbies. In addition, ING Bank has identified “regulatory developments” as a material aspect13 in its Annual Report 2016. The report states that the bank monitors regulatory developments in order to be able to assess their impact as well as respond adequately to initiatives (ING Group 2017a: 17). Furthermore, ING’s corporate website points out that the bank “is actively involved in public policy and regulatory developments in its relevant constituencies. It does so with the objective of enhancing (implementation of) financial regulation and supervision that support the interests of ING’s stakeholders (ING Group n.d.)”. To sum up, the company pursues lobbying activities to develop and coordinate the Bank’s positions on important financial regulatory issues – and how they are put into practice – in a way that supports the business interests of ING and its stakeholders as well as the banking industry as a whole (ING Group n.d.).

Rabobank

Coöperatieve Rabobank U.A. (hereinafter ‘Rabobank’ or ‘the Bank’) is a cooperative bank that is based in Utrecht, the Netherlands. Rabobank is an international financial services provider with a strong focus on the Food & Agri sector in particular. It “offers retail banking, wholesale banking, private banking, leasing and real estate services (Rabobank 2017: 12).” At the end of FY2016, the Bank had offered banking services to approximately 8.7 million customers (7.5 million Dutch customers and 1.2 million international customers) in 40 countries worldwide. Overall, the Bank had total assets of €663 billion at the end of FY2016 (Rabobank 2017: 10-13). Like ING Bank, Rabobank does not explicitly publish its budget for lobbying. According to the Bank, the overall expenditure for activities related to lobbying is not known within the Bank. The Public Affairs team of Rabobank states that the total budget for the Bank’s lobbying activities would be difficult to measure. Similarly, there is no overview of the costs of the many experts who are involved in Rabobank’s lobbying activities. Experts involved in lobbying often work in different departments with their own budget. Furthermore, membership fees for industry associations are also not publicly available

13 The Global Reporting Initiative (GRI) defines “material aspects” as “those that reflect the organization’s significant economic, environmental and social impacts; or that substantively influence the assessments and decisions of stakeholders (GRI 2016: 11).”

24 (SOMO 2016b: 3-4). In 2012, however, the Dutch Financial Times (Het Financieele Dagblad) reported that Rabobank’s contribution to the NVB was estimated at € 3.5 million (de Bruijn 2012). Nonetheless, the Bank published one figure related to lobbying on the EU Transparency Register. Rabobank states in the EU Transparency Register that the annual costs related to activities covered by the Register are estimated at 400.000 € in FY2016 (EU Transparency Register 2017a). In conclusion, these figures demonstrate that Rabobank spends a considerable amount of money on lobbying activities. In terms of Rabobank’s overall approach to banking, like mission, vision, or strategy, the Bank states that its mission is to “make substantial contributions to welfare and prosperity in the Netherlands (and) make a substantial contribution to feeding the world sustainably (Rabobank 2017a: 3).” As a cooperative bank with strong agricultural roots, Rabobank’s vision is to become the leading customer-oriented bank in the Netherlands as well as the leading Food & Agri bank in selected countries. In 2016, the Bank implemented the Strategic Framework 2016-2020 to achieve its ambitions. The framework focuses on the following three objectives:

1. Excellent customer focus: Rabobank wants to become the most customer-focused Dutch bank and in the Food & Agri sector; 2. Flexibility and balance sheet reduction: Rabobank expects a further tightening of the regulatory environment, for instance the implementation of the proposed reforms to Basel III, and therefore the Bank wants to make its balance sheet more flexible; and 3. Improving performance: To maintain its position, Rabobank wants to improve the cost/income ratio until 2020 (Rabobank 2017: 6 & 15).

To sum up, Rabobank’s overall approach to banking can be described as one of a traditional cooperative bank with strong ambitions both in the Netherlands and in the Food & Agri sector worldwide.

What is Rabobank lobbying for?

Rabobank is actively involved in influencing and shaping the outcomes of financial regulation. In its Annual Report 2016, the Bank states that position papers regarding regulatory issues are published on its corporate website (Rabobank 2017: 75-76). In practice,

25 the website explaining Rabobank’s principles, outlines a number of priority dossiers and the Bank’s vision with respect to regulatory developments or issues. Nonetheless, Rabobank does not publish all its responses to consultations sent directly or via industry associations to either legislators or supervisors (SOMO 2016b: 4). Rabobank has published one response to the BCBS as well as six position papers on regulatory developments14. Overall, the Bank published the following seven viewpoints:

1. Rabobank’s response to the BCBS consultation imposing constraints on the use of international risk models (Rabobank 2016a); 2. Position Paper: Capital requirements and Agri (Rabobank n.d.); 3. Article 'Capital requirements for banks: what is the optimal combination of regulation, supervision and market discipline?' (Rabobank 2015); 4. Action plan for Dutch SME access to financing (Rabobank 2014); 5. Rabobank and Big Data (Rabobank 2014a); 6. Bail-in and the Resolution Fund (Rabobank 2013); and 7. German Legislative Proposal Senior Unsecured Debt (Rabobank 2015a).

Rabobank’s response to the BCBS consultation imposing constraints on the use of international risk models was sent on 24 June 2016. In the response, the Bank firstly focuses on the impact of the proposal on Agri lending. Secondly, the Bank discusses other main impacts of the proposal. Rabobank concludes that the current proposals for internal risk models are disproportionate to the intended objective and could result in unforeseen effects on the financing of agricultural businesses. Finally, Rabobank states that it is willing to examine alternatives that can “possibly reduce the complexity of modelling risks (Rabobank 2016a: 5).” On Rabobank’s corporate website, the Bank published two viewpoints on capital requirements. Whereas one of the viewpoints specifically focuses on capital requirements and Agri, the other one focuses on capital requirements for banks in general. In the case of Agri finance, Rabobank fears that the proposed capital requirements will make lending more expensive (Rabobank n.d.). In the case of capital requirements for banks, Rabobank outlines

14 Rabobank’s position papers and responses to official consultations on financial regulatory issues as of 24 May 2017. Available at https://www.rabobank.com/en/about-rabobank/in-society/principles/index.html (accessed 24 May 2017).

26 its viewpoint on the optimal combination of banking regulation and supervision. The Bank recommends a regulatory framework that is “fine-tuned and simplified (Rabobank 2015: 1)” in order to address and mitigate risks. Overall, Rabobank’s published viewpoints underline the Bank’s strong ambitions in the Food & Agri sector. Furthermore, the Bank lobbies for simple requirements in the context of the Basel framework of Capital Accords. This viewpoint is also in line with Rabobank’s second objective of its Strategic Framework 2016- 2020 as outlined above. Consequently, Rabobank’s diversified business profile (i.e. customer-oriented bank as well as a strong focus on the Food & Agri sector) has an impact on the Bank’s decision to pursue lobbying activities on various regulatory developments.

How does Rabobank lobby?

This section elaborates on how Rabobank pursues lobbying activities. The Bank has its own Public Affairs department which has several different tasks. In June 2016, the department employed five Rabobank staff members in total. Their tasks include, amongst others, developing and maintaining dialogue with government authorities, supervisors, and regulators. Furthermore, the staff of Rabobank’s Public Affairs department monitors and analyses regulatory developments and examines potential effects of proposed regulations for Rabobank and its clients as well as its members15. After developing Rabobank’s viewpoints and positions on financial regulatory issues, the lobbying positions are discussed on Executive Board level. Eventually, the Executive Board of Rabobank has the final responsibility on lobby positions and activities. Finally, the Public Affairs department communicates official positions externally. Any information that is provided to Rabobank’s officials is carefully verified before it is communicated externally (SOMO 2016b). Rabobank engages with different stakeholders across Europe. Within the Netherlands, only the Head of the Public Affairs department is directly involved in lobbying. The Head of the department is registered in the lobbying register of the House of Representatives in The Hague - NB it is only possible to register one person per company - (Tweede Kamer der Staten-Generaal 2017). On EU level, Rabobank has registered one staff member who is in charge of EU relations in the EU Transparency Register (EU Transparency Register 2017a). On the

15 Rabobank is a cooperative bank. Consequently, the bank has members rather than shareholders (Rabobank 2017: 8).

27 international level, Rabobank subsidiaries abroad engaging in lobbying activities domestically are not part of the department because subsidiaries abroad often face different challenges and interests. Nonetheless, Rabobank operates in 40 countries worldwide. Hence, the department sometimes engages with regulators and supervisors in other parts of the world. The Public Affairs department, for instance, coordinates the interaction between diverse parties and legislators, both in The Hague and in Brussels. The department also receives support from other bank divisions to fulfil its objectives. Other Rabobank staff, for example experts from different departments, managers, or the CEO, engage with government authorities, supervisors, and regulators based on their expertise (Rabobank 2017; SOMO 2016b). The following section focuses on Rabobank’s involvement in business and industry associations. Rabobank is a member of a number of business and industry associations around the world. According to SOMO, the Bank is a member of 20 industry associations representing various interests (SOMO 2016b: 5). However, Rabobank only published three memberships in banking associations. In Rabobank’s Annual Report 2016, the Bank lists the following memberships in banking associations which are involved in shaping regulatory outcomes (Rabobank 2017: 140):

• European Association of Cooperative Banks (EACB); • Euro Banking Association (EBA); • NVB.

Accordingly, Rabobank has close ties with the NVB on the national level and with the European Association of Cooperative Banks (EACB) and the Euro Banking Association (EBA) on EU level. The Executive Board of Rabobank supports most of the positions taken by these industry associations. With regard to the NVB, Rabobank has two members on this board, namely Rabobank’s Chairman of the Executive Board and another member of the Executive Board (NVB 2017). The board of NVB takes the final decision on issues related to regulation and supervision. With regard to EACB, Rabobank has one member on the Board as well as three Executive Committee members. EACB is a lobbying association that supports and promotes the cooperative banking interests of its 27 member institutions (EACB 2017). Nevertheless, Rabobank’s Public Affairs department states that the Bank’s industry

28 association memberships are not solely for lobbying. Rather, these associations have multiple functions, like knowledge-sharing or monitoring regulatory developments.

Why does Rabobank lobby?

Rabobank as a provider of financial services is aware of its impact on the economy and society at large. Rabobank states in the public affairs chapter of the Annual Report 2016 that the Bank engages with all its stakeholders on various topics that may have an impact on the bank, its clients and its members. With regard to stakeholders, the Bank has included supervisors, politicians, and government agencies, amongst others. The topics which the Bank discusses with its stakeholders include “the operation and design of the banking industry and policies and bills in the financial sector as well as other regulatory initiatives (Rabobank 2017: 75).” Whereas the Bank identified ‘financial laws & regulations’ as material topics in its Annual Report 2015 (Rabobank 2016: 51), the Bank did not identify any material topics related to regulatory or supervisory developments in its latest Annual Report 2016 (Rabobank 2017: 124). In conclusion, the Bank pursues lobbying activities to develop and coordinate the Bank’s positions on important financial regulatory issues in a way that supports the Bank, its members, and its stakeholders.

5.2 Ethical Banks

Triodos Bank

Triodos Bank N.V. (hereinafter ‘Triodos’ or ‘the Bank’) is a European bank that is based in Zeist, the Netherlands. Triodos, like any other bank, offers a range of banking services from everyday banking services to investment management. However, the big difference to other banks is that Triodos only invests in sustainable organisations that benefit society and environment. The Bank has branches in five European countries: The Netherlands (Zeist), Belgium (Brussels), the United Kingdom (Bristol), Spain (Madrid) and Germany (Frankfurt). In 2016, Triodos had 1.271 employees offering banking services to 652.000 customers. Overall, the Bank had total assets under management of € 13.5 billion at the end of FY2016 (Triodos 2017).

29 Triodos does not explicitly publish its budget on lobbying in its annual reports or on its corporate website. According to SOMO which interviewed Triodos in October 2016, the Bank “does not have the capacity and financial means to engage in lobbying (SOMO 2016c: 1).” However, this is not entirely true because the Bank does engage in lobbying. Indeed, Triodos published one figure related to lobbying on the EU Transparency Register. According to the Register, the annual costs related to activities covered by the Register are estimated at 50,000 € - 99,999 € (EU Transparency Register 2017b). With regard to (annual) contributions to industry associations, the Bank did not publish any figures. Nonetheless, the revenue of 50,000 € - 99,999 € with which Triodos pursues lobbying activities on EU level is a substantial amount considering the size and financial resources of the Bank. In terms of Triodos’ overall approach to banking, like mission statement, purpose, or business principles, the Bank claims to be one of the world's leading sustainable banks. The main purpose of Triodos’ is sustainable banking. Other banks refuse to lend money to businesses engaged in sensitive sectors or topics, like weapons or chemicals, that have potential environmental and social risks. By contrast, Triodos only lends money to businesses that promote sustainability driven by values and ideas. Put simply, the Bank only finances companies and projects that benefit society and environment. For instance, Triodos decided not to finance or invest in the oil & gas sector or invest in complex financial instruments. In doing so, the Bank only engages with depositor and investors who encourage socially responsible business practices. Triodos’ mission is as follows:

“• to help create a society that promotes people’s quality of life and that has human dignity at its core; • to enable individuals, institutions and businesses to use money more consciously in ways that benefit people and the environment, and promote sustainable development; (and) • to offer customers sustainable financial products and high quality service (Triodos 2017: 11).”

To sum up, Triodos only offers products and services that promote sustainability. In doing so, Triodos is committed to transparency meaning that the Bank publishes details of the businesses and organisations it lends to.

30 What is Triodos Bank lobbying for?

Triodos states that it is actively involved in influencing and shaping the outcomes of financial regulations through government authorities and supervisory bodies. The regulatory issues that Triodos is lobbying for include that “regulation is both proportional for smaller and medium sized banks, and effective (Triodos 2016:14).” Furthermore, the Bank engages in lobbying activities to “include the positive impact and potential of sustainable banking, the strength of greater diversity in the banking industry and the need for broader retail participation in impact investing (Triodos 2017a).” During 2015 and 2016, Triodos pursued lobbying activities on the following issues: In the General Meeting of Triodos Bank held in 2015, the Bank discussed its lobbying efforts to address the increasing regulations that confront the Bank (Triodos 2015). As a relatively small bank, Triodos is concerned about the expanding regulatory costs imposed on small and medium sized banks. Furthermore, Triodos lobbied for a stronger legislation that restricts the use of conflict minerals (e.g. tantalum, tin, gold, or tungsten). Together with other European investors, Triodos successfully lobbied officials in Brussels to adopt the stronger and mandatory legislation which was later accepted by the European Parliament. Within the Netherlands, the Bank lobbied for making the Dutch tax regulations more sustainable and addressed low labour costs. In the same year, the Bank took part in a dialogue about the Sustainability Strategy of the Federal Government of Germany (Triodos 2016b). On the international level, the Bank participated in a G8 task force and lobbied against laws and regulations that would make it harder for “private persons to invest in different types of funds that contribute more to society than the traditional funds that invest in listed companies (Triodos 2015: 5).” During 2016, Triodos engaged with a number of financial institutions to embrace the Sustainable Development Goals (SDGs) that were launched by United Nations (UN) in 201516. In doing so, Triodos was part of an investment management community that invited the Dutch government and the Dutch Central Bank to work on achieving the SDGs together. In its Annual Report 2016, Triodos included the SDGs for the first time and elaborated on the contribution to them (Triodos 2017: 45-60). Last but not least, the Bank discussed new sustainable financial models with regulators from across Europe (Triodos 2017a). Overall, the Triodos’ lobbying efforts demonstrate that the Bank promotes proportional and effective

16 The SDGs are a UN initiative. The SDGs are a set of 17 Goals with 169 targets covering a broad range of development issues, including ending poverty, protecting the planet and promoting peace and prosperity (United Nations 2012).

31 regulations for small and medium sized banks. In addition, Triodos lobbies and advocates for a sustainable banking industry among businesses and in society.

How does Triodos Bank lobby?

This section elaborates on how Triodos pursues lobbying activities. Within in the Bank, there is no separate unit that engages in lobbying activities of any kind. The Bank does not have a policy that outlines how it interacts with supervisors and regulators or how it seeks to shape regulatory outcomes. Rather, “bank staff, up to the CEO, engage in advocacy at all levels of the market and society and, occasionally, at governmental level (SOMO 2016c: 2).” Lobbying activities and positions are dealt with by corporate staff members from different departments based on their field of expertise as well as depending on the subject. Eventually, the Management Board of Triodos has the final responsibility on lobby positions and activities. On EU level, Triodos states that two persons spend one quarter of their time on supervisory and regulatory developments (EU Transparency Register 2017b). Although the Register mentions the Bank’s Head of Strategy as the person who is in charge of EU relations, no person is accredited for access to European Parliament premises. Instead, Triodos hired a consultancy firm, namely ‘Linda van Goor Regulatory Communication’. However, the self-employed consultant is neither mentioned in the profile of Triodos nor on the Bank’s corporate website. The profile of Linda van Goor Regulatory Communication on the Register states that the consultant supports Triodos in lobbying the EU institutions with the revenue of 50,000 € - 99,999 € provided by Triodos (EU Transparency Register 2017c). Apart from that, the Bank decided in its Annual General Meeting 2015 to focus more on Brussels and Frankfurt. The Bank explained its decision to focuses on the EP and the ECB by pointing out that Triodos is concerned about the expanding regulatory costs imposed on small and medium sized banks (Triodos 2015: 5). Within the Netherlands, Triodos Bank did not register one of its staff members in the lobbying register of the House of Representatives (Tweede Kamer der Staten-Generaal 2017). Hence, the Bank is not pursuing lobbying activities in the Dutch parliament. The following section focuses on Triodos’ involvement in business and industry associations.

32 On its corporate website, the Bank mentions that it is a member of banking associations in countries where the Bank operates17. However, Triodos does not mention all its memberships in industry associations that engage in lobbying on either its corporate website nor on the EU Transparency Register. On its corporate website, the Bank mentions more than 40 associations or organisations in which it is a member. Nonetheless, most of these associations or advocacy organisations do not engage in lobbying activities. Moreover, Triodos Investment Management which is a fully owned-subsidiary of Triodos Bank lists additional networks and partners18. Based on the information provided by the Bank, the following six memberships in industry associations that are involved in shaping regulatory outcomes have been identified (EU Transparency Register 2017c; SOMO 2016c; Triodos n.d.): • GABV; • NVB; • British Banking Association (BBA); • The Belgian Banking Association (FeBelFin); • The Dutch Fund and Asset Management Association (DUFAS); and • Social Investment Forum (SIF).

Two industry associations in particular are worth mentioning. Firstly, Triodos is a founding member of the GABV. The Alliance consists of 39 financial institutions around the world. The members share a commitment to build a more sustainable banking industry that creates positive economic, social and environmental impact (GABV 2017). Secondly and most importantly, Triodos pursues most of its lobbying activities via the NVB. In the General Meeting of Triodos Bank held in 2015, the Bank pointed out “that an active contribution had been made via the Dutch Association of Banks (Nederlandse Vereniging van Banken, NVB) to the debate on the (increasing) regulation in the Netherlands as well as abroad (Triodos 2015: 5).” As an important industry association, NVB holds meetings to discuss and prepare positions for its members. The CEO of Triodos Bank is a member of the NVB board as well

17 An overview of some of Triodos’ most relevant memberships is available at https://www.triodos.com/en/about-triodos-bank/who-we-are/networks-and-partners/ (accessed 29 May 2017). 18 Networks and partners of Triodos Investment Management (fully-owned subsidiary of Triodos Bank). Available at https://www.triodos.com/en/investment-management/who-we-are/networks-and-partners/ (accessed 30 May 2017).

33 as the chairman of the governing council (Bestuursberaad) representing small and foreign banks (NVB 2017; SOMO 2016c).

Why does Triodos Bank lobby?

Triodos is actively involved in influencing and shaping the outcomes of financial regulations through government authorities and supervisory bodies. However, the Bank does not have a policy that outlines how it interacts with supervisors and regulators or how it seeks to shape regulatory outcomes. According to SOMO, Triodos was concerned with upcoming EU laws which “might undermine its financial services and products to achieve its sustainability objectives (SOMO 2016c: 1).” As a result, the Bank hired a consultant who monitors regulatory developments as well as assess their impact. In its Annual Report 2015, the Bank states that it puts “effort into constructive conversations with regulators (…) to help make sure regulation is both proportional for smaller and medium sized banks, and effective (Triodos 2016: 14).” During the General Meeting 2015, Triodos decided to focus its lobbying efforts on the increasing regulations in the Netherlands and abroad. Overall, the Bank is concerned about the expanding regulatory costs imposed on smaller and medium sized banks. As a result, the Bank focuses its lobbying activities on the EP in Brussels and the ECB in Frankfurt in order to contribute to the debate on increasing regulation. The Annual Reports of 2015 and 2016 reveal that the Bank did not identify material topics related to supervisory or regulatory issues and developments. Apparently, these topics are not most important to Triodos and its stakeholders (Triodos 2016:15; Triodos 2017:19). Nonetheless, the Bank engages in governmental and supervisory consultations in order “be recognised by key in influencers as a reference point for values-based banking, contributing to the development of a more diversified, transparent and sustainable banking sector (Triodos 2016: 17).” To sum up, the Bank pursues lobbying activities to develop and coordinate the Bank’s positions on important financial regulatory issues in a way that supports proportional regulation for small and medium sized banks as well as a sustainable banking sector.

34 ASN Bank

ASN Bank N.V. (hereinafter ‘ASN’ or ‘the Bank’) is a sustainable bank that is based in The Hague, the Netherlands. On 31 December 2016, the subsidiaries ASN and RegioBank N.V. merged with SNS Bank N.V. The banking licences of the subsidiaries ASN and RegioBank N.V. have lapsed and operated under the licence of SNS Bank N.V. At the same time and as a result of the merger, SNS Bank N.V. was renamed de Volksbank N.V. on 1 January 2017. According to market research this name had the most appeal. Today, de Volksbank is the fourth-largest bank in the Netherlands and has four brands: ASN Bank, BLG Wonen, RegioBank and SNS. Each of these brands has its own distinctive profile enabling de Volksbank to pursue a multi-brand strategy. ASN Bank invests in sustainable development and offers banking services to customers only in the Netherlands. In 2016, the Bank had 161 employees offering banking services to over 645.000 customers in the Netherlands. Overall, the Bank had total assets of 13.6 in Euro billion at the end of FY2016 (ASN Bank 2017; De Volksbank 2017). ASN does not explicitly publish its budget for lobbying. According to ASN, there is no separate budget for activities related to lobbying. There are several reasons why the Bank does not know its lobbying budget. Firstly, ASN Bank does not have a separate unit that is responsible for lobbying activities. Secondly, the Bank does not lobby for financial legislation and regulation. Thirdly, ASN only pursues lobbying activities in the field of human rights, climate and biodiversity (ASN Bank 2017; ASN Bank 2016; SOMO 2016d). Indeed, the Bank did not publish any figures related to lobbying. On the EU Transparency Register, there is no profile of ASN or any consultant that can be connected to the Bank. Hence, the annual costs related to EU lobbying cannot be identified. At the same time, contributions to industry associations, such as NVB, are not publicly available. In its Annual Report 2015, ASN published a list with donations, contributions and sponsorship to NGOs (ASN Bank 2015: 54). However, these NGOs are not active in lobbying on financial regulation. In conclusion, there are no figures related to lobbying. Indeed, it confirms that ASN does not lobby for financial regulation and only lobbies for topics concerning human rights, climate and biodiversity. In terms of ASN Bank’s overall approach to banking, like mission and strategy, the bank states that sustainability is the guiding principle of all its activities. Accordingly, the Bank only finances and invests in companies and sectors that respect people, animals and the environment.

35 ASN Bank’s mission is:

“Our economic conduct is aimed at promoting sustainability in society. We help to secure changes that are intended to put an end to processes whose harmful effects are shifted to future generations or foisted onto the environment, nature and vulnerable communities. In doing so, we do not lose sight of the necessity to yield returns in the long run that safeguard the continued existence of our bank. We manage the funds that our customers entrust to us in a manner that does justice to their expectations (ASN Bank 2016: 5).”

For ASN, sustainability or sustainable development not only refers to the environment. Rather, the Bank also focuses on social aspects, for instance to help ensure a fair distribution of wealth. Therefore, ASN Bank’s sustainability policy is built on three pillars: • human rights; • climate change; and • biodiversity (ASN Bank 2016: 7).

The Bank’s sustainability policy applies to all loans and investments. Furthermore, these pillars are the basis for selecting partner projects that ASN sponsors or donates money to. Last but not least, the three pillars of the sustainability policy reflect the topics that ASN Bank is lobbying for (ASN Bank 2016: 7). ASN Bank’s overall approach to banking can therefore be described as one of a sustainable bank that is offering a range of banking services on the basis of its sustainability policy.

What is ASN Bank lobbying for?

ASN Bank states that it is not involved in influencing or shaping the outcomes of financial legislation and regulation. Instead, the Bank only pursues lobbying activities in the field of human rights, climate and biodiversity (ASN Bank 2017: 83). In its Annual Report 2014, the Bank states that it pursues lobbying activities on the following issues: • in favour of fair trade, • anti-child labour, • anti-arms industry, • in favour of renewable energy, • care and welfare (ASN Bank 2015: 102).

36 For instance, ASN Bank lobbied actively for the Arms Trade Treaty adopted by the UN. According to the Treaty, every country must provide a statement of the import and export as well as transit of arms each year (ASN Bank 2015: 23). Furthermore, the Bank has also lobbied for the prohibition of investments in cluster ammunition. The Bank itself expects companies that they do not lobby or give political contributions to activities that violate the three pillars of ASN’s sustainability policy. However, businesses can also lobby for activities that are consistent with the Bank’s sustainability policy or even promote sustainability (ASN Bank 2015a: 10). Overall, the Bank’s lobbying activities demonstrate that the Bank strives for a sustainable and just world by strictly adhering to the three pillars of its sustainability policy (human rights, climate change, and biodiversity).

How does ASN Bank lobby?

This section elaborates on how ASN pursues lobbying activities. As already pointed out “ASN Bank made an explicit choice not to engage in lobbying financial regulatory policy makers regarding financial regulation and legislation (SOMO 2016d: 1).” It is therefore not surprising that ASN does not have a separate unit responsible for activities related to lobbying. Whether the Bank analyses regulatory developments and researches potential effects of proposed regulations or not is questionable. Nevertheless, the Bank has a Sustainability Policy and Research team. The team can be considered as the starting point for every ASN viewpoint on human rights, climate and biodiversity. The Bank’s sustainability policy thereby serves as a guideline in determining the bank’s lobbying positions and strategies. The members of the Sustainability Policy and Research team are responsible for developing and overseeing the Bank’s sustainability policies and positions. In practice, the staff members up to the CEO of ASN Bank “engage in advocacy at all levels of the market and society and, occasionally, at governmental level (SOMO 2016d: 1).” Indeed, ASN Bank states that it engages with the Dutch government in order to achieve its long-term goals as a sustainable bank (ASN Bank 2015: 18). Within the Netherlands, none of the Bank’s staff members are registered in the lobbying register of the House of Representatives in The Hague (Tweede Kamer der Staten-Generaal 2017). Nonetheless, ASN Bank took part in a hearing about sustainable banking at the Dutch House of Representatives in 2014. During the hearing, the former Managing Director of ASN “asked politicians to contribute to building a

37 sustainable society by assigning a key role to the circular economy in a new tax system (and) emphasised the importance of long-term rather than short-term thinking, and of social return in addition to financial return (ASN Bank 2015: 42).” On EU level, none of the Bank’s staff members are registered in the EU Transparency Register. Also, no profile of ASN or any consultant that is connected to the Bank can be found on the Register. Subsequently, no person is accredited for access to European Parliament premises in order to lobby EU institutions. In other words, ASN does not have a lobbyist who is directly involved in lobbying the EU institutions. On the international level, ASN was active in lobbying for the prohibition of investments in cluster ammunition (ASN Bank 2015a: 10). When examining ASN’s international lobbying activities it is vital to keep in mind that the Bank is only active in the Netherlands. Finally, staff members of ASN do not take the final responsibility of the Bank’s lobbying positions. Eventually, the Board of Directors of ASN has the final responsibility on lobby positions and activities. The following section focuses on ING’s involvement in business and industry associations. In its Annual Report 2014, ASN states that “as an advocate, we participate in national and international forums, such as the Carbon Disclosure Project, UNEP FI, Global Compact, Caring for Climate Initiative, De Groene Zaak, and Duurzame Energie Koepel (ASN Bank 2015: 22).” Moreover, ASN Bank lists memberships of associations, such as industry associations, on its corporate website19. However, most of the associations mentioned by the Bank do not engage in lobbying on financial regulatory issues. Based on the information provided by the Bank, the following two memberships in industry associations that are involved in shaping regulatory outcomes have been identified (ASN Bank 2016: 10-13; SOMO 2016d: 2-3): • NVB o NVB Sustainability Platform (Platform Duurzaamheid) o NVB (mentioned as a brand of de Volksbank) • DUFAS

ASN Bank is a member of the Sustainability Platform (Platform Duurzaamheid) of NVB. According to ASN “two of the objectives of the ten member banks are to create solutions to the issue of climate change and to protect human rights in international commercial chains

19 An overview of ASN’s most relevant memberships is available at https://www.asnbankverslag.nl/verslag/duurzaamheidsbeleid2/lidmaatschaeverklaringe2/a1107_Lidmaatsc happen-en-verklaringen (accessed 1 June 2017).

38 (ASN Bank 2016: 12).” In addition, the Bank is also mentioned as a member of NVB as a brand of de Volksbank (NVB 2017). Last but not least, ASN is a member of DUFAS since 2011. DUFAS is engaged in lobbying activities in order to promote an optimal business climate for Dutch asset managers.

Why does ASN Bank lobby?

ASN Bank claims that it is not actively involved in influencing and shaping the outcomes of financial regulations through government authorities and supervisory bodies. Hence, the Bank does not have a policy that outlines how it interacts with supervisors and regulators or how it seeks to shape regulatory outcomes. The Bank only pursues lobbying activities in the field of human rights, climate and biodiversity because the Bank’s sustainability policy is built on these three pillars (ASN Bank 2016: 7). The Annual Reports of 2016, 2015 and 2014 reveal that the Bank did not identify material topics related to supervisory or regulatory issues and developments (ASN Bank 2017; 2016; 2015). These topics are not most important to ASN Bank and its stakeholders. To sum up, ASN only pursues lobbying activities in the field of human rights, climate and biodiversity in order to create a sustainable and just world (ASN Bank 2017; ASN Bank 2016; SOMO 2016d).

39 6. Comparison of Traditional & Ethical Bank Lobbying

The task of the present analysis is to examine factors that explain differences in lobbying behaviour of traditional and ethical banks in the Netherlands. The comparative analysis section compares the lobbying behaviour of ING Bank, Rabobank, Triodos Bank, and ASN Bank. Advancing a theoretical framework, the comparative analysis argues that the decision to pursue lobbying activities is a function of two factors: banks’ organizational characteristics and banks’ overall approach to banking. Factors that explain differences in lobbying behaviour of traditional and ethical banks are therefore two-fold. Firstly, organizational characteristics, like financial resources and international banking activity, impact a bank’s decision to lobby (Chalmers 2017). Secondly, banks’ overall approach to banking, like strategy, mission, purpose or business model, impact a bank’s decision to pursue lobbying activities in terms of levelling the regulatory playing field with competitors. In order to systematically elaborate on the two factors, the comparative analysis seeks to answer the following sub-research questions:

1. What are traditional and ethical banks lobbying for? 2. How do traditional and ethical banks lobby? 3. Why do traditional and ethical banks lobby?

The comparative analysis is structured as follows. The first part of each sub-research question examines the similarities and differences in lobbying behaviour of traditional banks. The second part of each sub-research question focuses on ethical banks and examines the similarities and differences in their lobbying behaviour. After answering the sub-research questions for traditional and ethical banks, organizational characteristics, like financial resources and international banking activity as well as the overall approach to banking of both types of banks are compared. In doing so, it demonstrates that the decision to pursue lobbying activities is a function of two factors: banks’ organizational characteristics and banks’ overall approach to banking. Finally, the similarities and differences are presented in Table 1.

40 1. What are traditional and ethical banks lobbying for?

Traditional banks are actively involved in influencing and shaping the outcomes of financial regulation and public policy in all countries where the banks are doing business. The banks publish some of their positions and viewpoints on current regulatory and policy developments on their corporate website or annual reports. Nonetheless, traditional banks do not publish all information about their lobbying positions or activities because of confidential and competitive reasons. Traditional banks lobby for the proper functioning of financial markets and a coordinated approach to banking supervision. Furthermore, they seek to find the right balance between business interests, consumer protection, and innovation, as well as to level the playing field with competitors. The banks therefore often lobby for less stringent regulations because they consider some proposals disproportionate to the intended objective(s). For instance, ING Bank considers the BCBS’ proposals regarding risk-weighted assets too stringent (ING Group 2017b). In the case of capital requirements for banks, Rabobank recommends a regulatory framework that is “fine-tuned and simplified (Rabobank 2015: 1).” Overall, traditional banks lobby on financial regulatory issues and developments that require technical expertise. In conclusion, traditional banks’ diversified business profiles (wholesale, retail, private, and investment baking, etc.) have an impact on the Banks’ decision to pursue lobbying activities on various regulatory developments. This also supports the finding of Brandon and Padovani who show that banks are more likely to lobby when they have more diversified business profiles (Brandon & Padovani 2011: 31). Ethical banks are not always involved in influencing or shaping the outcomes of financial legislation and regulation. For instance, ASN Bank claims that it does not lobby for financial legislation and regulation. Instead, ASN Bank only pursues lobbying activities in the field of human rights, climate and biodiversity (ASN Bank 2017: 83). By contrast, Triodos states that it is actively involved in influencing and shaping the outcomes of financial regulations through government authorities and supervisory bodies. Since ethical banks are often smaller compared to traditional banks, Triodos engages in lobbying activities to promote proportional and effective regulations for small and medium sized banks (Triodos 2016: 14). In conclusion, ethical banks focus their lobbying efforts on topics related to the environment (e.g. renewable energy) and society (e.g. anti-arms industry) or sustainable banking (e.g. investing in sustainable enterprises) in order to achieve a banking sector and a world that are sustainable and just. The current lobbying activities and viewpoints of traditional and ethical banks are presented in Table 1.

41 2. How do traditional and ethical banks lobby?

Traditional banks have a separate unit that analyses regulatory developments, researches potential effects of proposed regulation, and supports the bank in formulating its standpoints and strategies. Furthermore, the unit communicates and advocates the viewpoints with the stakeholders of the bank through various ways and channels. The departments also receive support from other bank divisions to fulfil their objectives. Within the Netherlands, traditional banks have one staff member who is being registered in the lobbying register of the House of Representatives (NB it is only possible to register one person per company). On EU level, traditional banks have at least one or more staff members who are registered in the EU Transparency Register (ING Bank registered two lobbyists and Rabobank registered one lobbyist in the EU Register). Hence, the banks are directly involved in lobbying the EU institutions. The banks lobby through in-house lobbyists up to board members who maintain direct relationships with both national and international regulators and supervisors. Eventually, the Executive or Management level has the final responsibility on lobby positions and activities. Traditional banks are heavily involved in business and industry associations that shape regulatory outcomes. Overall, the banks are a member of a number of business and industry associations around the world. Most of the memberships are in banking industry associations and not in theme-oriented associations or think-tanks. On national level, traditional banks have close ties with the NVB. In addition, the banks often have one or more members on the board of NVB (ING Bank and Rabobank each have two members on the NVB board). The board of NVB takes the final decision on issues related to regulation and supervision. After all, traditional banks do not use industry association memberships solely for lobbying. These associations have multiple functions, like knowledge-sharing or monitoring regulatory developments. Ethical banks do not have a separate unit that engages in lobbying activities of any kind. Rather, the banks’ employees up to the Management level engage in lobbying at all levels. Lobbying activities and positions are dealt with by corporate staff members from different departments based on their field of expertise as well as depending on the subject. For ASN Bank, however, it is even questionable whether the Bank analyses regulatory developments and researches potential effects of proposed regulations or not. ASN Bank claims not to engage in lobbying financial legislation and regulation (ASN Bank 2017: 83). Traditional banks’ sustainability policy often serves as a guideline in determining the banks’ lobbying positions and strategies. For instance, ASN Bank strictly adheres to three pillars of

42 its sustainability policy (human rights, climate change, and biodiversity) and only lobbies in these fields. By contrast, Triodos pursues lobbying activities in Brussels and in Frankfurt because the bank is concerned about the expanding regulatory costs imposed on small and medium sized banks (Triodos 2015: 5). Within the Netherlands, traditional banks do not have a staff member who is registered as a lobbyist in the lobbying register of the House of Representatives in The Hague. On EU level, the banks do not have staff members who are accredited for access to European Parliament premises. Only Triodos hired an external consultant that lobbies the EU institutions on behalf of the bank. In the end, the Executive or Management level of the banks has the final responsibility on lobby positions and activities. Ethical banks are not as heavily involved in business and industry associations as traditional banks. Overall, ethical banks prefer memberships in theme-oriented business and industry associations. For instance, Triodos is a founding member of GABV which consists of 39 financial institutions that share a commitment to build a sustainable banking industry. Besides theme-oriented associations, ethical banks pursue lobbying activities through NVB. However, ethical banks are underrepresented on the board of NVB (only the CEO of Triodos Bank is a member of the board). Again, ethical banks tend to focus their lobbying efforts on specific themes. For example, ASN is a member of the Sustainability Platform (Platform Duurzaamheid) of NVB and Triodos is chairing the governing council (Bestuursberaad) representing small and foreign banks. The different approaches to lobbying of traditional and ethical banks are presented in Table 1.

3. Why do traditional and ethical banks lobby?

Traditional banks have identified ‘financial laws & regulations’ or ‘regulatory developments’ as material aspects in at least one of their last two annual reports. The banks mainly engage in lobbying in order to enhance the implementation of financial regulation and supervision that support their interests. In doing so, the banks develop and coordinate their positions on important financial regulatory issues. In conclusion, traditional banks consider it important that financial regulations are put into practice in a way that supports the business interests of the bank and its stakeholders. Ethical banks did not identify material topics related to supervisory or regulatory issues and developments in their annual reports. This demonstrates that these topics are not

43 most important to ethical banks and their stakeholders. Rather, ethical banks engage in lobbying activities in order to contribute to a more diversified and sustainable banking sector. In particular, Triodos supports proportional regulation for small and medium sized banks. By contrast, ASN does not lobby for financial legislation and regulation. ASN only pursues lobbying activities in the field of human rights, climate and biodiversity because the Bank’s sustainability policy is built on these three pillars.

Organizational characteristics & overall approach to banking

Answering the sub-research questions provides interesting insights into the lobbying behaviour of traditional and ethical banks. But what factors explain the differences in lobbying behaviour of these banks? In order to give an answer to this question, this section compares organizational characteristics and the overall approach to banking because these two factors impact a bank’s decision to lobby. First, traditional banks’ organizational characteristics, like financial resources, are much higher compared to ethical banks. On average, traditional banks had total assets of roughly 754 in Euro billion. Ethical banks had total assets of only 13.55 in Euro billion at the end of FY2016. The vast financial resources of traditional banks are also reflected in the budget for lobbying. Traditional banks’ contribution to the NVB is estimated at € 3.25 million on average per year. Figures that show ethical banks’ contribution to NVB are unknown. Furthermore, traditional banks state in the EU Transparency Register that the annual costs related to activities covered by the Register are estimated at more than 400.000 € in FY2016. Out of the two ethical banks only one spent € 50,000 - € 99,999 to lobby the EU institutions in FY2016. After all, one of the two ethical banks analysed in this study does not have a budget for lobbying. With regard to international banking activity, traditional banks are active in nearly 40 countries worldwide. By contrast, ethical banks are only active in either one or a handful of countries. Second, traditional banks’ overall approach to banking, like strategy, mission, purpose or business model, is essentially profit-oriented. For instance, traditional banks aim at becoming the primary or leading bank for more customers. Overall, they seek to achieve financial and commercial success for the bank and their stakeholders. Ethical banks have strict policies regarding companies and sectors that they finance or invest in. For example, Triodos only invests in sustainable organisations that benefit society and environment.

44 Triodos even claims to be one of the world's leading sustainable banks. ASN Bank only finances and invests in companies and sectors that respect and adhere to the three pillars of its sustainability policy. Banks’ organizational characteristics and overall approach to banking as well as their approach to lobbying are presented in Table 1.

Table 1: Factors that Explain Differences in Lobbying Behaviour of Traditional and Ethical Banks Traditional Banks Ethical Banks ING Bank Rabobank Triodos Bank ASN Bank Organizational Characteristics Total Assets € 845 billion € 663 billion € 13.5 billion € 13.6 billion Budget for • NVB: • NVB: • EU Transparency No budget for Lobbying € 3 million € 3.5 million Register: lobbying • EU Transparency • EU € 50,000 - € 99,999 Register: Transparency € 400.000 - Register: € 499.000 € 400.000 International 40 countries 40 countries 5 countries in Europe 1 country: the Banking worldwide worldwide Netherlands Activity Overall Approach to Banking Strategy, • Become the • Become the • Triodos claims to • ASN’s Mission, Vision, primary bank for leading be one of the sustainability Purpose or more customers customer- world's leading policy is built Business • Achieve oriented bank sustainable banks on three Principles financial and in NL • Only invests in pillars: commercial • Leader in sustainable 1. human success and Food & Agri organisations rights; create value for financing that benefit 2. climate all its society and change; stakeholders environment and 3. biodiversi ty • ASN only finances and invests in companies and sectors that respect and adhere to the three pillars of its sustainability policy

45 Traditional Banks Ethical Banks ING Bank Rabobank Triodos Bank ASN Bank Approach to lobbying Lobbying Unit ING Regulatory and Public Affairs No separate unit No separate unit International Affairs department (5 department (17 staff staff members) members)

Registration in 3 in total: 2 in total: 1 in total: 0 in total Lobby Registers • 1 In the House of • 1 In the • 0 In the House of Representatives House of Representatives of the Representativ of the Netherlands es of the Netherlands • 2 in the EU Netherlands • 1 in the EU Transparency • 1 in the EU Transparency Register Transparency Register (hired as Register external consultant) Final Management Board Executive Board Management Board Board of responsibility on Banking Directors lobbying activities Current • Banking Union • Rabobank’s • Lobbying efforts • Does not lobbying needs a response to against the lobby for activities and European the BCBS increasing financial viewpoints Deposit consultation regulations that regulation and Guarantee imposing confront small legislation Scheme constraints on and medium • Only pursues • EU Retail the use of sized banks lobbying Financial international • Contribute to the activities in Services risk models development of a the field of • Macroprudential • Position more diversified, human rights, policy in the Paper: Capital transparent and climate and Banking Union requirements sustainable biodiversity • A European and Agri banking sector • In favour of digital single • Article • Restrict the use fair trade market for retail 'Capital of conflict • Anti-child financial services requirements materials (e.g. labour • Capital Markets for banks: tantalum, tin, • Anti-arms Union what is the gold, or industry • The importance optimal tungsten) • In favour of of risk sensitive combination • Make Dutch tax renewable capital for of regulation, regulations more energy Europe supervision sustainable and • Care and and market address low welfare discipline?' labour costs • Action plan • G8 task force: for Dutch Lobbies against SME access laws and to financing regulations that • Rabobank and would make it Big Data harder for

46 • Bail-in and “private persons the to invest in Resolution different types of Fund funds that • German contribute more Legislative to society than Proposal the traditional Senior funds that invest Unsecured in listed Debt companies (Triodos 2015: 5).” • Lobbied for the prohibition of investments in cluster ammunition Memberships of industry associations that 38 20 6 3 lobby on financial regulation

47 7. Conclusion

This research project examines factors that explain differences in lobbying behaviour of traditional and ethical banks. Despite growing interest of scholars in bank lobbying activities following the recent global financial crisis, little research had focused on the determinants of bank lobbying. Further, little is known what factors explain why some banks decide to lobby financial regulation in order to shape regulatory outcomes while others do not. In particular, the lobbying behaviour of ethical banks has not been analysed yet. This research project addresses this shortcoming by examining the lobbying behaviour of two traditional banks (ING Bank and Rabobank) and two ethical banks (Triodos Bank and ASN Bank) in the Netherlands. This research project contributes both theoretically and empirically to existing research. First, it delivers an explanation of bank lobbying based on banks’ organizational characteristics and their overall approach to banking. Together, these factors provide insight into both the capacity of traditional and ethical banks to lobby as well as their motives for doing so. With regard to the empirical approach of this study, it is the first analysis that examines the lobbying behaviour of ethical banks. The main findings of this research project do not only speak to scholars and practitioners in the field of bank lobbying but also draw attention to transparency and accountability of lobbying by banks in the Netherlands. Hence, this study also speaks to critical customers to help them to choose a bank according to their preferences. The main empirical findings can be summarised as follows. Factors that explain differences in lobbying behaviour of traditional and ethical banks are two-fold. First, organizational characteristics, like financial resources and international banking activity, impact a bank’s decision to lobby. These findings give support to existing studies suggesting that wealthy and internationally active banks tend to be more likely to lobby. Indeed, a prominent explanation for bank lobbying is related to banks’ resources. Superior wealth and other material resources have the potential to translate into significant political lobbying power for banks. Financial resources, for instance, are important for financing strategies and activities related to lobbying. Furthermore, the number of registered lobbyists on EU level by traditional banks confirms that internationally active banks are more likely to lobby at the international level. After all, international scope translates into banks’ lobbying power because internationally active banks have the potential to provide law-makers and regulators with technical information and expertise.

48 Second, this research project finds that a bank’s overall approach to banking, like strategy, mission, vision, purpose, or business model, impacts a bank’s decision to pursue lobbying activities. Indeed, ethical banks are often smaller compared to traditional banks. Hence, ethical banks are more likely to engage in lobbying activities to promote proportional and effective regulations for small and medium sized banks. At the same time, a bank’s overall approach to banking can affect its lobbying behaviour. In general, ethical banks focus their lobbying efforts on topics related to the environment (e.g. renewable energy) and society (e.g. anti-arms industry) or sustainable banking (e.g. investing in sustainable enterprises) in order to achieve a banking sector and a world that are sustainable and just. For instance, ASN Bank made an explicit choice not to engage in lobbying on financial regulation. ASN Bank’s sustainability policy allows the bank to pursue lobbying activities only in the field of human rights, climate and biodiversity. Traditional banks’ diversified business profiles (wholesale, retail, private, and investment baking, etc.) have an impact on the Banks’ decision to pursue lobbying activities on various regulatory developments. This finding is consistent with a study which shows that banks are more likely to lobby when they have more diversified business profiles (Brandon & Padovani 2011). There are multiple avenues for future research regarding factors that explain differences in lobbying behaviour of traditional and ethical banks. First, the results presented in this analysis are only valid for a small number of traditional and ethical banks in the Netherlands. Expanding the dataset to include more banks would help to increase the generalizability of the factors explaining differences in lobbying behaviour. Future research could therefore go further in examining the lobbying behaviour of traditional and ethical banks in a cross-country study. One central limitation of this research project is the transparency of lobbying. Overall, banks do not publish all details about their lobbying activities. The reasons for this are manifold. Nonetheless, it is understandable that information about lobbying positions or contacts is kept confidential for competitive reasons. An interesting finding is that especially ethical banks have little means to ensure their transparency about lobbying activities. As such, it is difficult to examine the way in which ethical banks pursue lobbying activities. Thus, future research could examine ethical bank lobbying in greater detail. It will also be important for future research to assess the degree to which traditional and ethical banks’ lobbying efforts are successful.

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60 Appendix: The Dutch Fair Bank Guide (Eerlijke Bankwijzer) Scores

Source: Eerlijke Bankwijzer. (2017). “Beoordeling van het duurzaamheidsbeleid van tien bankgroepen – 16e actualisering.” Retrieved from http://eerlijkegeldwijzer.nl/media/373541/2015-66-eerlijke-bankwijzer- rapport-beleidsupdate-161214.pdf (accessed 25 April 2017).

61