Christian lenders attack culture of greed at mainstream banks

The bosses of Britain's Christian lenders have attacked the sales-obsessed culture and declining ethics of the mainstream banking industry.

Trevor Smith, the chief executive of the Salvation Army's Reliance Bank, accused high-street banks of abandoning principles to chase profits and sell dubious products. The bank, based in the City, was founded in 1890. Mr Smith, who spent his career at Barclays before joining the Salvation Army in 1998, said: "When I joined the Institute of Bankers, the profession was about probity, integrity and 'my word is my bond' and over the last 30 or 40 years that has been corrupted by competition... The moral balance just seemed to go and this greed culture came in."

Chris Sheldon, who runs Kingdom Bank, said he left his job at NatWest in 2002 because he wanted to do something more valuable with his skills.

Both banks operate traditional models of collecting deposits and making loans and have gained business during the crisis. Reliance's main purpose is to manage the finances of the Salvation Army's operations but it has expanded into personal and small-business banking in the past 20 years.

Mr Smith said: "A number of people who have lost faith in the banks on the high street have come to us." He added that this was partly because the bank pays at least 75 per cent of its profits to the Salvation Army. Both banks said they had never had a complaint made against them to the Financial Ombudsman.

Kingdom, founded in 1954 in Nottingham and also owned by a Christian charity, has roughly doubled in size since it became a trading subsidiary nearly seven years ago. Unlike Reliance it does not offer current accounts but it collects savings to lend to churches and Christian organisations working in the community. It donates 10 per cent of its profits to its parent charity and 10 per cent to other Christian causes.

Mr Sheldon, interim chief executive at Kingdom, said new customers liked to know their money was funding good causes. He added: "They also felt we weren't doing anything complicated. We wouldn't know a derivative if it bit us on the backside."

Still, the crisis has caused problems in the form of bad debts and margins shrunk by low interest rates. Reliance's pre-tax profit last year dropped to £152,120 from £647,105 in 2010, driven by a £237,000 charge for a bad debt and legal charges. Its donation to the Salvation Army fell to £116,460 from £503,750 the year before.

A £200,000 charge for a bad debt and suspended interest sent Kingdom to a £145,000 post-tax loss last year after reduced net interest income helped to cause a £92,000 loss the year before.