Yolanda Díaz wants to regulate ethical banking to put the spotlight on the investments of large financial institutions.

MadridThe Ministry of Labor, under the leadership of Yolanda Díaz (Sumar), aims to ensure that customers know whether their bank invests in fossil fuels, weapons, or violates human rights. This regulation of social economy and ethical finance institutions is intended to help regulate these institutions. Sources within the Ministry of Labor confirm that they have reached an agreement with the Ministry of Economy to expedite the draft royal decree on "promotion and development of social economy and ethical finance institutions," which has been open for public comment. The next step is to obtain the necessary reports, after which the legislation can be submitted to the Council of Ministers and subsequently to the Congress of Deputies. Therefore, the approval timeline remains entirely open.

With this regulation, Díaz and her team intend to boost ethical banking that operates under the umbrella of the social economy, but above all, to clearly define what is meant by ethical banking, so that, for example, misleading advertising is prohibited. In other words, to ensure greater transparency.

How? Sources at the Ministry of Labor explain that the regulation will include ten strict criteria for determining what constitutes this type of banking entity, thus preventing the penetration of banks that operate outside the logic of the social economy—that is, conventional banks. Among the candidates to be included on the list of ethical entities, the same sources cite the Catalan bank Coop57, some rural savings banks, and Fiare Banca Ética as examples.

Díaz's team believes that the criteria under which these entities operate challenge the activities of large conventional banks, especially regarding their investments. Sources at the Ministry of Labor cite as an example that in an ethical bank within the social economy, a senior executive cannot receive a salary seven times higher than the lowest salary within the company. They also want banks to be accountable for where they invest their clients' money, so that if, for example, Banco Santander or BBVA invest in fossil fuels or the arms trade, the client can be informed.

The underlying objective is to passively expose the unethical practices of large, traditional banks, sources at the Ministry of Labor acknowledge, which directly affects their reputation. For all these reasons, Díaz's team maintains that the Ministry of Economy did not want this sector regulated. In any case, it should be noted that the regulation does not include a sanctions regime. In Catalonia, the Centre Delàs has been publishing the report for years. Armed Banking, which details the entities directly related to weaponry.

However, receiving this distinction from the Ministry of Labor will allow ethical entities to access specific subsidy programs that will not include large traditional banks. Sources within the ministry explain that this will be a way to revitalize these entities.