Banca Etica: Ethical banking in Italy ANOTHER Italy was on display this month at Florence's 16th-century Fortezza da Basso, where Banca Etica, an ethical bank, held its annual meeting. Outside, stands were selling all sorts of bio foods. Inside, casually dressed shareholders discussed weighty subjects such as social responsibility and the economic crisis. Until a few months ago Banca Etica was known only to insiders. But then the new parliamentarians of the anti-establishment Five Star Movement, which won more than 25% of the vote at the general election in February (but flopped at local polls on May 26th and 27th), queued to open accounts when parliament convened. That helped spread the word. Now people are curious. Ethical banks are nothing new, but Banca Etica takes its name seriously. Its annual report calls for a citizens" revolt against casino finance, the use of tax havens and speculation in commodities. Executive pay is not allowed to exceed six times the lowest wage at the bank. And it does not want to get involved with anything having to do with pornography, oil or arms (a rule that even applies to shareholders: the directors" report raised concerns that two, Banca Popolare di Milano and Banca Popolare dell'Emilia Romagna, are now on a list of banks related to arms production and sales). Such ideas may explain why Banca Etica is small: it has only 17 branches, around 230 staff and loans of less than €1 billion ($1.3 billion), and made a profit of €1.6m in 2012. The firm provides mainly credit to the non-profit sector and green businesses. It was, for instance, the first Italian bank to lend to co-operatives of young people who farm land confiscated from the Mafia. Yet Banca Etica has attracted a broad range of shareholders. They number 38,400, of which 5,900 are firms, including 83 financial institutions. By some measures, it is among Italy's best-run banks: only 0.4% of loans are in default and only 4.9% of loans are classified as "problematic." And its managers seems inventive. They have set up a platoon of 24 travelling bankers to drum up business in areas far from its branches. Can Banca Etica grow beyond its niche? That probably depends less on the firm itself than on Italy's established banks. If there are more scandals such as the one surrounding Monte dei Paschi di Siena, the world's oldest bank, which lost billions in dubious derivatives deals, Banca Etica may attract more business than it can deal with.