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Reinventing regional banking

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  • Picture of Tony Greenham FRSA
    Tony Greenham FRSA
    Founding Director, South West Mutual
  • Community Banking
  • Transform

To have more prosperous regions we need more regional banks. This was one of the conclusions of the Inclusive Growth Commission convened by the RSA. Now a new regional challenger bank is planning to put this to the test in the South West.

The UK banking sector is very unusual.

Most of our industrial competitors have a mixed and diverse banking system where smaller scale regional banks co-exist with national and global giants. Whether commercial, co-operative, or public, these local banking institutions tend to be the ones that excel in SME lending. They also support regional prosperity by directing more local savings back into local economies, and they provide more support during economic downturns. Finally, they also tend to do more to ensure that all citizens are included in access to fair and affordable banking products, including a bank account.

Take the city of Plymouth as an example. It has a regional bank called Mutual Bank that has assets of over USD 500 million and 9 branches. Their mantra is that “local people and their businesses are best served by a local bank, with local interests at heart.”  This is not Plymouth Devon, but Plymouth Massachusetts where the Mayflower ended its epic voyage from the Barbican steps.  Similar banks exist from Canada to Japan, with the strength of the Swiss and German economies due in no small part to the support given by their regional banks to the SME sector.

South West Mutual will be seeking a banking licence to serve households and businesses across Cornwall, Devon, Somerset, and Dorset. It will offer everyday banking products from current accounts, savings, mortgages, overdrafts to business loans. It will open new branches and have branch directors that have the power to take decisions based on their understanding of local business and the regional economy. As part of the Community Savings Bank Association, it will collaborate with other regional banks across the UK to gain cost efficiencies of scale through collective procurement, while enjoying the advantages of proximity to local markets by being independent and regionally head-quartered.

This is not about turning back the clock. Banking is evolving. With more people banking online the UK is losing 300 ATMs and 60 branches a month. Many of the existing branches are in the wrong places and are built for a bygone age.

But neither is this the dawn of the cash-less society. Welcome to the ‘less-cash’ economy. Many people and businesses still rely on cash and will continue to do so for many, many years. South West Mutual is built around the idea that customers should be able to choose how they bank, whether online, on their phone, or in a branch, and should not be forced off the high street.

Equally, research has shown that to lend successfully to smaller local businesses it is essential to have local relationship managers that know the patch and who can take decisions locally without being overridden by anonymous credit controllers in distant skyscrapers.

To reinforce the priority of customers’ needs it will be the customers themselves that own the bank. Building societies such as Nationwide enjoy high trust ratings because as mutual institutions their interests are closely aligned with customers. South West Mutual will also be owned by and accountable to its customers, one member one vote. As a regional bank, the shared ambition from the branch up to the Boardroom will be to help deliver inclusive and sustainable prosperity for the region.

If you are interested in hearing more get in touch with Tony Greenham on tony.greenham@southwestmutual.co.uk.

The article was originally published in Profile, the magazine of Devon Chamber of Commerce.

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  • Until we educate every one to understand how banks work 

    Until everyone understands that a bank is just a business 

    Until everyone understands that a bank is only as good as the people managing the risk 

    Until everyone is capable of calculating and understanding the risk , only then can a community bank evolve 

    Until everyone will realise that these small entities are high risk affairs and that risk takers get rewarded because they can lose everything then morally we cannot abuse the nation any more than we already do 

    A national bank underwritten by the tax payer is the only really safe place to go while the populous economy remains in such ignorance of how banks really work so why not roll out the NSI to every community and use any profit for every one in the country 

  • I think this is an exciting project. I fully endorse it.

    Ever since I took on a senior banking executive in Taiwan as a private student, I have come to know a little bit more about the banking industry and how banks can affect communities for the better. The banking sector in Taiwan is still young compared to say, the UK. But Taiwan recently liberalised the banking sector as part of her emergence from authoritarian rule; and in the course of the last 30 years, the Taiwanese government has made it possible for smaller banks to compete with their bigger cousins on an equal footing. The result has been the expansion of capital to sections that would otherwise have been excluded. I believe the same may be possible in the UK. I wish you well in your endeavour.   

  • As a resident of a South West town that once had five banks and a building society and now has no banks and a different building society, I'll be interested to see how this develops (we still have cash machines and access to four credit unions tho).  

  • One question about this.  There is certainly a case for local banks to provide basic payments services and savings accounts.  There is also a case for locally-based banks to lend to SMEs.  But should they be the same institution?  The small saver wants security and if their prosperity is linked to that of the local economy it may be correlated with the prospects of local SMEs.  The small saver is subject to higher risk and correlated risk if her savings are lent to local SMEs.  Take an example: a steelworker in Port Talbot saves with a local bank that lends to SMEs in the Tata supply chain.  What happens if Tata closes: the worker loses his job and could take a hit on his savings too.  Safety for savers and an ability to lend to businesses requires a certain scale.  Can these local banks provide that?  It might work if they are networked to diversity geographical risk. across the system

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