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 [email protected].
The article was originally published in Profile, the magazine of Devon Chamber of Commerce.
Gemma Bone Dodds FRSA
Dr Gemma Bone Dodds FRSA sets out why we urgently need to transform the banking system and create a truly local bank for the people and businesses of the North East.
Chief Finance Officer at the London Borough of Brent, Conrad Hall, discusses the value of local banks in tackling financial exclusion and supporting disadvantages communities.
Derek Mills on the development of a new community bank for Wales as part of a wider movement by the RSA Transform-supported Community Savings Bank Association.