We are living through unsettling times.
Across the globe, ordinary people feel that they are missing out on the benefits of globalisation, left behind in declining regional economies and threatened by the prospect of job losses resulting from automation. Further, many worry about the existential threat posed by environmental degradation and climate change.
As a mother of three, like many of you, I suspect, I fear for the future of my children. But rather than lie in bed at night worrying, I have decided to use the skills I have developed over decades in the financial services sector to try to address at least some of these issues right here in London.
Designing a different type of bank for London
The financial crisis, which inflicted real hardship on people in this city as it did elsewhere across the globe, revealed serious failures in banking practice. As the economy continues its slow recovery, it is time to consider how we might reduce the likelihood of a recurrence.
One approach is to design a radically different bank, one that focuses on helping its local community flourish and aligns its interests with those of the individuals and businesses it serves, reducing the chance the bank will take unnecessary risks to benefit management at the expense of customers, namely individuals and small businesses.
That is, in essence, the purpose of the Community Savings Bank Association (CSBA), which is working hard to establishment of a network of mutual banks across the UK, each focused on a particular geographic region.
Greater London Mutual (GLM), a member of the CSBA, is part of this movement. And we are not the only ones to feel this way. The RSA is supporting the CSBA, the first time it has ever supported a Fellow-led undertaking through its Transform programme.
How is Greater London Mutual different?
First, the ownership structure. GLM is owned by its members, who will become its customers. Thus, the bank will at the most basic level be required to act in the best interests of those it serves.
Voting rights are associated with membership rather than the number of shares owned, with each member granted one vote. This gives each member an equal say in the governance of the bank.
Other strategies include GLM’s pricing model, which will be transparent, and its management practices, which will be fair.
Thus, staff will earn at least the London Living Wage, the best paid will earn no more than ten times what the least well-paid do, and no one will receive bonuses. This is radically different from the way most banks operate. Indeed, the CEO of one major UK bank recently came under fire for scrapping a final salary pension for every employee but himself.
Designing a financially inclusive bank to help customers
GLM plans to be a full-service bank. It will operate a branch network as well as offer on-line banking and a mobile app. It will accept cash. Rather than credit cards, it will provide qualifying customers with debit cards linked to overdraft facilities, a lower-priced option.
It will make loans, both secured and unsecured, including mortgages. We believe these services will appeal to a broad range of customers, from students to the self-employed and small business owners to individuals of all socio-economic levels interested in banking with an institution whose values are aligned with theirs.
GLM plans to go further by being a financially inclusive bank, addressing issues of inclusion in product design. For example, its current account will feature budgeting tools, known as a digital “jam jar”, which will enable account holders to allocate cash to particular uses.
It will also feature near real time settlement, so account holders will always know exactly how much money they can spend. Such features would benefit any account holder. However, they are particularly useful to those managing on a tight budget.
As fears of incurring unexpected bank charges is major reason why some on the lower end of the socio-economic scale do not have bank accounts, this should go some way towards reducing the poverty premium individuals incur when the lack of a bank account prevents them from paying bills by direct debit.
Importantly, we have identified a range of measures we plan to track from the outset, such that we will have available information we can use to assess our progress on an ongoing basis. With the help of partners such as providers of social housing and energy, we believe we can tackle issues of financial exclusion.
The challenges of starting a new bank
Establishing a new bank is a challenge. Before we can begin operations, we need to be authorised to do so by the Prudential Regulatory Authority and the Financial Conduct Authority, our regulators.
They will want to see our business plan and assure themselves that we will be a sustainable enterprise, one that will keep deposits safe and treat customers fairly. The process could take a year or more. If we are successful, we will be authorised to operate on only a limited basis to assure our regulators that we have the systems, people and processes we need to expand our operations across the city.
Again, the process of obtaining regulatory approval to begin full operations could take a year. We are currently raising funds so we can hire the staff and professional advisors we need to develop our business plan, commence limited operations and finally capitalise the bank.
How you can help Greater London Mutual
The RSA has lent a hand, investing £10,000 in GLM and offering valuable support and advice through its Transform programme. Nonetheless, we have a lot to do.
There are a number of ways you can help us. If you are either a sophisticated investor or high net worth individual and would like to know more about the possibility of investing in GLM, we would love to hear from you.
Other ways to get involved include becoming a friend, an advisor, a member of the team or, eventually, a customer. We need the support of the 9,000 Fellows living in London to help us realise our vision. We cannot do it without you.
Kathryn Kerle FRSA is the Chair of Greater London Mutual.
If you meet the criteria as a high net worth or sophisticated investor and would like more information about investing in GLM you can email her at [email protected]
For other queries and to find out more about getting involved and supporting GLM please email Mark Hall, Deputy Head of Engagement at the RSA at [email protected]