A new paper published today, in collaboration with All In, Newcastle University and the RSA, sets out why we need to do something about local banking in the North East and proposes the adoption of the Community Savings Bank Association’s model, outlining some specifics of how this model could be adapted for the region.
Report author Dr Gemma Bone Dodds FRSA explains why we need a truly local bank for the people and businesses of the North East.
In 2008, I was studying for my master's degree in political economy when the banking crisis hit. In every seminar we avidly followed the collapse, turmoil and rescue of these banks, pouring through the pages of the Financial Times alongside theories of economic manias, panics and crashes. The theory told us that economies periodically go into crises of one sort or another and that our banking and financial systems often lead the way. Soon, the governments and regulators of the time were to find out that the 'big bang' reforms of the 1980s meant that our banking institutions were 'too-big-to-fail' and that the public had to bail them out.
Banking reform was all too briefly on the cards, but the veneer of complexity and a lack of critical financial understanding from journalists and our elected and unelected officials meant that reform faded from memory as austerity took hold. Many have been trying to put banking reform back on the political agenda; however, trying to convince regulators and governments to challenge a hugely powerful banking system (which is not currently in crisis) has proved difficult – but not impossible.
Eleven years on there is the opportunity to transform the banking system, not just through political pressure or regulatory change, but by creating a new bank: one that will be at the heart of communities across the North East of England. Its purpose will be to serve the people and businesses of the area and it will be a mutual, true cooperative bank which will be run by and for the interests of its members. This is possible because of the vast amount of work from the Community Savings Bank Association (CSBA), supported by the RSA, to create a model ‘bank-in-the-box’, which regions across the UK can then make their own.
2008 showed us that we need greater resilience in the system; this proposal will contribute towards that, especially as a number of these banks are currently in development around the UK. But we also need to remember that banks were not adequately serving society before, during or after the crisis, and this model will also address this issue by having a fundamentally different structure.
Ethical by design, as a cooperative, our region's needs can and should be built into the bank, responding to our unique situation and pushing the boundaries of what it means to be a financial organisation serving its customers. The CSBA have done a lot of the hard work: developing business planning blueprints, speaking to the regulators, working out financial models and projections, and designing the latest technology to enable 24/7 full service provision. Branches are a really important part of banking for many people and thus they are an important part of the CSBA model, making this intervention even more crucial for our semi-rural and rural communities and businesses. Not only will this be of benefit to us now, but it will make us more resilient and better able to withstand shocks imposed on us from elsewhere.
It is common to feel a sense of helplessness when trying to tackle systemic challenges like banking reform, but this proposal is at least one means to make a meaningful and lasting impact that is within our reach. The important thing to remember is this: banks should exist to serve the needs of society, business and the wider economy. I believe that we can create a bank that does this, within the next few years. So, let’s do this.
Read the full report: A Bank for the North East.
We are keen to work with local authority leaders and public bodies across the North East (and elsewhere across the UK) who share our vision to create local banks that will serve their region. If you would like to lend your support or find out more please email Mark Hall, Deputy Head of Engagement at the RSA on email@example.com
You can also register your details below to keep up to date with this project in the North East and across the UK.
Dr Gemma Bone Dodds FRSA is an innovation and systems change specialist who concentrates on economic transformation and is the author of our earlier paper 'Banking for the Common Good: Laying the foundations for safe, sustainable, stakeholder banking in Scotland'. She has a PhD in diverse economic thinking and is a director of All In, a research and systems change agency dedicated to transforming the economy to serve the needs of society and the environment.