‘Preston Bank’ plan would benefit businesses and residents, policy expert says

This is the assessment of a community banking specialist, who says the concept would help create a more “inclusive and resilient” economy.

Mark Hall, deputy director of engagement at the Royal Society for Arts, Manufactures and Commerce (RSA), commented as plans backed by Preston City Council to create the “North West Mutual Bank” progressed to the point of calling for a Licence.

However, the project was reviewed last week by one of its other local authority funders, the Liverpool City Council, which was recently the subject of a critical government inspection report.

Without commenting on the ensuing political wrangling in Preston, Hall said the fallout from the 2008 financial crisis points to the need for locally-oriented banks.

“Many big banks started cutting their lending after the crash, while in Germany – where they have a well-established layer of regional banks and cooperatives – they were actually able to increase lending to small businesses. .

“Regional banks have a lot more information about their customers, while the big banks depend a lot more on algorithms because they’re not that close to their community.

“This has been an extremely difficult year, especially for small businesses – and we see community banks as a more or less essential part of the social and economic infrastructure to build back better.

“Having these banks across the country will improve the resilience of these [individual] regions and the economy as a whole if there is another financial crisis in a few years, ”said Hall.

An RSA report last year found that the UK’s financial landscape is dominated by commercial banks, which make up 82% of the banking sector. In Germany and France, more than half of financial institutions are cooperatives, mutuals, credit unions or organizations supported by the state.

A Bank of England survey in 2016 found that nearly one in three small businesses were unable to access the financial support they needed to grow.

Mark Hall says local banks like the Preston-backed North West Mutual are channeling their lending into “the real economy, rather than speculative trading” – and thus can help businesses and individuals.

“They ensure that money flows into the local economy rather than fleeing to London and the South East – so this helps regions like the North West to develop a more vibrant and inclusive local economy.

“Community banks also support financial inclusion – for example, they offer everyone in the region access to a full checking account, while large banks might only offer limited access to slightly older people. vulnerable. This means that these people cannot benefit from things like levies that reduce [their] fresh.

“Regions tend to have a real commitment to maintaining traditional bank branches, which is essential for the most vulnerable people, but also for businesses that trade in cash.”

North West Mutual Bank was registered with the Financial Conduct Authority in May 2020 and, in addition to applying for a business license, it is also in the process of acquiring the necessary trademarks and intellectual property to operate.

Preston City Council, which has allocated £ 1million for the project over the next two years, last week defended forming a joint venture with Liverpool City Council, after the Merseyside authority was described by local government secretary Robert Jenrick as having a “dysfunctional culture”. . Wirral Council is also a partner in the project.

Preston’s Community Wealth Building Cabinet Member Cllr Freddie Bailey told a full board meeting: “Any director once this bank is established must be approved by the Bank of England.

“And once it is established, it will be a member-owned cooperative bank, which means that it will be the members who control this bank – not Preston City Council, Liverpool City Council or Wirral Council.” Cllr Bailey said in a meeting. of Preston City Council.

2 of 3 – UK bank branches closed between 1990 and 2020.

13 percent – proportion of free ticket vending machines closed between 2019 and 2020.

75 percent – proportion of the UK population that has an account with one of the “big four” banks. 1m + – number of people in UK without a full bank account.

1m + – number of people in UK without a full bank account.

Source: The Road the Resilience report, RSA, 2020