Saturday, October 12, 2013

Hampshire Community Banks - which one first?

In the UK some of us have been waiting for years for a community bank to roll up and open its doors and now in Hampshire it could be coming true. Alastair Fee of BBC TV South Today has this week run a series on Local Banks. This has given insight into the trials and tribulations of the unpaid volunteers who are trying to change the face of British banking to give it a truly local dimension with an emphasis on the common good. The core need is that local businesses should have far better access to bank loans so that the local economy can flourish, and the new way proposed will be through not-for-profit banks. Thus the monopoly profits now accruing to private shareholders and to top bank management and traders, through astronomic salaries and bonuses, will be captured by the people who make such a wonderful money spinner possible - the ordinary people. It is a theme of my book The Free Lunch -Fairness with Freedom that it is through the successful society that banking is possible. The common trust between individuals with their skill and productivity as they live in harmony under the rule of law, fosters the orderly background for profitable banking to happen. Thus the rightful owners of this special banking wealth are its creators -ordinary citizens:  quid pro quo. With the recent mess created by those entrusted with the banking monopoly the chance is here to be grasped for something really different.

Declaring my interest as a director of Local First CIC ('Promoting Local Banks') it is gratifying to see the wider public start to be intrigued in what could become their local not-for-profit bank.  The series started on on Sunday 6th October with ** The Politics Show  (start at min: 34>49) with an overview of the German Sparkassen local bank model in operation (also on Tuesday see BBC TV South Today/facebook - 8th Oct, Bavarian Banks) - an electrician who started his solar roof panel business within two days with a bank loan; a cinema owner who says his bank manager is friendly and trusted - 'not a gangster'. 
** Alternative link see: off-screen recording.  

On Monday 7th October it was the turn of the project for a 'Hampshire Community Bank' with our Local First team headed by Prof Richard Werner (Chair of International Banking, Univ of S'ton):   BBC TV South Today / facebook - 7th Oct Local First . Keith House, Leader of Eastleigh Borough Council gave his support and commitment to seeing the bank in place and lending within about a year. This 'Hampshire Bank' hopes to match-fund £7m raised locally with government backing to make £14m capital and lend £100m in its first year. Dr Werner said deposits should not be difficult to attract (offer a bit more interest) and he hoped people would be attracted to support the bank as a way to help their local community. Because 'banking is a highly profitable business it is a no-brainer for a local authority to invest by setting up a local bank'. Technically, banking is not difficult, the key to successful community banking is good service based on local relationships. Mike Battersby is one of the team and has decades of banking experience. Vince Cable MP, BIS Minister was seen giving his blessing, he said we need diversity in banking and he wants the government to support such experiments.

On 9th October Bournemouth Borough Council's 'bank' plan was featured. Cathy Jones was turned down by her bank for a £5,000 loan but the Council took her seriously and are lending, and up to £10k loans and £150k mortgages will be available for other local people soon. Liz Wilkinson Executive Director of Finance said 'we will do a job that the banks are not doing at all at present'. Bournemouth is using £15m from reserves (gaining only 0.8% interest), lending it out and over 10 years hoping to profit by £8m. By merely recycling the £15m rather than forming a bank with it as per the above case (£14m>>£100m loans), this is clearly not a normal fractional reserve bank envisaged by Prof Werner. But Council Tax bills will be cut and local business helped nevertheless. 

Wimborne has a group of retired people who hope to lend out sums more efficiently than banks do now, give better rates of interest and plough back profits, giving something back to the community. Martin Tidd said it will not cost millions to set this up.  Dave Fishwick's attempts to do this in Burnley have shown, if the will is there, a local 'bank' can be set up without a full bank licence. However the First Dorset Credit Union  has had its fingers burnt, Rosemary Britten related, after they had lent to new businesses, so even locally-focussed lending is not without the normal pitfalls of banking.

Clearly there is gathering expectation and growing expertise for a completely new type of bank in Hampshire and Local First CIC for one is well placed to bring community banks to birth. 
Posted by Charles Bazlinton, author of The Free Lunch - Fairness with Freedom; Director of Local First CIC

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