Local banks for local communities

Local banks for local communities

A new challenger has joined the UK’s banking market, Community Savings Bank Association (CSBA).

The association, which is registered as a co-operative society, is working with an established bank, Airdrie Savings Bank, to set up a UK-wide network of independent, customer-owned, regional banks. These banks will support local communities and businesses.

The rationale
“The UK is made up of distinctive regions, each with their own character and priorities,” CSBA states on its website. “Strong regional banks that share those characteristics and have only those priorities is something we’re missing. We used to have it and its time to put it back.”

These banks will “serve the every day financial needs of ordinary people, local community groups, and small and medium sized companies”.

The banks will be taking local savings and using them to create local loans – “storing and safeguarding the wealth of the region in the good times to be available to help in the bad times”.

Removing the barriers
CSBA says it has made it “easier, simpler, less risky, quicker and cheaper for each region to set up its own customer-owned bank”, as it realises that many people are put off from doing this by the complexities and costs.

Legal, constitutional, governance, financial and business plans are ready and available to be used to start the process of applying for a banking license, it says.

Lower fees with financial and legal advisors as well as key equipment suppliers have been negotiated.

And “most importantly”, CSBA is working in partnership with the UK’s only independent savings bank – Airdrie Savings Bank – “and will use its banking DNA and IT systems to create the new banks”.

This tie-up will help to reduce the risks, timescales and costs of setting up a new bank, compared to starting from scratch, CSBA hopes. “It still won’t be easy but it will be easier.”

Regional pull
“We’ve selected the regions to be meaningful, to be small enough to have local identity and to be large enough to support a strong local bank,” CSBA states. The association is calling on people interested in setting up a local bank in the following regions to get in touch:

  • Scotland
  • Northern Ireland
  • North East
  • North West
  • Yorkshire & Humberside
  • Cheshire & Manchester
  • Wales
  • West Midlands
  • Greater Birmingham
  • East Midlands
  • East Anglia & Lincolnshire
  • East of England
  • South Central
  • South West
  • Far South West
  • Hampshire & Sussex
  • Surrey & Kent
  • Outer London
  • Inner London

Once they are up and running, the banks will own and control CSBA.

We’ve seen this before…
The idea is similar to that of TSB when it was first created (Trustee Savings Bank, later Lloyds TSB and now TSB Bank).

Trustee banks were set up across the UK to accept savings deposits from those with moderate means.

The banks’ directors were appointed as trustees (hence the name) on a voluntary basis.

The shares were not traded on the stock market. Depositors had no voting rights or the power to direct the financial and managerial goals of the organisation (unlike with mutually held building societies, for example).

The first trustee savings bank was founded in the Scotland in the early 1800s with its sole purpose being to serve the local people in the community.

In the 1970s and 1980s, the trustee banks across the UK were brought together as the TSB Group, which was then floated on the London Stock Exchange (LSE).

In 1995, TSB merged with Lloyds to create Lloyds TSB. However, as a result of the financial crisis Lloyds TSB was forced by the regulators to divest – TSB was spun off to a separate entity again and floated on the LSE in June 2014.

A Spanish banking group, Sabadell, purchased TSB the following year.

TSB has a domestic network of 630+ branches and 4.6 million customers. Its HQ is in Edinburgh, Scotland.