New wave of mutuals aim to shake up UK banking sector

A network of regional, mutual banks will launch across the UK, beginning in London and the south-west. Jules Peck explains why the time is right for an imaginative leap in banking

Banking is in trouble. Low levels of trust, a failure to serve the poor and small and medium-sized enterprises, an ignorance of sustainable development, and public bailouts maintain the assumption that the industry is too big to fail. It can’t be much fun to introduce yourself as a banker around many dinner tables.

Trust ought to be key to banking and yet it’s not something that springs to mind when one asks the average customer to describe a key characteristic of banks.

According to a recent survey of 35,000 people by the Reputation Institute, UK trust in banking has only just returned to pre-Northern Rock levels. Hardly surprising when the misconduct fines and charges among big banks since 2011 amount to £66bn.

Then there is the question of ‘the unbanked’, those whose needs just aren’t served by the big banks – there are over 1.7m people in the UK without a bank account and SMEs are also shockingly poorly supported by our banks compared to their continental equivalents.

And we don’t have any banks which really seem to be interested in helping to create a more sustainable form of prosperity based on regional, decentralised, ethical and sustainable forms of energy, transport, food, farming and housing.

Across Europe a host of community and state-owned banks like the Landesbanks, JAK Bank, agricultural co-operative banks, and the Mondragon Caja Laboral, all serve such needs. But, in comparison, the UK is a neoliberal winner-takes-all desert.

Unlike countries across Europe where co-op banks are thriving, and places like Canada and the US, we don’t have, nor in fact have we ever had, any customer-owned, mission-led, sustainability-orientated and regionally focused banks.

Thankfully, 2014’s Co-operative and Community Benefit Society Act has now clarified that UK co-operatives can now legally trade as bank ending the big mainstream banks monopoly.

Community-bank-in-a-box to launch

This new act has helped kickstart an exciting new movement in which a group of innovators with over 150 years banking experience between them have set up the Community Savings Bank Association (CSBA) and developed ‘community banks in a box’. CSBA is supported by the RSA and a host of individuals.

Their vision of regionally focused, mission-led Community Banks are set to disrupt the banking sector and put sustainable development, people and planet, back at the heart of the UK investment sector.

This CSBA development has inspired me to get involved, as has my work as a research fellow with the Democracy Collaborative’s Next System Project in which I’ve seen how socialised forms of banking having been the lynchpin to the development of ‘new economy’ systems already emerging in places like Emilia Romagna, where the social economy equates to 50% of the economy, and the $40bn strong Quebec social economy.

So I’m joining the CSBA effort and starting a community bank where I live. In a way I’ve jumped sides. I spent many years working with NGOs campaigning against banks and other players in the finance sector. Now I’m starting a bank myself! I guess it’s a case of if you can’t beat them, join them (then beat them).

My vision is that banks like the one we are founding, can play a key role in being anchor institutions for a Commons Transition in regional and national economics away from our current system of ‘socialism for the rich and capitalism for the poor’ to a participative economic democracy where we are all vested and invested in our future.

Avon Mutual will build community wealth and mutual trust

Our bank here in Bristol, Bath, Wiltshire, Somerset and Gloucestershire, Avon Mutual, will take local savings and using them to create local loans. We will serve the everyday financial needs of ordinary citizens, local community groups, and small and medium sized companies. We aim to become a key anchor institution in shifting our region’s economy to what I’d call a ‘new economy’ focused on promoting sustainable and equitable prosperity for our region.

We are working with brilliant people like Tony Greenham, a leading light on the future of finance, and deputy chair of our sister bank the Greater London Mutual.

Our region has a host of ethical finance experts as well as institutions like Bristol and Bath Regional Capital, Bristol Credit Union, Wiltshire Savings and Loans, Bath and Bristol Community Energy and Bristol Pound, which already make up an ecosystem of community wealth building alternative investment innovations that we plan to add to and support.

In our bank every member gets a vote to influence how we will operate. We want to help herald in a new economic democracy. With a series of local branches and customer service and relationship-banking at our heart, we aim to know our customers and their needs intimately so we can support them and lower the risk to the bank, allowing us to be more successful and return more wealth to our community and members.

We plan to have raised our £20m initial capital and to have staff recruited and a banking license within two years. Within a few years we aim to have a loan book approaching £500m. We have a fantastic board and advisory board coming together and support from our local authorities, mayors, business communities, entrepreneurs, NGOs and community groups.

We hope our bank will be part of kickstarting a wider movement across the whole UK and an imaginative leap in the way we all expect banking to be done. Maybe all banks should be community owned banks. Who knows – maybe some day they will be.

• Find out more about the CSBA here.