London needs a regional public bank to provide loans and finance to small businesses in the capital, Green candidate for Mayor Sian Berry said today.
The big banks have a poor record on lending to small business and, in the wake of mis-selling scandals, take a cautious approach to building relationships and advising customers. If Sian Berry is elected Mayor she pledges to push forward plans for a Bank for London to fill these gaps.
With this project, the Greens will aim to kick-start a community banking revolution in London and emulate the success of the regional banks that support a thriving small and medium-sized business sector in Germany.
The bank would also provide a safe and ethical choice for people who want their savings to help build a more diverse and sustainable economy for London.
Starting with a feasibility study and project board funded by the Greater London Authority, the bank would seek investment from borough and GLA reserves, and will consider issuing bonds to provide more capital. The benefits to London’s economy of a stronger small business sector will result in increased business rates for the boroughs, as well as direct returns on investment for the partners involved.
The bank would start small and grow organically as its deposits and loans increase, and Sian estimates that its initial levels of investment and capitalisation could total just £40 million. This represents just over 0.1% of the balances and reserves of all London boroughs, which are currently £31.3 billion.
Launching the policy outside the Bank of England, Sian said: “This is an idea that small enterprises, which make up 99 percent of all businesses in London, have been crying out for. It’s not healthy for a tiny number of very large commercial banks to dominate the market, and that’s not how they do things in many other European countries.
“Germany has a successful network of public savings banks, which are owned in trust for the public benefit, run by local stakeholder groups, and lend within a specific geographic area. This idea is long overdue for London, and as Mayor I will lead the way in getting this project off the ground.
“In recent years, for very good reasons, banking has become a dirty word because people associate it with greed and enrichment at the expense of the rest of society. It’s easy to forget that bank managers were once the most trusted figures in many communities, and how small and medium businesses have suffered since the financial crash because the large commercial banks have failed in their commitment to support them better.”