Today I launched plans to set up a regional public Bank for London to provide loans and finance to small businesses.
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.
The Bank for London could fill this important gap and be a safe and ethical choice for people who want their savings to help build a more diverse and sustainable economy for London.
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.
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 so we estimate the starting investment could be just £40 million, just over 0.1% of the balances and reserves of all London boroughs, which are currently £31.3 billion.
Our briefing expands upon the reasons why this idea is needed in London, and explores how our next Mayor could go about taking a project to create a Bank for London forward and how this could help make London’s economy stronger and more resilient.
And watch my video from Elephant and Castle, launching my other policies for small businesses:
The banking market in other European countries is very different to here in the UK, where we see a small number of very large commercial banks dominating the market, with a range of public, mutual and co-operative banks (stakeholder banks) and credit unions taking a much greater share of banking services.
In the UK we therefore have a real gap for quality, personal, locally focused small business banking, which the GLA and London’s boroughs can help fill by setting up a Bank for London.