NatWest is accused of ‘banking on the cheap’ with mobile unit in Sidmouth | Latest Sidmouth and Ottery News - Sidmouth Herald
Barclays Bank announces Sidmouth branch to close in November | Latest Sidmouth and Ottery News - Sidmouth Herald
Sidmouth to lose another bank following Santander announcement to close 140 branches | Latest Sidmouth and Ottery News - Sidmouth Herald
And this has an impact on the local economy:
Futures Forum: More high street banks to close in Devon >>> "If you don’t keep a town’s pubs, restaurants, shops – and, yes, its banks – a town starts going into decline."
There are possible alternatives - with Exeter showing interest:
Futures Forum: A Bank of the South West > to serve the everyday financial needs of ordinary people, local community groups, and small and medium sized companies >> Tony Greenham in Exeter: Thursday 26th October
Futures Forum: The Bank of the South West > Tony Greenham's presentation from the RSA in Exeter
And Ottery too:
Futures Forum: Community banking for the South West comes to Ottery
Meanwhile, the District Council are very interested in supporting the nascent South West Mutual bank, as the agenda from Wednesday's cabinet meeting shows:
Supporting the formation of South West Mutual (Pages 123 - 126)
This report outlines a proposal from South West Mutual to form a regional bank. Initial funding is being sought of £500,000 through the issuing of Founder Shares, local authorities have been approached to be part of this early investment in order to help set up a regional bank.
http://eastdevon.gov.uk/media/2749288/060219combinedcabinetagendapublic.pdf
The minutes confirm the council's support:
Supporting the formation of South West Mutual
The Strategic Lead Finance presented the report which outlined a proposal from South West Mutual to form a regional bank. Initial funding was being sought of £500,000 through the issuing of Founder Shares, local authorities had been approached to be part of this early investment in order to help set up a regional bank.
The report asked members to consider an investment of £49,995 which purchased 3,333 shares. These shares would receive a dividend of 7.5% once the new bank becomes profitable and this dividend would rise over time if South West Mutual was successful. Founder Shareholders would also receive an additional 2 shares for every share held. The combination of these two returns generated an estimated internal rate of return of approximately 20% per annum.
It was emphasised that that there was a risk that there would be no financial return and the entire initial investment could be lost if the plan to launch the mutual was unsuccessful or a banking licence was not granted. Accordingly the report did not recommend investing in the Mutual with the purpose of deriving a financial return as the proposal was deemed too much of a financial risk. Members were asked to consider other benefits to be obtained from supporting a regional bank and if supported it was proposed that the Council sets aside £49,995 from the business rate pilot monies in 2018/19 in a reserve that if necessary this investment could be written off against.
Discussions included:
Concerns over risk and whether ratepayers would be happy with this
The social benefits outweigh the risk
This was a mutual bank who would also be looking at private investment rather than just local authorities
Many market towns across the district now did not have a bank
Branch networks were costly and risky
Some banks now allow cheques to be paid in through the use of their apps
Funding should come from Revenue or Investment accounts of the Council not business rates as a Social and Environmental issue
Many people cannot access mobile banks hence the need for a new bank
This was offering a face to face service which traditional banks were lacking. Banks need to support small businesses
People need to access their revenues and benefits – not everyone could have a bank account as they did not meet the criteria
Could this be used by the Council as its own bank?
This would help all people
RECOMMENDED:
1. that an investment of £49,995 to support the formation of South West Mutual with the equivalent sum to be set aside in a reserve from the 2018/19 business 100% rate pilot gain, in order to back the investment risk, be agreed and,
2. (If 1 approved) Delegated authority be given to the Strategic Lead for Finance to conclude the ordinary share acquisition.
REASON: The reasons and purpose of setting up a South West Mutual Bank meets a number of priorities in the Council’s Plan, included within encouraging communities to be outstanding and developing an outstanding local economy.
http://eastdevon.gov.uk/media/2760135/060219-cabinet-mins.pdf (page 11)
The theme has been taken up by the wider media:
East Devon set to invest £50,000 in setting up a local bank for local people
South Hams and West Devon council have agreed already to invest £50,000 to help support the formation of the bank, and on Wednesday night, East Devon District Council’s cabinet agreed to recommend to full council investing in the bank.
Daniel Clark Local Democracy Reporter
8 FEB 2019
East Devon District Council looks set to join South Hams and West Devon councils in setting up a local bank for local people.
The bank, known for now as South West Mutual, would be owned by its members and would pursue only what is in the customers’ best interests.
The new venture would be the first ever high street bank dedicated to Cornwall, Devon, Somerset and Dorset and unlike national financial institutions, the Mutual would not engage in financial speculation, or pay huge bonuses to staff for selling financial products.
South Hams and West Devon council have agreed already to invest £50,000 to help support the formation of the bank, and on Wednesday night, East Devon District Council’s cabinet agreed to recommend to full council investing in the bank.
Simon Davey, the council’s Strategic Lead for Finance told councillors on Wednesday night that was a risk that there will be no financial return and the entire initial investment could be lost if the plan to launch the mutual is unsuccessful or a banking licence is not granted. But he added the council proposed to sets aside £49,995 in a ringfenced sum – the same value as the investment – to cover the risk, and that it should be looked as something that will have economic and social and environment benefits.
Mr Davey said: “This will help make banking more local, provide branch facilities in rural locations, recycle the savings of local people and businesses back into the regional economy, promote financial inclusion and improve access to credit for small and medium sized business. The ethos behind the new mutual is consistent with many aspects of the Council Plan including an important promise that any individual in the District can have an account, currently some individuals are excluded by the high street banks for differing factors which can make life extremely difficult for those individuals.”
Mark Williams, the council’s chief executive, said: “This is extremely high risk which is why we are ringfencing a road, but the social and environmental benefits justify the risk. If we do succeed and South Hams and West Devon have already made the leap of faith, it may help with the problems that small businesses are facing and there will be a face-to-face service for small business in towns.”
Tony Greenham, founding director of South West Mutual, had previously said that the regional bank would run seven staffed and 21 satellite branches across Devon, Cornwall, Dorset and Somerset.
The idea drew support from councillors, with Cllr Jill Elson saying: “Many of our small towns have no bank, and this will operate as a bank. Businesses have to travel god knows how many miles to deposit money at the moment.”
Cllr Tom Wright said: “The bank will guarantee a bank account for everyone. It won’t give loan or credit but will give them a bank account, and some people for whatever reason cannot get a bank account. This bank is aimed at assisting businesses and will enable fund to be raised in the South West to enable business to spend and develop in the South West.”
Cllr Alan Dent added that Budleigh Salterton has recently lost its last bank, but when Lloyds and Natwest run a mobile bank three times a week there are constantly queues. He said: “The service provided to rural communities sounds extremely beneficial, irrespective to what happens with businesses.”
Deputy leader of the council, Cllr Phil Skinner said that he was sent a cheque this week and had to think where he could go to put the cheque into the bank, with the nearest being Exeter or Sidmouth.
He said: “The small businesses of today have lost the connectivity they have with banks. This idea does that part of the business, and there are also people who we have to give benefits to and we cannot do through the normal process as they don’t have a bank account. This will deliver on the sectors of society that the banks today are failing as every time I go into a bank there is always a queue, so people want the face to face service this will offer.”
Concerns were raised though that there was a risk the council could lose all the money. Cllr Steve Gazzard said: “I understand the principles of going down this road but what concerns me is the risk around it. We are investing £50,000 but there is risk you may not get any of it. In the realms of the budget, it is not a lot of money, but to people outside, it is a huge amount.”
Cllr Brian Bailey added that the investment was so high risk that it doesn’t meet the council’s own requirement for a financial investment.
But the cabinet agreed unanimously, with one abstention, to recommend to full council to approve an investment of £49,995 to support the formation of South West Mutual. Mr Greenham will also do a presentation for councillors prior to that meeting.
No branches are likely to open until 2020 at the earliest and that the company is still working to secure £20m capital and £500,000 towards its banking licence application.
East Devon set to invest £50,000 in setting up a local bank for local people - Devon Live
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