Financial Services Bill Amendment: The Case for Regional Mutual Banks

Today (1 March 2021) is day 3 of committee stage for the Financial Services Bill in the House of Lords. I am putting forward an amendment to the bill which could positively impact the levelling up agenda.

If accepted, this amendment could:

Dramatically increase financial inclusion for our superb SME businesses.
Develop an effective ‘patient’ capital ecosystem across the UK.
Reignite the positive reality of ‘friendly societies’ and mutuals.

The amendment in full:

Insert the following new Clause—
“Regional mutual banks
(1) The Secretary of State must report to Parliament, within 3 months of the date of the passing of this Act, on existing barriers to the establishment of regional mutual banks in the United Kingdom.
(2) The report must consider—
(a) current capital adequacy requirements;
(b) other limiting features of the current regime;
(c) regional mutual bank structures in jurisdictions outside the United Kingdom and the adoption and adaptation to the United Kingdom of best practice; and
(d) the use of dormant assets as seed capital for the establishment of such regional mutual banks.”
Amendment 126, Lord Holmes of Richmond, Committee Stage Day 3, Financial Services Bill, House of Lords, 1 March 2021.

The amendment would cause the consideration of current capital adequacy requirements. Are they fit for what we want, across all potential financial services models?

There is much to learn from other jurisdictions, not least Germany where regional mutual banks are well established.

Public finances are clearly tight right now. Therefore, to seed such regional mutual banks, dormant assets could be so gainfully deployed.

Finally, as we build back out of Covid, there could barely be a better moment to consider such structures as regional mutual banks. Built in our great communities, with close customer connection, crucially, with an interest, a stake a part in all those future economic, social, individual and organisational journeys and -as yet unwritten-stories of success.

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