Hello! It's been a while since our last update and, along with everyone else, we have needed to navigate the changes brought about by the coronavirus pandemic.
We have just published our Annual Report and are pleased to share the latest on our plans for South West Mutual.
We hope you enjoy our newsletter.
Not so long ago, I had a conversation with an economic adviser to the government who described the idea of relationship-based community banks as a ‘romantic notion’.
Maybe, as a well-heeled urban professional with a comfortable salary and countless fintech companies chasing after his custom, he was unable to perceive any flaws in the UK banking industry.
Perhaps his economics training emboldened him to pass judgement on the question unencumbered by any actual evidence. Sadly, speaking as an economist, this is too often true of my academic discipline.
So, instead, let’s turn to someone who really should know what she is talking about.
Michelle Bowman is the Governor of the US Federal Reserve – the American equivalent of the Bank of England. She does not think that community banks are just a ‘nice to have’; she considers them to be ‘irreplaceable … in responding to the needs of consumers and small business clients’.
In the first wave of help for small businesses in the US during the Covid-19 pandemic, community banks distributed 60% of the financial assistance despite only accounting for 15% of total US business lending. Even in the second wave of finance they punched 3 times above their weight, accounting for 45% of the programme.
Unlike the government economist, Governor Bowman can speak from direct experience: “As a former community banker, I know that few understand their communities better.”
Despite broad recognition of the strong economic and social case for community banks in the UK, creating them from scratch faces considerable obstacles, which we examine in this newsletter.
But as I have written before, support for community banking in the US is not just based on economic evidence. In America’s favourite nostalgic Christmas movie, It’s a Wonderful Life, the hero is a community banker.
Relationships matter. Perhaps community banking is a romantic notion after all, but one that also happens to be an irreplaceable engine of economic prosperity and contributor to thriving local communities.
At our recent Annual General Meeting we updated our members on our progress. As previously reported in our newsletters, the economic impact of the Covid-19 pandemic has been to delay our investment plans. We had to pause activities at three times during the year to conserve funds, but despite this disruption and necessary scaling back of activity, we were still able to submit our draft regulatory business plan and meet with regulators before the end of 2020.
Since then, we have successfully raised additional funds to continue work.
Covid has not been the only issue we need to address. Despite many people recognising the strong economic and social case for community banks in the UK, creating them from scratch faces considerable obstacles. We are currently developing innovations to overcome two challenges: first, mutuals law and, secondly, achieving efficient scale.
As a co-operative society, the key piece of legislation for us is the Co-operative and Community Benefit Societies Act 2014. Unfortunately, we have found that this act has considerable flaws when applied in practice to the business of banking.
Together with our trade association, the Mutual Banks Association, we are examining alternative legal structures better suited to banking whilst maintaining our key mutual principles, including one-member-one-vote. We are appraising these structures in consultation with legal experts in the field, Co-operatives UK and many other stakeholders to ensure that any new mutual legal structure we develop is well tested and supported.
The second challenge is the combination of regulatory overheads, ever increasing costs of addressing cyber security and banking fraud, a tougher investment climate and higher barriers to gaining a banking licence in the current economic climate. Having completed our detailed business planning and costing, and reassessed the prudent levels of capital that a regional bank would need to hold, the bottom line is that the costs of entry to banking are now signficantly higher than our initial estimates three years ago.
We are examining how we can strike the right balance between the advantages of big (in regulation, compliance, technology costs and access to capital) and the advantages of being small (better customer service, local knowledge and lending quality).
We look forward to updating you in the next few months on the solutions we are developing to these challenges so we can get back to progressing our banking licence application and bringing community banking to the region.
It's fair to say that my relationship with exercise throughout my life hasn't always been a positive one. I've started gym memberships many times - all for them to be cancelled after the new year is a not so distant memory.
When I changed my career, I decided that it was time to start looking after myself better, get into shape and to start running. It seemed like something I could do and I was looking for something that would also be good for my mental health. I started on couch to 5k and was inspired by those around me - including our very own Darren's quest for completing the London Marathon.
But it was the loss of my Mum, that really highlighted the need for me to seriously look after myself. It's always tough to lose parents, but when neither of them are around to support, challenge and worry about you - it does change your outlook on life. It wasn't a positive experience for me.
I went back to the beginning and quickly got back to 5k runs. Then I felt the need to push on to the next goal, and the next - within 6 months I had achieved half marathon distance for the first time.
A good friend of mine had talked to me about joining her to run an ultra marathon in Jordan - to which I laughed at the prospect. But it planted a seed. If i didn't truly push myself now - then when would I? If other people did it then why shouldn't I?
Sam asked me again - and I went home and booked the event.
250km over 5 days across the Wadi Rum desert in Jordan. A multi stage event in 30 degree heat in arid conditions.
I have spent the last year training hard. I've had weekly PT sessions with my coach and the aim has been building strength, becoming stronger and eating well. These are not the things that I thought I would spend my time doing during lockdown. I've run my first marathon in under 5 hours and I've complete a 2 day 100km event in July this year in 14 hours.
On the 4th - 8th of October this year I will be heading out to Jordan to take part in possibly the most physically and mentally demanding event there is. It isn't easy - but losing your parents, struggling with your mental health or navigating good financial health isn't either.
I'm supporting Cruse Bereavement Care - a charity that supports people who are grieving or struggling with loss of someone. It's a charity that exists on donations and volunteers. I've raised just over £3000 so far - all of which will go to the Devon branch of this wonderful supportive organisation.
If you would like to support the fund raising then please head to my Just Giving page here.
An influential group of MP’s has strongly endorsed the case for regional mutual banks and called for government support. The All Party Parliamentary Group on Fair Business Banking launched a report, “Scale Up to Level Up” on Tuesday 7th September in the House of Commons with a number of recommendations for ensuring that small businesses in all parts of the country have access to finance. Prepared by independent economists, the report endorsed the benefits of local decision-making and relationship banking for business lending.
The Chair of the APPG, Kevin Holinrake, spoke of the strong performance of regional banks in other countries and in response Paul Scully the Minister for Small Business also mentioned regional mutual banks as part of a broad range of finance providers that could ensure that entrepreneurs everywhere have the chance to build their businesses.
In his role as a director of the Mutual Banks Association, Tony played a key role in building awareness and support for the regional mutual banking model, giving evidence to the APPG’s enquiries and speaking at the report launch.
We were delighted to welcome founder members to our (online) Annual General Meeting on 18th August.
It's always a positive experience hearing the enthusiasm about the project and aims when we spend time with our members.
You can now find details of our Annual Reports and Accounts for the year ending 31st March 2021 on the site.
Click below to view them now.
If you'd like to get the newsletter straight into your email inbox - complete the sign up below.
South West Mutual Limited is Co-operative Society 4451 registered under the Co-operative and Community Benefit Societies Act 2014
Devonport Guildhall, Ker Street, Plymouth, PL1 4EL Tel: 01752 936906
* Disclaimer: We intend to apply for a banking licence to the Prudential Regulation Authority and Financial Conduct Authority. We are not yet authorised as a bank so please do not take any information on this website as an invitation or inducement to apply to South West Mutual for any banking services or products.
Copyright © 2020 South West Mutual