What do we need to set up a community bank?

Setting up a community bank takes a bit of effort but it’s entirely achievable.


There are a number of models that can be used to create a community bank but the model chosen here is the Community Savings Bank Association (CSBA) model (http://www.csba.co.uk/). The CSBA model is registered and approved with the Financial Conduct Authority (FCA). The model has also been endorsed by the New Economics Foundation (http://neweconomics.org/), a people-powered think tank; and by the Royal Society for the Encouragement of Arts, Manufactures and Commerce (https://www.thersa.org/), a fellowship that inspires, supports and enables new solutions to address the problems of the 21st Century.


The CBSA model forms the core constitutional documents which encapsulate all the principals, powers and obligations needed by a community bank. In other words, the model provides the A-Z of banking expertise and knowledge needed to set up a community bank, leaving Our Money to get on with building the campaign.


The complete business model needed to set up a community bank, and that can be secured through the CSBA model, are:

  

  • The right people: The community bank will employ staff with the right skills and expertise, people who have solid experience in the financial sector and who believe in the ethos of community banking and democratised finance. Anyone going for the more senior positions will have to be approved by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).


  • A banking licence: The community bank will need a licence from the Bank of England which has approval from the PRA and the FCA. The license can be obtained through the mobilisation route where the FCA would consider the bank under the category of a small specialised bank. The people at CSBA provide the help needed to obtain the license and already, three other community bank campaigns in England have applied for their licence under the CSBA model.


  • A legal structure and corporate governance framework:  The community bank has strict rules it must abide by if it’s to actually be a community bank e.g. owned and managed by the members; local regional focus; productive, rather than speculative, lending and investment; not to be sold into private ownership; etc. To ensure these rules are followed and not deviated from, they’ll be written into the bank’s constitution, a legally binding document, with a corporate governance framework supporting that. The bank will be registered with the FCA under the Co-operative and Community Benefit Societies Act 2014.


  • Start-up capital: £20m is needed to get the community bank through the licensing process and fully operational. This will be raised by issuing shares, at £15 each, that members can buy. It may also be raised by securing financial commitments from public bodies such as councils. To put this sum of money into perspective, £20m is equivalent to the cost of a mile-and-a-half of dual carriageway.


  • Complete banking software system:  The community bank will avail of CSBA’s banking software which provides the complete IT system required for a fully functioning bank. The bank will have online 24/7 services and a mixture of manned and automated branches. Routine customer transactions will be automated and supported by video links to a central customer centre—this is similar to the automated centres used by the German Sparkasse. The automated functions provided include cash withdrawal, paying in (cash & cheques), bill payment, account queries, statement   printing, account management and safe deposit boxes.


  • Product and service line: The community bank will offer all the services you’d expect from a modern banking service. The products offered will include a competitive range of current, savings and loan accounts, together with online capability. The bank will be able to earn revenue from the transactions of non-members e.g. non-members withdrawing money from one of our ATMs.


  • Ongoing role of CSBA: Once the community bank is operational, CSBA will provide central services such as internal audits, IT development and product development. They will also help us ensure we operate in accordance with the rules of community banking.


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