Bank of Essex to challenge high street brands

Councillors in Essex have released plans to create their own bank, in a bid to ease local companies' concerns that money is leaving the area, and pioneering a new era of investment in the region

Local firms made complaints to the council that high street banks were taking decisions - such as loans - out of the hands of local branch managers, and into head offices were those making the decisions were unaware of what Essex needs. Given the state of current markets, there has been widespread support for smaller, “community banks”. Both sides of Parliament have been rallying with the FSA to offer aid to the proposed bank, whilst Lord Hanningfield, leader of Essex county council, says it’s essential.

“The situation in Essex for the next year does not look good,” he said. “If the banks won’t help our local businesses, someone has to.”

Lord Hanningfield identifies the model used for county banks in the US as a potential framework by which to work with. Funds may be generated by the EIB in a bid to boost smaller businesses in trouble.

Colin Breed, the Liberal Democrat MP who sits on the Treasury committee, is working on a more radical plan.

“The big banks have become so big over the years that there has been too much power in too few hands. These would be small institutions that would make local decisions for local communities,” he said.

Breed has also proposed dividing the country into a number of segments, each of which would each be allocated a community-banking licence to be auctioned to consortiums. The new banks could also be run by existing credit unions, under Breed’s proposals.

The FSA strongly opposes the idea, after announcing plans to provide aid to existing institutions.

Although not the only plan by the government designed to generate growth in the economy, many believe that looking on more of a microcosmic scale may be the way forward given the number of larger banks who have fallen into liquidation this year.

The nation’s regional development agencies have been attempting to establish around £24m in emergency loans in a bid to support firms’ losses during the current climate.

The establishment of a new bank in the Essex could potentially free up funds in the near and medium term future.