Councils invest in planned bank

But Mid Devon concerned about delays of mutual society

Mid Devon councillors have criticised the lack of progress in setting up a new bank the authority has invested in.

In 2019, the district council – along with Teignbridge, East Devon, West Devon and South Hams – agreed to each put £50,000 into South West Mutual – described as a “regional bank for inclusive growth.”

If it succeeds, they may benefit financially through dividends in the future but risk the possibility of losing their investments should the bank fail.

A number of other investments have also been received by South West Mutual, including a further £470,000 from public and private investors and £350,000 of grant funding.

The company says it is working towards obtaining a banking licence to eventually offer a broad range of services to local people and businesses, such as current accounts, savings, loans, overdrafts and mortgages.

In an update last week, the council’s cabinet was told progress has been slowed due to both covid and legal issues but that its first product – a loan fund for nature friendly farming – is aiming to launch later this year if enough money is raised.

A report also revealed South West Mutual was cited in a recent government ‘levelling up’ document as an “example of the local financial firms needed to drive regional prosperity,” which is hoped will lead it to “attracting and accessing greater funding.”

However, leader Bob Deed (Independent, Cadbury) said he was “extremely disappointed” with progress, claiming: “They seem to have gone to sleep over the last two years of covid despite the fact of [Microsoft] Teams and Zoom.

“I’m also disappointed given that this is not the first mutual bank that has existed within the UK, that they still are trying to establish how they’re going to be established.”

He said the bank was “concentrated on one particular aspect on the agronomy [a branch of agriculture],” when he thought one of the aims when it was set up was to “help the majority of people … to whom mainstream banking may not be that attractive.”

Deputy CEO Andrew Jarrett replied: “It’s probably fair to say I share your frustration, leader….Most of the Devon districts put aside £50,000 – the same as we did three years ago – and we’re all reflecting on the level of progress – or all lack of – at the moment.

“And I think a lot of us were very interested in the wider cross section of people that couldn’t access the normal banking communities.”

Deputy leader Clive Eginton (Conservative, Taw Vale) echoed their remarks, saying when they agreed the funding, the council’s “major interest at that time was to provide a [banking] hub in Cullompton.”

“One would hope that the combined effort of all the authorities within Devon can now bring some pressure to bear to say, ‘Come on. It’s about time you actually got your act together and we start seeing some results.’”

In response, Tony Greenham, executive director of South West Mutual, said it “continues to work towards offering a full range of banking services in the region, and our planned loan fund for nature friendly farming is a practical first step.”

“Progress has been slower that we would like and the reasons for this were clearly set out in our report to [Mid Devon District Council]. We will continue to adapt our strategy in response to challenges and developments in the banking industry.

“Regional mutual banks are a new format in the UK that regulators and investors are unfamiliar with, and we have always been very explicit about the risks involved with this venture. We look forward to meeting with [the council] to discuss their concerns.”