A Liberal Democrat solutions to this problem is supplied by Re-banking the UK: How to create a diverse lending infrastructure. This is a report written for the independent New Weather Institute by David Boyle. The work behind it was funded by the Joseph Rowntree Reform Trust and carried out with Susan Kramer before she became a minister.
As the institute says, this is important unfinished business for rebalancing the economy, because:
- The big banks bad at assessing and pricing the risk of lending to small businesses, and are consequently no longer geared up to do so.
- Competitor countries have small banks. In the UK, just 3 per cent of banks are local, 34 per cent in the USA, 33 per cent in Germany and 44 per cent in Japan (and they all have better SME [small and medium enterprise] track record).
- Co-operative and savings banks reduce the drain of capital from urban centres and foster regional equality because of their ability to lend to SMEs. See the recent report on stakeholder banks.
- Our lack of local banks means that our recessions are likely to be deeper than theirs, and our SMEs are at a disadvantage.