Author: Don Obrien

Bank North secures licence in new wave of regional lenders

UK banks updates

A bank backed by prominent northern investors including Manchester’s local government and Skipton Building Society has secured a banking licence as it looks to lead a wave of new regionally-focused lenders.

Bank North will start lending to small businesses in and around Greater Manchester from October after receiving a limited licence from the Bank of England on Wednesday. It plans to start taking retail deposits next year, after the central bank lifts the last of its restrictions. 

Jonathan Thompson, Bank North chief executive, said the company aimed to be “the antithesis of the heavily centralised UK banking market”.

Britain’s business banking sector is dominated by a small number of nationwide lenders, but Bank North is one of several new companies hoping to break their stranglehold with more local expertise.

“The regions in particular have felt the pain of traditional banks scaling back their frontline teams over the past decade,” Thompson said.

“If you bank with an incumbent, you’re likely to be dealing with someone in a central contact centre, but the UK is complex — each region has its own strengths and characteristics, so that regional empathy is absolutely critical.”

Earlier this year, Birmingham Bank opened its doors after buying a small existing bank, but Bank North is the first to receive a new licence. Others looking to follow suit include Alba in Scotland and GBB in Newcastle.

Bank North plans to open “regional pods” in different parts of the country, with each employing its own staff who will be empowered to make lending decisions locally.

The decentralised model is similar to Swedish group Handelsbanken, which has long been famed for its “church spire” principle — the idea that decision makers should be able to see all their customers from the top of a tower. 

Thompson said Handelsbanken, which has a £21bn loanbook in the UK, was “a good comparison”, but said Bank North hoped to be more efficient by using modern technology systems and not operating physical branches.

Bank North’s backers include Greater Manchester Combined Authority, the venture arm of Channel 4 and Teesside-based entrepreneur Dean Benson. Estonian banking group LHV also invested in a £20m funding round to provide the capital required to secure a licence.

Madis Toomsalu, LHV Group chief executive, said: “Small and medium-sized businesses are essential to a healthy economy and we have learned that to help SMEs reach their goals, a bank should really know their clients’ local marketplace.”

The BoE handed out dozens of new banking licences as part of a push to improve competition following the 2008 financial crisis.

The pace of new licencing has slowed in the past few years as the regulator increasingly focuses on ensuring stability and reducing barriers to growth among existing banks, but a trickle of new businesses have continued to launch.

Last week Kroo, a consumer-focused digital bank, also received a banking licence with restrictions.

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Oliver Bolt

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