The Campaign for Community Banking Services has developed the concept of the neutral “community bank” as a model for meeting the basic banking needs of those members of a community that are most disadvantaged by the closure of local bank branches i.e.

• small retailers and other small businesses
• the elderly
• disabled people
• those without access to private transport
• people on low incomes

and as an amenity/convenience for other sectors of the market, influencing local spend and thereby helping to sustain retail and other services for the benefit of all.

Characteristics of a Community Bank

• Would operate within the ‘umbrella’ of an independent company responsible for licensing, relationship and inter-action with bank principals, operating framework, promotion of concept etc.
• Low cost operation, tailored to local needs
• No bank accounts maintained, nor sales activity, thus no threat to banks
• Local, rather than national, branding to preserve neutrality and minimise re-branding and re-imaging costs
• Representation would take a variety of forms-see later
• In larger communities would complement post offices and in smaller ones could take on basic postal services without conflict

Services provided

In all cases as AGENT of banks through agreements negotiated nationally with Community Banks plc.

• Receipt of deposits/credits (notes, coin and cheques) to bank accounts.
• Receipt of third-party credits e.g. bill payments
• Provision of cash in exchange for cheques, credit and debit cards
• Provision of change
• Currency and travel cheques to order
• Supply and receipt of basic information on behalf of bank principals
• Other services relevant to local needs such as postal, fax and copying
• Availability of/introduction to sources of credit from non conflicting providers such as credit unions and CDFIs as well as generic money and debt advice.

Framework

Ownership

Initially the ‘umbrella’ company would probably be established and capitalised by shareholding principal banks but this should be extended as soon as practicable to include other interested parties such as consumer and community organisations (lottery funding?), charitable trusts, etc to define its independence.

Cost/Income Scenario

Branch network analysis suggests the scheme would be cost neutral for the major branch owning banks and the intention would be for operating costs to be covered as far as possible from :-

• fees charged directly to users
• agency fees similar to inter bank agency agreements and ATM interchange fees
• fees charged to utilities and others for bill paying
• ‘rental’ for interviewing space used by visiting bank representatives
• social use subsidy from government/local government
• sale of ancillary services/products

A validation study in March 2001 by Loughborough University Banking Centre found the community banks model to be “operationally feasible and financially viable”. Similar models operate successfully in the United States .

Campaign for Community Banking Services www.communitybanking.org.uk
50 Roundwood Park Harpenden Herts AL5 3AF Tel/Fax 01582 764760

8 February 1999
(Revised 1 March 2006 )