Could new community banks change Britain for the better?

A protest against the ECB in 2015. Image: Getty.

In the wake of the 2008 crisis, it rapidly became clear that banking was broken. The global financial sector had captured its own regulators and mis-sold mortgages while spreading the risk across the entire system to such an extent that the global economy crashed nearly overnight.

Andy Haldane, chief economist of the bank of England responded by suggesting that part of the problem was lack of diversity of ownership model. This dovetailed neatly with the work the Royal Society of Arts (RSA) was doing, envisaging the new economy that was clearly necessary to replace the broken old one: modelling, researching and promoting initiatives and policies such as economic democracy, basic income, financial reform etc. Now, over 10 years later several economists affiliated with the RSA are launching or promoting public and community banks.

Community and social banks of this sort are commonplace in several other countries: there are the Sparkassen in Germany, the ICBA group in the US and Triodos in the Netherlands. The Sparkassen banks have very good customer relations relative to the rest of the German financial sector, while an ICBA member bank, the Bank of North Dakota, helped the state weather the effects of the financial crash in a way that just did not happen in other states. Meanwhile the Netherlands’ Triodos only finances projects that aim to make a positive cultural, social or environmental change – particularly financing a transition to renewable energy.  

Tony Greenham, former director of economics at the RSA, is one of the economists promoting community banks as a solution for the UK, and is currently launching South West Mutual, a community bank for the South West region. Greenham describes it as a regional stakeholder bank that is “focussed on a particular geographic subregion of a country, with a dual social and financial mission”. It differs from a normal shareholder bank insofar as it’s accountable to all stakeholders, not just shareholders. In practice this means that anyone with a stake in the bank, which could simply be a current account, gets to vote on how it is run.

Greenham explains that “these banks are quite often successful by collaborating together in networks to share costs and resources”. That is exactly what is happening in the UK. The Community Savings Bank Association is a network of eighteen banks, of which South West mutual is one, which are aiming to establish themselves across the UK, from Scotland to Kent.

Such banks could help the UK address the structures behind a variety of social and economic problems. The city of London and the hegemony of the banks and financial institutions based there, bear significant responsibility for the political and economic malaise we find ourselves in today. Capital flows from the various regions of the UK into London, and the presence of the financial sector there narrows the focus of politicians to a small area in and around London, meaning it receives a disproportionate amount of public spending at the expense of poorer areas.

New community banks might not be able to break the stranglehold of the city over our politics and economics, but they can mount a challenge and show there is another way. They outperform the big banks on a number of metrics such as financial inclusion, lending to small and medium businesses and smoothing out regional inequalities.


That last metric is crucial to the UK which has some of the worst regional inequalities in western Europe. Greenham and others in the new economics scene argue that part of the reason that these inequalities are so bad is because we lack these regional stakeholder-owned banks that can capture and recirculate money within a region and prevent it from flooding back into the capital.

Greenham is not the only one who thinks this. He has been in touch over a period of months with Matthew Brown, leader of Preston Council and pioneer of the much lauded “Preston model”, who is helping to launch the North West regional community bank which is part of the CSBA network. Their regional and community focus, and the ability to retain capital inside an area, means these banks will be a boon to further devolution and projects, like the Preston model, based on radical municipalism.

Some critics – such as RSA fellow, economist and social bank advocate Paul Gower who will be speaking at the Institute for Social Banking’s summer school in Switzerland – have suggested that the smaller scale of these banks can lead to corruption, as has sometimes happened in Germany, if they are not carefully managed. Greenham’s argument is that “all corporate failures are ultimately failures of governance”: he disagrees that the smaller scale makes these banks inherently more vulnerable to corruption. Indeed, he notes, nobody points to the corruption at Metrobank as indicative of inherent flaws at that larger scale of finance.

Supporters of community banks also argue that they could have an impact beyond their size by dragging the larger banks in a more socially oriented direction. Greenham likens it to the role the BBC as a public service broadcaster has played in raising the quality of other channels’ programming, by forcing them to compete with programme designed a social good.

Meanwhile, Gower notes that the big banks are stealing the language of social banks and may find themselves in a situation where their employees have bought into the social purpose: shareholders and directors would have no choice but to comply or risk damaging employee engagement and therefore productivity.

The CSBA network probably isn’t the revolution people in Occupy camps were hoping for 10 years ago. But whether it’s helping finance the retrofitting of houses with passive insulation as part of the zero carbon transition, regenerating regions or rebuilding the high street, these smaller, democratically controlled and socially oriented banks can help address the abject failures of big financial institutions and could form a small part of much wider transformations in the country.                    

 

 
 
 
 

To see how a city embraces remote work, just look to Helsinki

A deeply rooted culture of trust is crucial to the success of remote work. (Sean Gallup/Getty Images)

When I speak to Anssi Salminen, an account manager who lives an hour outside Helsinki, he’s working from a wooden platform on the edge of a Finnish lake. With a blanket laid out and his laptop set up, the sun low in the sky, Anssi’s remote work arrangement seems blissful. 

“I spend around half of my time working somewhere else other than the office,” he says. “I can work from home, or on the go, and I also travel to the Netherlands once a month and work from there.

“The emphasis in my work has always been that it doesn’t matter when or where I work, as long as I get things done.”

For many people around the world, the shift to remote work was sudden, sparked by the coronavirus pandemic. Finland, however, is finding the transition much less significant. Before Covid-19, the Nordic nation already displayed impressive levels of remote working, with 14.1% of its workforce reporting usually working from home. Only the Netherlands has a comparable percentage of remote workers, while the UK lagged behind at 4.7%, and the US’s remote workforce lingered at around 3.6%

Anssi works for one of many Helsinki-based companies that offers its employees flexible policies around when and where they work. That arrangement is in part due to the Finnish capital’s thriving start-up scene. In spite of being a relatively small city by global standards it is home to over 500 technology start-ups. These companies are leading the way when it comes to keeping employees connected wherever they choose to work.

“Our company has a completely location-free working policy,” says Kasper Pöyry, the CEO of Helsinki-headquartered software company Gapps. “All meetings are made available for online participants and facilitated accordingly. Some employees have worked extensively from abroad on a working holiday, whilst others prefer the comfort and social aspects of the well-stocked office. Whatever works for our employees is what works for the company.”

Like Gapps, many Helsinki-based firms are deeply preoccupied with providing the necessary technology to attract talent in a vast and sparsely populated country. Finland has only 15 inhabitants per square kilometre, and companies understand that in order to compose teams of specialised expertise, they may have to seek talent outside of the city. Local governments take a similarly proactive stance toward technological access, and Helsinki offers free, unrestricted, high-speed Wi-Fi from city-wide hotspots, while the country as a whole boasts some of the best coverage in Europe. 

But encouraging remote work isn’t just about optimising the potential of Finland’s workforce – companies in Helsinki also recognise that flexibility has clear benefits for both staff and employees. 

“The idea of a good work-life balance is ingrained in Finnish culture,” says Johannes Anttila, a consultant at organisational think tank Demos Helsinki. “It goes back to our rich history of social dialogue between labour unions and employers, but also to an interest in delineating the rules of working life and pushing towards people being able to enjoy their private life. Helsinki has been named the best city in the world for work-life balance, and I think that this underlies a lot of the mentality around remote work.” 

For Peter Seenan, the extent to which Helsinki residents value their free time and prioritise a work-life balance prompted his move to the city ten years ago. He now works for Finnair, and points to Finland’s summer cottages as an example of how important taking time to switch off is for people in the country. These rural residences, where city residents regularly uproot to enjoy the Nordic countryside, are so embedded in Finnish life that the country boasts around 1.8 million of them for its 5.5 million residents

“Flexible and remote work are very important to me because it means that I don’t feel like I’m getting stuck in a routine that I can’t control easily,” he says. “When I’m working outside of the office I’ll go down to my local sauna and go ice swimming during the working day, typically at lunchtime or mid-morning, and I’ll feel rejuvenated afterwards… In winter time especially, flexibility is important because it makes it easier to go outside during daylight hours. It’s certainly beneficial for my physical and mental health, and as a result my productivity improves.”

The relaxed attitude to working location seems to pay off – Finland is regularly named the happiest country in the world, scoring highly on measures such as how often its residents exercise and how much leisure time they enjoy. With large swathes of unspoiled countryside and a national obsession with the outdoors, sustainability is at the forefront of its inhabitants’ minds, leading to high levels of support for measures to limit commuting. In January, Finland passed a new Working Hours Act, the goal of which was to help better coordinate employee’s work and leisure time. Central to this is cementing in law that employees can independently decide how, when, and where they work.

Yet enacting the new ruling is not as simple as just sending employees home with their laptops. For Kirsimarja Blomqvist, a professor of knowledge management at LUT University, perhaps the most fundamental feature that remote work relies upon is a deeply rooted culture of trust, which Helsinki’s residents speak of with pride. The anecdotal evidence is backed up by data which suggests that Finland boasts one of the highest levels of trust and social cohesion in Europe, and equality and transparency have always been key cornerstones of political thought in the country.

“Trust is part of a national culture in Finland – it’s important and people value it highly,” she explains. “There’s good job independence, and people are valued in terms of what they do, not how many hours they work for. Organisations tend to be non-hierarchical, and there is a rich history of cooperation between trade unions, employers, and employees to set up innovative working practices and make workers feel trusted and valued. 

“It’s now important that we ensure that this trust can continue to be built over technology, when workers might have been more used to building it face-to-face.”

As companies begin to look hopefully toward a post-Covid future, the complexities of remote work are apparent. Yet amid issues of privacy, presenteeism, and social isolation, the Helsinki model demonstrates the potential benefits of a distanced working world. The adjustment to remote work, if continued after the crisis, offers a chance to improve companies’ geographical diversity and for employers to demonstrate trust in their workforce. On these issues, Blomqvist believes other cities and employers can learn a lot from Helsinki.

“People are now beginning to return to their workplaces, but even as they do they are starting to consider the crisis as a jumping point to an even more remote future,” she says. “The coronavirus pandemic has been an eye-opener, and people are now interested in learning from Finland’s good practices… We are able to see the opportunity, and the rapid transition to remote work will allow other countries to do the same.”