COUNCIL and universities across Hampshire hope that an £8m investment into a community bank will boost the local economy – and see it survive any future credit crunch – despite authorisation to operate as a bank not yet awarded.
Portsmouth City Council is one of the eight founding investors in the Hampshire Community Bank and is set to contribute £5m as a loan, totalling 62 per cent of the shares.
To date the investors, including Eastleigh Borough Council, Winchester City Council, the University of Portsmouth and the University of Southampton, have each released half of the funds that were agreed.
Until bank authorisation is granted the company must be known as Hampshire Community Bank Ltd and is restricted to only making commercial loans to businesses, rather than offering banking services to individuals.
But Portsmouth City Council believes the project will benefit the city.
A council spokesperson said: 'It's primary purpose is to support the local economy (mainly through lending to small and medium enterprises) and therefore protect and grow employment and prosperity in the area.
'It will offer the full range of banking services to individuals and businesses, starting initially with savings accounts, loans to businesses and mortgages.'
They explained how community banks differ from others and added: 'The bank is "not for profit" with any surpluses distributed between the founding investors (e.g. Portsmouth City Council and the other public sector investors) and grants to the local area on a 50/50 basis.
'It will be owned and run by local bodies for local people. It's main purpose is to create a strong and sustainable local economy that is more resilient than conventional banks to a "credit crunch"
'The bank cannot ever be taken over or sold and there are no "bankers’ bonuses".'
'Portsmouth City Council is one of eight founding investors in the Hampshire Community Bank - this means that it will share in the bank's profits as well as holding the majority voting rights for the distribution of grants to deserving causes in Hampshire.'
Currently the bank is set to pay the council six per cent interest on the £5m loan over a 10-year period.
The bank already has a loan portfolio for lending of over £1m to 13 different small and medium sized companies mainly in the Winchester and Eastleigh areas.
It is likely the bank's authorisation will be considered next year by the Bank of England via the Prudential Regulation Authority and the Financial Conduct Authority.
Plans are under way to set up a premises in Winchester.