George Freeman highlights need for bank reform to support small business
11th May 2012
Over the last twenty years or so something has gone wrong with our banking system. The culture in our small number of big banks seems to have become more interested in trading in complex financial instruments and massive global investment banking at the expense of 'old fashioned' high street banking. The case of Adcocks in Watton profiled by the BBC's Robert Peston recently as an example of a local business damaged by complex interest rate products sold by their bank is symptomatic of a wider problem.
The collapse of the banking boom, the debt crisis and subsequent recession are a wake up call for the need for a banking system focussed on supporting grass roots saving and local businesses. To drive a sustainable recovery we need vibrant local economies which in turn need local banking.
I addressed a breakfast meeting at the Wayland Chamber of Commerce today on the subject of bank support for local businesses. I talked about the potential of Norfolk’s rural economy to play a significant role in helping to rebalance the national economy and I called on the banks to refocus their attention towards supporting a vibrant, rural economy.
The Government’s forthcoming Banking Reform Bill, announced in this week’s Queen’s Speech will implement important measures to separate investment banking from the 'retail' banking. In due course I believe we may need to go further to support local banking by promoting new entrants to the sector and encouraging smaller local banks to be set up.
We should also think about other sources of finance for local businesses. I am particularly interested in exploring ideas for new finance models for local businesses, such as micro finance, where people in Norfolk may have the opportunity to invest their savings in successful Norfolk-based businesses.