The long road to establishing the Bank of Birmingham
Helping businesses and families through the recession by establishing a Municipal Bank of Birmingham is a big idea. But there is a long way to go before the first customers walk through the doors, as Public Affairs Correspondent Paul Dale reports.
Almost three months have passed since Birmingham City Council leader Mike Whitby announced plans to establish a municipal bank as a means of helping businesses and families hit by the credit crunch.
During that time, the council’s brightest lawyers and accountants have been working flat out in an effort to put some flesh on the bare bones of Coun Whitby’s vision.
They have discovered that pushing forward with a ground-breaking project of such complexity is an immensely difficult task.
It is by no means clear whether the council has sufficient legal powers to run a bank, and if it does there is uncertainty about the precise ways in which a municipal bank might operate.
The most pressing problem, according to briefing notes prepared by senior council finance offices, is whether an Act of Parliament will be needed to give Birmingham permission to proceed.
If that is the case, the timetable for getting the bank up and running is likely to be extended by many months, perhaps even years.
A paper presented to a scrutiny review group formed to examine the scheme warns: “Setting up a bank may require primary legislation and would need to take account of competition law.
“There is no or no sufficient in-house legal expertise on these specialist areas of law so external support would be required.
“It is not clear from the above what timescales would be involved in establishing a bank. Also the fact that despite publicity to the contrary, no council has actually done this yet, suggests that it is not a straight forward process.”
There are certainly European Union competition laws to consider.
At least one influential West Midlands business leader has warned the council privately that any perceived favouritism given by a public body to a municipal bank could invite legal action from the country’s stricken banking sector.
The review group paper states: “Any public funding needs to take account of the state aid rules and in particular funding provided by way of grant.
“Whilst the objective of the state aid regime is to create a level playing field across
