A bank in which a North West local authority has taken a 33% stake could launch as early as the summer after clearing a major set of regulatory hurdles.
In January, Warrington Borough Council approved plans to invest £30m to help create a joint venture, Redwood Bank.
Now the bank has entered its “mobilisation phase” after receiving a banking license following approval from the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA).
Danny Mather, corporate finance manager at Warrington, told Room151: “Redwood Bank has been granted a ‘restricted banking licence’ which means that it can currently only raise deposits up to £50,000 in total.
“It will therefore now go through what’s called a ‘mobilisation phase’.
“During this phase, the bank’s IT systems and associated infrastructure will be introduced-to enable it to then be able to subsequently offer its lending and deposits products to SME customers.”
In addition, Redwood Bank will also recruit further staff and finalise its policies, procedures and processes.
Mather said: “It is anticipated that this will take a number of months, with the objective being to complete mobilisation and then open the bank sometime during this summer.”
During the mobilisation phase, the banks’s business development teams will talk to brokers and customers about potential lending deals that may be possible post-launch.
When the bank is ready, further approval will then be required from the PRA and FCA to remove the current restrictions on its banking licence, and remove deposit limits.
Warrington Borough Council’s executive board member for corporate finance, Russ Bowden, said: “This is a really important deal for Warrington and part of our commitment to innovative financial approaches which support growth and sustainability in the borough.
“We see our stake in the company as an investment in our future. It’s about investing in our local economy, helping businesses thrive and generating income which will enable us to protect council services.”
The bank is now expected to announce a number of senior board-level management appointments over the coming weeks as it gears up for launch.
It will have a northern regional office based in Warrington. The council hopes the bank will allow it to help more businesses than by authorising loans directly.
The Warrington deal is understood to be the first time a council has used treasury money to invest in a bank.
The structure has been influenced by Cambridge and Counties Bank, established in 2012 as a joint venture between University of Cambridge’s Trinity Hall and Cambridgeshire Pension Fund.
Jonathan Rowland, co-founder of Redwood Bank, said: “With the opportunities being created by Brexit and the financial services sector’s rehabilitation, this is a great time to be entering the market.
“This is a unique public-private partnership that heralds a return to community banking in the UK.”
