Tynedale Community Bank seeks to challenge big lenders

Britain’s newest bank plans to fight loan sharks and payday lenders by offering lower interest charges as it aims to give 50,000 people in south and west Northumberland a savings and lending alternative to big banks.

Tynedale Community Bank, the latest so-called challenger bank, opened on Friday. Its average interest charges on loans are expected to be between 0.5 per cent and 3 per cent a month.

The lender is the brainchild of Hexham Conservative MP Guy Opperman.

“People are fed up with banks disconnected from the local area,” said Mr Opperman.

“Banks like the one we are creating in Tynedale will be a local bank that serves the community when too often it has seemed the other way round. We will not solve the banking sector’s problems overnight, but we will be helping to shine the light on a new way of banking in Britain.”

The lender says it will plough any profits back into it. Initially, it will operate as a savings and loans operation. For now, there will be a £15,000 limit on loans, which will be individually assessed.

The bank, fully regulated and covered by the Financial Services Compensation Scheme, will not at this stage issue debit cards. Deposits into accounts can be made via internet banking from other accounts and withdrawals via the Faster Payments Service that all banks use. Savers will be paid an annual dividend.

It is the latest of many operations developed since the banking crisis that began with the near collapse in 2007 of Northern Rock — an operation with headquarters in north-east England that had its roots in the local building society movement before it demutualised and grew aggressively.

The government’s encouragement for a wider range of banking models has helped stimulate the growth in the past few years of challenger banks aiming to break the dominance of the big players. Credit unions have also grown strongly; community banks have been slower to spread.

Since Justin Welby, Archbishop of Canterbury, castigated payday lenders, the Church of England has championed the growth of credit unions, introduced a programme to provide financial support services and set up a task force led by Sir Hector Sants, former chief executive of City watchdog the Financial Services Authority. He has acknowledged that credit unions need more funds to grow and urged the wealthy to lend to them. Mr Opperman has favoured a community bank model, rather than a credit union, to attract middle-class savers.

Tynedale’s strong community spirit may well help the new bank. But findings this week suggest that nationally, despite the criticism heaped on banks by the public, customers remain “stubbornly resistant” to switching. Last month, a competition watchdog report showed the big four — Lloyds, HSBC, Barclays and Royal Bank of Scotland — controlled more than 70 per cent of personal current accounts.