Because of the scale of the merger between HBOS and Lloyds TSB to form the new Lloyds Banking group, few will have given thought to the fact that sitting in a drawer in an HBOS office in Edinburgh are the deeds to the Bank of Wales that was swallowed up by the Bank of Scotland 20 years ago, before it, too, succumbed to the consolidation virus. Could this be the moment to ask for them back?
It is now 38 years since the Bank of England gave its permission, on 9th February 1971, for Sir Julian Hodge to register the title ‘Commercial Bank of Wales’. The word ‘Commercial’ had been inserted to avoid giving the impression that a new national bank was being created, and may have had something to do with regulatory nervousness about the whole venture. James Callaghan’s friendship with Julian Hodge was thought to have been of crucial assistance.
It wasn’t until 1st December 1986 that the bank was allowed to drop the word ‘Commercial’ and start trading as simply the Bank of Wales. Despite the change of title it remained primarily a commercial rather than a retail bank, with only five offices – in Cardiff, Newport, Swansea, Carmarthen and Deeside.
It always operated at a modest scale, and few were surprised when it was eventually bought out, although it wasn’t until September 2002 that the Bank of Scotland decided that the Bank of Wales should cease to trade under that name. Four years later, on 14 December 2006, it was finally re-registered from a plc to a private dormant company.
Why bother, you might reasonably ask? Who would want the title deeds to a dead bank these days? And even if the deeds could be prised from the HBOS vault, what would anybody do with them?
As a sign that optimists survive even in these gloomy times, the magazine Business Week recently pointed out – under the headline ‘This may be the ideal time to start a bank’ – that no fewer than 72 new banks opened in the US last year, although the number was down from 127 the previous year. Many of these small, locally focused new banks – in places like Alabama, New Jersey and Massachusetts – have been concentrating on small business loans from which the bigger banks have retreated.
Ben Levisohn of Business Week put forward a simple argument: “Unlike existing banks, those born after the bust don’t have bad assets threatening their books and earnings. This frees them up to make fresh loans. And banks can do so at a tidy profit right now because they an borrow money at ultra-low interest rates and charge borrowers hefty premiums.”
Britain, some will say, let alone Wales, is not America. The notion of local financial institutions has been dead for a while in his country. It is hard to see even the wealthiest of Welsh people chancing their arm on such a private venture. By now the Hodge financial interest is centred on a successful niche bank – the Julian Hodge Bank. Sentiment alone will not revive a Bank of Wales.
But something else is stirring in the forest. Local authorities have started to talk of opening local banks as a way of getting credit flowing in their own backyard. Peter Mandelson, the business minister, is talking of turning post offices into banking centres. In Scotland, there is a debate opening up about the borrowing powers of the Scottish Parliament, or rather its current lack of borrowing powers.
In this new situation the title Bank of Wales might have a real future value for society and government in Wales. After all, it is a name that has too much of a public resonance to languish as a discarded private pawn. It should be regarded as a Welsh national asset.
The issue is, rather, about the best use we could make of it. That is a matter beyond my expertise, but a number of options have been put to me by well-informed people in recent days:
• a ‘people’s bank’, a kind of super-mutual at arm’s length from government and perhaps retailing through post offices;
We might at least try to find a model that enabled us to generate some Welsh self-help focused on small business development, housing improvement, public transport, or rural development, not to mention building indigenous financial expertise.
Since the British Government owns 43% of the Lloyds Banking Group, perhaps now is the moment for Rhodri Morgan to ask Alastair Darling to secure the deeds and make a gift of them to the Welsh nation. It would be a longer-lasting legacy project for the First Minister than the Ryder Cup.