Essex County Council launched its own banking operation on Friday with a fanfare of publicity and claims of a radical new approach to finance.
However, credit-starved Essex entrepreneurs searching for branches in which to apply for a new loan are likely to be disappointed.
In spite of the council’s claims that the venture is “one of the most significant developments in the governance or financing of Britain for a hundred years”, Banking on Essex in fact consists of a freephone number that directs prospective customers to a call centre in Merseyside operated by Abbey, the UK subsidiary of Santander, the Spanish giant.
Banking on Essex is a brand name for a suite of loans aimed at small businesses based in Essex but designed and run by Abbey. The venture has earmarked an initial £30m ($44m) for new lending, with the council effectively guaranteeing half of any agreed loan that is signed. Profits will be shared equally between the two.
Abbey will apply its usual credit-scoring criteria to the loans, which are aimed at small businesses with less than £25m in turnover and 25 or fewer employees. However, the council will operate an informal credit committee that has the right to appeal against rejected applications and veto approvals.
Though several councils have explored launching banks, the regulatory and administrative hurdles have previously proved prohibitive. For Abbey, the Essex venture is a way to tap into local knowledge to reach customers not venturing into its branches.