How it’s going

I’m Chair of Cambria Cydfuddiannol Ltd, the Co-operative Society that was formed specifically to develop Banc Cambria, and this is my personal take on the how and why I’m involved with this project. It’s been a long road so far – setting up a co-operative/mutual bank was never going to be easy, but it is going slower than any of us thought.

However the big news is we are now working with the Monmouthshire Building Society to drive this project forwards, and we’re planning for a launch in 2023

Banc Cambria – a bank with a mission

Why are we doing this?

The Welsh Economy is not healthy. West Wales and the Valleys was the only part of the European Union that qualified for three rounds of EU Structural Funds, as the problems we suffer are both chronic and systemic, and the work done so far has not brought about a cure.

Welsh GDP per head is very low. In 2018 it was £23,866[1], which ranked Wales 54th in the world, the same as Romania (2019), and the island of Anglesey at £16,034[2] (2018) ranked 87th, the same as Montenegro (2019). For comparison, Luxembourg at £85,861 (2019) is ranked 2nd.

Our economy, once dominated by UK nationalised industries, has now become dominated by outside commercial interests, largely because our economic development policies have been focussed on inward investment, the inevitable consequence of which is foreign ownership of our industries. Successive UK Governments have been seduced by the monetarist policies of Milton Friedman and the laissez faire capitalism of Ayn Rand, leading to austerity and the privatisation of much of the state. Sadly, they have given up on the proven policies of John Maynard Keynes[3], forgetting that his advice rescued us from the Great Depression of the 1930’s.

Today the need is particularly strong for a redirecting of our economic policies towards developing an economy more rooted in Wales, more sustainable, and with a clear sense of social purpose. We need to address the issues of wealth redistribution, physical regeneration, social & economic development, and the environment.

A key part of this reshaping of economic policy is the creation of a Banc Cambria – an independent, locally based, co‑operatively governed, mutually owned Bank that will enable the Welsh Economy to be strengthened; to become more resilient and more sustainable. This, in turn, would provide more jobs, whilst helping to fill the financial access gap created by the closing down of local commercial bank branches in towns and rural areas across Wales.

Banc Cambria will have a clear set of principles to guide its policies, and to this end we would also look to examples elsewhere, such as the Quebec Solidarity Fund, which although not a Bank, has clear ethical and social values[4] which govern how it invests its funds.

Banc Cambria will provide a number of things that existing revolving loan funds cannot. Currently there is nowhere for individuals and/or corporate bodies to invest in the Welsh Economy. Banc Cambria will provide that, capturing our own money to prevent it leaving Wales.

But it can also actually create money here in Wales, as the Bank of England explained in its quarterly journal in 2014.[5] It’s a long and complicated explanation that the magic money free really does exist, and how it operates.

Banc Cambria will provide Welsh Government, Local Authorities, and the rest of the Welsh public sector with an excellent investment opportunity. It would also provide a reliable and sympathetic source of investment capital to Small and Medium Enterprises (SMEs) across Wales, and as its customers would be part of its ownership and governance, would adapt to their needs rather than the needs of external shareholders.

Wales lacks financial infrastructure

At present, Wales lacks money supply infrastructure owned and controlled within its borders. By creating money and recirculating wealth within the Welsh Economy, Banc Cambria will be a key agent in developing the resilient and sustainable economies and communities envisioned in Welsh Government policies and strategies such as the Wellbeing of Future Generations Act and Prosperity for All.

The Welsh Government commissioned a report[6] in August 2017 from the then Public Policy Institute Wales (PPIW)[7]to look at our proposals, and this concluded that a fully‑fledged, publicly owned Bank could deliver a range of benefits including:

  • Better access to investment for SMEs and regional economic development
  • Reduced dependence on private sector capital
  • The ability to create and retain jobs in Wales
  • The ability to “create money” rather than recycle funds

The report noted that the power to “create money” is restricted to deposit-taking Banks which can leverage their capital by a factor of 10:1 or more and could be of real benefit to Wales.  As the Bank of England’s 2014 Report, Money Creation in the Modern Economy [8] explained, the widespread view among the public and politicians as to how money is created is wrong.

“The reality of how money is created today differs from the description found in some economics textbooks: Rather than banks receiving deposits when households save and lending them out, bank lending creates deposits ……. Whenever a bank makes a loan, it simultaneously creates a matching deposit in the borrower’s bank account, thereby creating new money.”

Today over 97% of money in the UK is created in this way as loans by private sector banks. As the PPIW[9] report highlights: while co-operative and publicly owned banks that take deposits are not a feature of UK Banking, they are widespread in Germany, and, internationally, about 40% of banks are publicly or co-operatively owned. The PPIW report has shown the potential and the benefits being delivered today for citizens, communities, small businesses, and Governmental bodies by public banking from Hamburg in Europe to North Dakota in the USA.

How it all began

Cambria Cydfuddiannol Ltd was incorporated in February 2019 as a Co-operative Society using Community Savings Bank Association (CSBA) model rules. The founders had already been active on this project for around 5 years, working with the Public Banking Institute (USA), the Public Bank for Wales Action Group (PBWAG), the Community Savings Bank Association (CSBA) and the Royal Society for the Arts and Science (RSA). The groups had looked at models across the world, including the Bank of North Dakota, the Sparkassen and Raiffeisen Banks, and Co-operative Banks such as Rabobank, Laboral Kutxa and Credit Mutuel.

We concluded that a co-operative/mutual model was better suited to the UK legislative situation, as this would avoid any restrictions imposed by the Public Sector Borrowing Requirements, be more sustainable, and more democratic, and ensure we will remain independence from government.

How it’s going

A project this big can’t be developed without the support of Government, as well as potential investors and the public at large. Consequently, we’ve spoken to lots of key actors across Wales, including the other mutual and non-profit financial institutions such as Credit Unions and Building Societies, and all the political parties represented in the Senedd.

All the political parties have expressed their support, and the First Minister, Mark Drakeford became so convinced of the need for a co-operative bank, that in April 2018, when he stood for election as Labour Leader, he included a page in his personal Manifesto arguing for a mutually owned Community Bank

We’ve worked at social media, without spending a penny, and on Twitter we now have 5,980 followers

We’ve carried out opinion research using DooPoll, a Wales based online polling company, and had data gifted to us from Welsh Government’s Development Bank team.

We’ve worked with the CSBA on mapping software to identify where to locate branches to get 95% of the population within a 30 mins drive of a branch.

Business Planning

Working with James Moore at the CSBA and his bank in a box formula and pro-forma Business Plan, we’ve started to put some figures together. In the process we’ve stress tested his Plan and found no problem areas.

The application process

This was originally quoted by the PRA as 18 months to 2 years. However, Brexit led to over 100 European Banks applying for UK Banking Licences, overstretching the PRA, so that is now quoted as nearer 4 years, and covid19 won’t speed it up.

A partnership approach

Time delay doesn’t reduce the need for co-op banks, so when we discovered there’s no single thing called a “banking licence” but it’s a series of permissions that adds up to a banking licence, we realised we might be able to work with other financial institutions that already operate in Wales and have some of those permissions.

We are also keen to work with rather than compete against Credit Unions (CUs). We have spoken at regional meetings of CUs, and we already have a positive understanding with Wales’ largest CU on how we can work together.

Legal structure and governance

After much consideration, we concluded that what Wales needs is an independent, mutually owned, co-operatively governed bank, and we have based our structure around the CSBA model[10], which is supported[11] by the RSA[12]and NEF[13].

Operating under Society, rather than Company legislation which allows for withdrawable, redeemable, and permanent shares to be issued, as well as and a variety of bonds. Any Permanent Shares we issue, which will be transferable, will qualify as Tier One Capital under the Capital Requirements Directive IV (CRD IV)[14], and so enable us to lend against them.

We favour a multi-stakeholder Board, with members drawn from public life, the public sector, investors, and borrowers, in a similar model to the Welsh Housing Mutual model favoured by Welsh Government for Registered Social Landlords. However, the Bank of England’s licensing requirements for Banks mean that Directors must satisfy their definition of a “fit and proper person”. This will constrain us from simply electing directors from amongst our membership at the AGM, and like all other licensed Banks and Building Societies, we must recruit Directors with proven financial expertise through a Nominations Committee.

To ensure that our members are as engaged as possible in Banc Cambria’s governance, we will seek other ways to ensure their voice is heard at all times, and they are able to influence, if not control, our direction.

Working in partnership with MBS – Governance 2.0

We’ve been working on this project since 2014, so by 2019 we fully recognised the difficulties of securing a banking licence on our own. It was taking an extended time due to the resources needed, estimated at circa £20million to get to launch, and the delays caused by Brexit, which had loaded top the Bank of England with over 100 applications for UK banking licences by European banks that had previously been able to operate here with an EU licence.

As a result, when after talking with all the Building Societies in Wales, we were approached by the Monmouthshire Building Society at the end of 2019 with a suggestion to work in partnership, we saw a real opportunity to speed up the whole process. So, from then until December 2021, we’ve been privately negotiating how this might proceed.

On Dec 14th this partnership was publicly announced in the Senedd by Vaughan Gething MS – the Minister for the Economy. You can watch his announcement here

Whilst this will change our governance a little, the basic principles of co-operation and mutuality remain unchanged, and our capital raising share issues will now be via Core Capital Deferred Shares (CCDS) in the Monmouthshire Building Society. CCDS are the equivalent type of permanent transferable share that can be issued under Building Society legislation. These will qualify as Tier One Capital under the Capital Requirements Directive IV (CRD IV)[14], and so enable us to lend against them in exactly the same way as we planned for the Co-operative Society.

How we’re sorting out the finances

The Welsh Government is playing an important enabling role by providing help towards the start-up costs and the Banking Licence.

Capital investment will be acquired through issuing Core Capital Deferred Shares (CCDS), which can be bought and sold with the agreement of the Board. These could be attractive to public sector pension funds and other investors who wish to invest in Wales, in the same way as bonds have been used in the past. As Dwr Cymru, the mutual that runs Welsh Water has shown, bonds can be very successful for securing long-term capital, and its initial bond issue in 1989 was £19 billion – the largest ever in the UK. The success of the ethical investment movement through online platforms such as Ethex[15], Seedrs[16] or Crowdcube[17] shows there is considerable investment looking for a socially responsible home, which could be attracted to Banc Cambria’s welsh base and social mission.

Creating Capital

As the Bank of England makes clear, a licensed Bank can create capital by lending, using the mechanism known as Fractional Reserve Banking.[18] This enables a Bank to lend out more than the deposits it holds, subject to suitable capital being available from its shareholdings and other assets. This is strictly regulated by the Bank of England, which allows the major high street banks to operate to a ratio of up to 12.5:1 (Risk Weighted Assets [Loans] to Tier One Capital).[19]  However, it is likely that the Bank of England would initially only permit a much lower ratio for a new bank such as Banc Cambria, and our intention, to ensure the stability and sustainability of the bank, is to operate at up to a maximum of 5:1 which is in line with the Common Weal response to the Scottish Government consultation for a Public Bank in Scotland.[20]

A completely different way of working – co-operation

A key role of Banc Cambria will be to restore locally based banking, making it easier for smaller local businesses to obtain finance and to enable local deposits to be recycled within the local or regional economy. Having a team of local loan officers with knowledge of the local economy, whilst expensive relative to the increasingly centralized methods of commercial Banks, will be beneficial for renewing local Welsh economies around Wales as well as ensuring our lending is prudent and appropriate.

Branch & Digital Strategy

We are fully committed creating a face to face, in-person branch network across Wales, and it is our intention to establish at least 30 branches across Wales in the first 5 years from launch, which will ensure that 95% of the population can reach their nearest branch in under 30 minutes. The exact details of which towns and cities we will locate these branches in, is being worked up, and will of course be influenced by which other mutuals wish to share facilities with us, as well as detailed calculations to give the best geographic fit. They won’t all be like the bank branches we’ve been used to, some will be smaller, some will be part-time, but they’ll all provide a face to face service when needed.

It is our intention to work alongside other established finance institutions in Wales, not to compete aggressively against them, but to work synergistically to build a resilient Welsh finance sector. To this end Banc Cambria is keen to work in partnership with other mutuals that are operating in closely related areas such as Credit Unions, Building Societies, Community Development Financial Institutions (CDFIs), and other local co‑operative or public-interest lenders, and benefit from their local knowledge. This will support and optimize the use of human judgement in credit assessment rather than “computer says no”.

We will also make use of the new generation of Automated Bank Terminals such as the TellerInfinity[21] which allow for withdrawals and deposits of cash and cheques, as well as providing a direct video link to an assistant in our head office, to help with any queries or problems our customers may have. These can be located at many more sites around Wales to provide a comprehensive service to the public and are currently being trialled by the CSBA. We will also look to work with the Post Office network to enable our members to use their pay-in and withdrawal facilities.

Banc Cambria will also have to work with other banks in the Real time Gross Settlement (RTGS) and Clearing House Automated Payments System (CHAPS) in order to process transactions between banks, both in the UK and in other countries. We will also work with other UK banks in the cheque clearing system run by the Cheque and Credit Clearing Company Limited (C&CCC). We will clear through a partnership with an existing member bank, and this will be part of the detailed Regulatory Business Plan that will be drawn up and presented to the Bank of England as part of our banking licence application.

Providing social and environmental benefits

Banc Cambria is committed to financing and supporting businesses and projects in Wales with a social purpose. Whilst Banc Cambria will concentrate on personal and micro-business lending at first, as it grows it will be able to address, along with partner institutions, the financing needs in sectors such as residential care homes, renewable energy and sustainable forms of agriculture.

Banc Cambria will work with public, mutual, non-profit and charitable funders to enable it to finance a range of difficult to finance projects with high social and environmental benefits. As Banc Cambria will be driven by social objectives, not just the hunt for profit, any given project could be supported, even if it is not sufficiently profitable to appeal to other commercial lenders, as long as it is secure, can generate an adequate return, and delivers our social and economic objectives.

The Welsh language & the movements for independence

We are fully committed to providing a full service in Welsh and English, both in-person, over the telephone, and digitally. We have engaged with the Office of the Welsh Language Commissioner to seek their advice and support. There are currently no banks that provide a full banking service in Welsh, and the Commissioner’s estimate is that such a facility would bring circa 30,000 interested potential members.

We have no political affiliations as an organisation to the movements for Independence, Federalism or Devo-Max, but we recognise the discussions and campaigns on these issues will highlight the need for independent Wales based financial institutions, and we intend to be one of those organisations satisfy that need, serving our members where they live and work in the language of their choice.







[7] Now known as the Wales Centre for Public Policy












[19] Tier One Capital is defined by the Bank of England and includes paid up share capital (not withdrawable shares), PIBS (or the equivalent) and accumulated retained profits

[20] Common Weal (2017) Scottish National Investment Bank: Submission to the Scottish Government consultation, November 2017.