Banking Reform

The Time Party would go beyond current banking reform policy by radically correcting fractional reserve banking anomalies in the mortgage market. The party would also establish an Industrial Development Bank, together with regional banks devoted to long-term lending to SMEs. We would also monitor and support the rapidly growing digital banking sector.

The UK government, via the Financial Services (Banking Reform) Act 2013, imposes improved standards of conduct on banks in the UK. Its intention is to enhance their loss-absorbing capacity and it ring-fences retail (High Street) from wholesale (investment) banking activities. The Time Party approves of these reforms. However, TIME would go further.

Up until the 1970s in the UK, the mortgage industry was dominated traditionally by building societies. In the ten years to 1987 the societies’ share of the new mortgage loans market fell thirty per cent to 66% as banks and other financial institutions entered the market. Unlike building societies which provided loans to match deposited funds, the banks provided mortgages off the back of property assets used as collateral. This fuelled residential property price inflation and led to homes becoming increasingly unaffordable for those wanting to be first time buyers and seeking to get onto the property ladder. The Time Party will legislate to reverse this trend by ensuring that any bank or financial institution involved in the property market must only provide mortgages to a value equal to corresponding funds held on deposit by that organisation. A bank or financial institution must operate a separate book in respect of loans and deposits for residential property mortgages and it must maintain a balanced book, linking total deposits with total loans.

TIME will retain the British Business Bank (BBB) and enhance its reach in providing credit to small and medium-sized enterprises (SMEs). Post-Brexit the funds which were hitherto earmarked for the European Investment Fund of the European Investment Bank will be channelled into the BBB.

Also, the Time Party will establish a government-backed Industrial Development Bank (IDB) with the remit to provide appropriate loans to boost nascent businesses in emerging industries and long-term loans to established companies in mature industries. For example, amongst other things, the IDB will help finance a trawler boat-building initiative to boost the UK’s fisheries industry and the local economies of coastal communities.

TIME believes that far too much decision-making power and influence rests with Westminster and Whitehall and that the UK should be rearranged into autonomous territories, called ‘Lands’. One of the many responsibilities of the Lands would be to develop Land-owned banks, regulated by the Bank of England, with the potential for offices in all major towns and cities within the confines of their Land borders. These will offer long-term loans, of up to 30 years’ duration, to reputable and expanding local industrial and commercial enterprises. These banks will be prohibited from making investments, either directly or indirectly, in high risk domestic and international financial markets.

The Time Party recognises advances being made by the rapidly expanding challenger and alternative digital financial services and banking sector and will be monitoring their performance as they develop. The Financial Conduct Authority issues banking licences to organisations in this sector.

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