Ed Miliband: British Business Needs Regional Banks

Labour leader Ed Miliband has said he wants to create a regional banking system in the UK to help support small businesses in local communities across the country.

Speaking at a British Chambers of Commerce event, Miliband said he would reshape the small business finance landscape if elected at the next general election.

"I believe we need a regional banking system, reaching out to each and every region of the country," said Miliband.

"Regional banks, with a mission to serve that region and that region alone.

"Not banks that like to say 'no', but banks that know your region and your business. Not banks that you mistrust, but banks you can come to trust."

He touted the German system of "Sparkassen" – community-based savings banks – as a possible model for Britain.

One of the pre-crisis banking system's failures is seen as the demise of the personal-touch relationship between a bank and the businesses who are its clients, something many say could be restored with a local-focused finance infrastructure of smaller lenders who can get to know their customers more intimately than the High Street giants.

Miliband also repeated Labour's pledge to set up a central Business Investment Bank to "provide long-term and patient capital for British businesses, especially those just starting up", as well as creating more competition by making it easier for new challenger banks to enter the market.

A lack of access to finance for smaller business has been highlighted by many as a reason the economy is stagnating, with firms unable to find the bank lending they need to expand, creating jobs and increasing output along the way.

However, research into SME finance by BDRC Continental revealed that in the fourth quarter of 2012 three quarters of small and medium-sized businesses were "happy non-seekers of finance", suggesting there is a general lack of appetite for bank lending.

Of those who did apply for bank finance, 71 percent were approved.