New bank to woo small firms with local loans policy

BANK managers will be put back at the heart of decision making on lending, according to a new bank readying itself for a launch on Scotland's high street.

Project New Bank, which is being set up by City grandees Lord Levene and Sir David Walker, will give local branches the power to make their own decisions on lending to small businesses and individuals.

A person familiar with the plans said the bank - which is being set up to buy branches from Lloyds Banking Group and Northern Rock - would be able to keep risks low by making decisions at a local level, so that any failures would be confined rather than group-wide.

Plans for local decision-making - rather than centralised or computer-based modelling - are expected to appeal to small businesses, which have complained that staff in many existing branches lack the necessary powers to lend money, even though local staff may have worked with clients over many years.

But sources said Project New Bank will still offer modern services - such as telephone and internet banking - when dealing with business and personal customers.

Documents are expected to be published this week detailing plans for the bank's launch on the Alternative Investment Market (Aim) later this month or early next month.

The initial vehicle is expected to be valued at around 50 million but the bank is later expected to transfer from Aim to the London Stock Exchange's Main Market following a multi-billion pound secondary listing.

As well as Lloyd's of London chairman Levene and former City regulator Walker, the bank has signed up Lord McFall - former head of the Treasury select committee and MP for Dunbartonshire West - and Charles McCreevy, Ireland's former European Commissioner, as directors.

Cenkos, the investment bank, will act as broker and boutique advisory firm Kinmont will be helping Levene and Walker prepare the listing.

A person familiar with the project said the new bank would not close branches and would "maintain job levels in the assets acquired".

Project New Bank yesterday confirmed it is in advanced talks with several senior banking industry managers as it starts building up its business.

It is expected to target assets being sold off by Lloyds Banking Group, including its 185 Lloyds TSB branches in Scotland, which the company is being forced to sell off as the price for accepting tax-payer aid during the 2008 banking crisis.

Lloyds has confirmed that the sale of 600 branches would go ahead by the deadline of November 2013.

The UK Government is also advancing plans to return state-owned Northern Rock to the private sector.

Other players linked to the possible purchase of assets from Lloyds and Northern Rock include Sir Richard Branson's Virgin Money.