A recently published report from the Public Policy Institute for Wales brings together evidence on the effectiveness and viability of a full public bank in Wales. The report argues that there are problems in the Welsh banking sector and wider economy that a public development bank could help to alleviate.
A public bank or network of community banks with an explicit regional objective could help boost SME lending and regional economic development.
A public bank could also contribute to socially desirable outcomes.
For example, a significant proportion of the German KfW’s lending goes to projects with environmental objectives. Borrowers also receive financial reward if they reduce emissions. This has helped the German government in its aims to insulate homes and meet its climate change targets. … A full public development bank could make investing in socially desirable outcomes a focal part of its lending strategy, as well as investing profits from its business into socially desirable projects.
Setting up a public development bank, in any form, is not easy. … However, … this report has highlighted the potential for a public development bank to benefit the Welsh economy. Profits from public banks could also then be put back into the Welsh economy. Examples from around the world demonstrate the importance of good governance structures to limit political interference and overreaching, but where they have worked they have led to a more diverse banking system that better serves the various priorities of the national economy, rather than just its financial capital city.