QUESTIONS have been raised about the viability of a county-wide community bank project after a councillor questioned whether it was right to continue backing it.

The Hampshire Community Bank (HCB), which aims to support small businesses and communities though investments, rather than seek profits, is based in Winchester and is being financially supported by several councils, including Winchester and Eastleigh, as well as Winchester, Solent and Southampton universities.

But now a member of Portsmouth City Council, also one of the other investors, has questioned whether it is right to continue supporting the scheme.

Cllr Ian Lyon, an opposition Conservative councillor who serves on the governance, audit and standards committee, told a meeting: “It seems to me... that the principle of having a community bank was to invest in our community.

“You are actually running a bank that is trying to compete with banks that have got a dog-eat-dog principle.

“This is effectively us pretending to be bankers as opposed to helping the community to access cash without having to put up assets, without having their livelihoods destroyed if something goes wrong. I don’t see this as a viable proposal.”

The project has already missed its target to obtain a banking licence, meaning the scheme is behind schedule. A disclaimer on its website says: “We are in the process of applying for a banking licence to the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).”

According to the update report that went before Portsmouth City Council’s governance committee, the delay came about through funds being unexpectedly pulled.

The report said: “The original timetable anticipated a start of operations in 2016, however that reflected a £7m injection by central government which, following the general election in 2015, did not materialise.

“Delays have arisen through a combination of HCB being an entirely new concept requiring closer scrutiny and the advent of Brexit which has generated a significant extra regulatory workload for the regulators.”

Now full authorisation is not expected until early 2020.

However, it has already begun lending. The report said: “At the end of March 2017 loans ranging from £20,000 to £250,000 and totalling £1,145,000 had been given to 13 different companies largely in the Winchester and Eastleigh areas.”

The bank was set up around five years ago and works with community interest group Local First. It has previously been chaired by Liberal Democrat leader Sir Vince Cable.

Keith House, leader of Eastleigh Borough Council, said: “What has become clear is that getting the Banking Licence is taking much longer than anticipated. This says a lot about regulation, which is stifling innovation.

“Eastleigh Borough Council is firmly committed to the project as it has enormous potential to support local business growth.”

A Portsmouth City Council spokesman added: “The bank will be owned and run by local bodies for local people. It can’t ever be taken over or sold, and there will be no ‘bankers bonuses’. Its primary purpose would be to support the local economy.”

The Chronicle has approached Winchester City Council for a comment, but is yet to receive a response.