IT is fair question: why launch a new bank when we are still to properly reform the ones we already have? But the businessman Jim McColl’s plans for a new Scottish bank, revealed this week, could well be the right idea at the right time. Confidence in the banking sector remains at a low level. The Scottish economy is lagging behind the rest of the UK and much of the rest of Europe. A new bank with a mission to help small businesses could be just what we need.

The details of the new bank have yet to emerge, but, speaking to the Scottish Parliament’s Economy, Jobs and Fair Work Committee, Mr McColl, who is the chief executive of the investment group Clyde Blowers Capita, revealed a little of his plans. He would apply for a banking licence in March, he said, with the aim of offering loans to small businesses of up to £5million. And he was doing it, he said, because no one else was going the extra mile to support small businesses after the government bailout of the Royal Bank of Scotland and the Bank of Scotland’s acquisition by Lloyds.

Mr McColl’s assessment of the banking sector in Scotland is hard to refute. In recent years, the Royal Bank of Scotland has attempted to prove that it is doing its best to support small businesses – in 2016, for example, it launched a £100million fund offering loans to small businesses at fixed rates and with no set-up or repayment fees.

Loading article content

However, many small businesses find it hard to forget the behaviour of RBS’s Global Restructuring Group. That was marketed as a turnaround specialist for firms experiencing financial difficulties but has since been accused of deliberately stripping the assets of the businesses for its own profit. The bank has since set aside millions of pounds to compensate customers who complain about the unit’s behaviour.

Mr McColl’s mission statement appears to be that his bank will step in to fill the gap and provide finance where he thinks the big banks are failing to - and, if it goes according to plan, it could be one of the positive steps that is needed to get Scottish economic growth back on track. One issue that will need resolved, however, is how it fits in with the plans which the Scottish Government has already announced to launch a national investment bank, an idea suggested by the First Minister’s council of economic advisors, of which Mr McColl is a member.

Launching the idea last year, the First Minister Nicola Sturgeon said that the national investment bank would be an important means of delivering infrastructure development in Scotland, finance for high-growth businesses and strategic investments innovation, but Mr McColl appears to have his doubts. He says he remains wary of how this would be structured, and how much cash will be made available for businesses.

The doubts may be answered by the public consultation which is currently underway on the national investment bank idea, but in principle the idea of a national investment bank is sound, particularly if it can offer more support to Scottish firms to compete internationally in the way that other EU nations do with their firms.

The worry is that the national investment bank will fall short – or that it will be established without the level of funds needed to make a profound difference, which is where Mr McColl’s new bank may be able to make a difference.

Naturally, any new bank would have to be careful about who it lends to, and how much – after all, the roots of the financial crisis of 10 years ago lay in handing out too much credit. But much of the Scottish economy is founded on small businesses and helping those businesses to expand, grow and flourish is a route back to economic strength – with the help of banks big and small.