Birmingham’s Municipal Bank could reopen under radical proposals to help business through the current economic difficulties.

Council leader Mike Whitby believes that “the time might be right” for the council to relaunch the bank, which closed after 60 years in March 1976.

Exact details of financing, services offered and structure are yet to be revealed and officers are currently examining a range of proposals on how the bank would operate under the current economic circumstances.

“The credit crunch has put intolerable pressure on many small yet sound businesses, people trying to get on the property ladder and those seeking to invest in the city,” he said.

“We once ran a Municipal Bank, and given the recent market failings, I think the time might be right for us to do so again.”

Coun Whitby added that the council would consider using the imminent re-tendering of their banking contract to establish a Bank of Birmingham dedicated to serving the people of the city.

He also raised the possibility of using the council’s access to financial markets and its well-being powers to provide asset-backed finance to businesses in the city and those who want to invest.

Reviving the Municipal Bank was one of several suggestions due to be unveiled at today’s Birmingham Prospectus Breakfast Briefing.

In what was intended as a clear show of support for local businesses, Coun Whitby was set to address the problem of financing small enterprises and called for support for struggling homeowners.

One of the available options was seeking partners to intervene in the local mortgage market to help bring stability.

He further said that the council was also considering a proposal to purchase properties, machinery and business equipment for companies struggling to operate in difficult economic conditions.

The council would buy physical assets for local businesses and lease them back to them.

The council’s plan flies in the face of existing council support for Private Finance Initiatives, in which businesses are contracted by the council to assist with local government work.

This ‘reverse-style PFI’ would provide the business with operating capital and security of tenure, while enabling the council to use the asset as security against which to increase its prudential borrowing - a system which allows councils to borrow without the consent of central government, as long as they remain within their own affordable borrowing limits.

John Lamb, of the Birmingham Chamber of Commerce, welcomed the proposals but said that the council would need to look hard at the structure of the bank.

“In a way, it is good news. Anything that helps with the cashflow of businesses in difficult times is to be welcomed,” he said.

“It’s certainly an area worth looking at. But I shall be interested to see how the council proposes to run this. Will they take on more staff? What will the costs be? It’s a bit ‘suck it and see’.”

And despite a series of financial coming under increasing pressure and collapsing, Mr Lamb said that the decision to open a new bank could be a wise move.

“I think perhaps it is very astute. Maybe with the market being flat, it is just the time to launch. I don’t imagine that this will mean we’re all going to see huge cuts in our council tax as a result of a new bank, but I think it is generally speaking something to be welcomed.

“Customers may see it as a safe bet, something to be trusted in difficult financial times.”