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* Handelsbanken makes lending decisions inside branches
* Local approach contrasts with British rivals
* Banks have opened branches while rivals shut them down
* Rivals say lending policy can be inconsistent
* Bank shuns annual bonuses in favour of profit sharing
By Matt Scuffham
WILMSLOW, England, Feb 2 (Reuters) - 'The branch is thebank' sounds like a slogan from before digital technology wasseen as the future of banking. But that mantra has enabledSweden's Handelsbanken to expand in Britain at anunprecedented rate since the financial crisis of 2007 to 2009.
Handelsbanken has drawn upon the practices it adopted in itshome market in the 1970s when then Chief Executive Jan Wallanderintroduced a culture of 'decentralisation'. He handed branchmanagers full control over lending decisions and shunned annualbonuses for staff in favour of a long-term profit sharing schemethat matures when they reach 60.
It is also something of a throwback to the days when thelocal bank manager was a pillar of British provincial life.
"The people running the bank are the branch staff," thebank's UK Chief Operating Officer Andy Copsey, 48, said in aninterview at Handelsbanken's local branch in Wilmslow, Cheshire,185 miles (300 km) north of London.
"Head office exists to serve the branches. It's a very flatstructure where people are trusted," he added.
In contrast, every other major bank in Britain uses a'centralised' decision making process, heavily reliant oncomputers to assess customers' credit ratings.
While domestic rivals have slimmed down in order to bolstertheir capital positions and meet tougher rules from regulators, Handelsbanken has more than trebled the number of branches thatit has in Britain and more than doubled its loan book to 13.3billion pounds ($20 billion) over the past four years.
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Wilmslow branch manager Anthony Flynn, 38, saidHandelsbanken has attracted customers fed up with Britain'sbiggest banks, whose reputations have been tarnished by a seriesof headline-grabbing scandals.
"We've had lots of interest from businesses which are reallydissatisfied with their service elsewhere," he said in hisbranch, in an affluent town south of the city of Manchester.
"They hear about us as a bank that's offering somethingdifferent and, specifically, as a bank that's offering localdecision making where they know the people they're dealingwith."
British lawmakers are keen for challengers to break thedominance of the country's 'big four' banks -- Lloyds BankingGroup, Royal Bank of Scotland, Barclays and HSBC -- which control over three-quartersof current accounts and provide nine out of 10 business loans.
Handelsbanken opened its 189th British branch shortly beforeChristmas, having had fewer than 20 a decade ago. In the sameperiod, its domestic rivals have closed more than 2,000branches, citing the growing number of customers banking online.
Handelsbanken itself has also revamped its internet bankingin the past three years and launched a mobile app 18 months ago.
Berenberg analyst Nick Anderson said that the bank's rate offuture expansion in Britain may depend on whether it can findcandidates with the right experience to manage its branches.
"The main concern is 'can they find the right calibre ofpeople to maintain the culture and values that have enabledHandelsbanken to do so phenomenally well?'," he said.
Handelsbanken has one of the best records in the industryfor successful lending, with a far smaller proportion of badloans than the industry average in Europe. That helps to justifythe expense of a branch network and has enabled it to have thelowest funding costs of all European banks, according to its2013 annual report.
PROFIT SHARING SCHEME
Not everyone is convinced by the Handelsbanken model.
Paul Pester, chief executive of rival TSB, hassuggested some customers fear their branch managers might beswayed by favouritism when making decisions.
Meanwhile, a senior executive at another British bank whichcompetes with Handelsbanken told Reuters he believed that thebank's lending criteria could be inconsistent across branches.
"Handelsbanken is a risk adverse prudent lender," saidCopsey, who joined Handelsbanken in 2001 when he opened itsfifth British branch in the northern English city of Leeds.
"If a branch manager seems not to have understood the creditpolicy then the regional manager will explain what it means," hesaid, dismissing any talk of double standards.
Handelsbanken pays branch staff a higher fixed salary thanthe industry average because of their extra responsibilities.
Staff at Handelsbanken also join a scheme known as Oktogonenwhich awards them an equal share of the bank's profits provided its annual return on equity is better than the average of itsrivals -- a target it has hit in each of the past 42 years.
The awards, the same for kitchen staff at the bank's headoffice as they are for its chief executive, are granted in theform of shares in the bank which cannot be accessed until staffreach the age of 60.
That is meant to discourage short-term decision making andexcessive risk-taking and is consistent with moves by regulatorsto make banks defer bonuses for longer periods of time.
Industry sources said the payouts can be worth upwards of amillion pounds for staff that spend their entire working liveswith the bank. Handelsbanken declined to comment on their value. ($1 = 0.6573 pounds) (Reporting by Keith Weir, 44 20 7542 8022)
