I see that the government are planning to instigate a "bad bank" to buy up all of the toxic loans. And my immediate thought was "why doesn't someone set up a good bank instead."
The tagline could be something along the lines of "deposit your money with us: we don't have any debts, toxic or otherwise."
It is, I think, a very good idea: it is unfortunate that setting up a bank requires such massive amounts of box-ticking in order to gain the licence from the government.
But it shouldn't be that difficult, I thought: after all, the infrastructure—the ATMs and suchlike—is all there. Why not?
I never seriously investigated setting up The Bank Of Hell, but it seems that others have been a bit more pro-active, as this LaunchLab article shows.
It’s what entrepreneurs do: find something that’s wrong with the world, fix it, and make some money along the way.
So while most of us complained about small business’ lack of access to finance; a group of entrepreneurs decided to take affirmative action.
Cambridge-based telecoms entrepreneur Dr David Cleevely is leading a team researching the potential for a new bank that would focus on giving “fairer” funding options for small businesses.
He tells The Independent: "We are sick to death of the way the banks are operating. They are offering people almost nothing for deposits but charging small businesses up to 15 per cent for their credit facilities. There is something fundamentally wrong."
"Quite apart from the social issues, there is an arbitrage opportunity here to set up a bank because of the huge disparity between borrowing and lending," Dr Cleevely said.
"Talk of their being no money around is nonsense. There is tons of money but no one wants to put it in the banks earning next to nothing."
Nigel Brown of NW Brown, the Cambridge-based corporate finance business, and Dr Alan Goodman, a biotech entrepreneur who has founded more than 30 companies, are also involved in the project.
The group is in talks with Cambridge University, Cambridge City Council and the Treasury to see whether or not their scheme is a goer.
It sounds like a good idea to me. After all, if you wanted to set up a new bank, you could hardly pick a better time than now. Only one thing slightly worries me about this endeavour—and that's the involvement of someone who says something like this...
“We need to change this and it could be that commercial and investment banking must be separated by law."
Um... So, tell me, how is lending capital to businesses so that they can expand, in return for interest on the capital, substantially different to buying up shares in businesses so that they can get capital to expand, in return for a dividend?
Still, one to watch, I think; although I wonder how easy they will find to get a licence: after all, if they did very well and started to take massive numbers of depositors from the big banks, they could precipitate another capitalisation crisis. And that, of course, is something that the government simply cannot afford...