In Business Let’s Start a Bank

Banking is a bit of a mystery, and that’s how bankers like it. One of the starting points of banking was when people in a physical sort of business, such as 16th century gold merchants, realised that there was business to be done by lending assets rather than selling them. They discovered that bits of paper backed by guaranteed assets tucked away in a vault could as potent as the gold itself in making other transactions possible.

And then they discovered that creditors seldom asked for their money deposits or gold back all at the same time. They could lend more than they had on deposit, in other words, the banking mystery had begun.

Except that from time to time all the creditors did come in to demand their money back and if the money wasn’t there, this created a run on the bank. This happened periodically, but just irregularly enough for banks to be regarded as sound most of the time.

And so the mystery spread. With the coming of the industrial age, banks financed businesses and banks were created by businesses which threw off surplus cash and lent it out in local communities across Britain.

But it took a long time for banks to discover quite how popular credit could be. The credit card was a post World War Two invention, even in the USA. It did not reach Britain until the 1960s when in the words of the Access advertisement, it promised to “Take the Waiting out of Wanting”, which marks a significant psychological threshold in the public attitude to borrowing.

Meanwhile, banks were getting bigger and bigger all over the world, and the old strict distinctions between banks and investment houses and stockbrokers and even insurance companies were breaking down. Banks began to take their personal customers almost for granted and branch out into huge new international adventures by playing markets with their own money rather than lending out for other people to make businesses with.

And so many banks – a vital part of the financial system too important to a national economy to be allowed to fail – transformed themselves into casino gamblers taking huge trading risks to justify the bonuses they were paying to their traders.

When these huge new entities failed, as they have done over the past two years, because they were still also banks with public business to be done and a public role to be maintained, they were still deemed to be too big to fail even though that would have been the normal way of dealing with gamblers who bet on the wrong horses so ignorantly and consistently.

With this in mind, it may be a good time to think about starting a bank from scratch, built on different (maybe old–fashioned) principles, a bank based on lending and borrowing and financing enterprise and endeavour.

And that thought is the starting point for this programme : “Let’s Start a Bank”.

Peter Day

Previous Programmes

Watch Your Language - Peter Day joins a group of enthusiasts determined to improve the language of business.

Keep it Local - As pubs struggle to survive, Peter Day travels through villages in Yorkshire and Cumbria to talk to local activists.

Space - Peter Day asks what happens next on the USA's journey into space.

German Pencils - Peter Day asks Faber-Castell and Staedtler how they both stay sharp ...

Building BRICS - Peter Day finds out about the BRICS - Brazil, Russia, Indonesia and China

Over A Barrel - Peter Day contemplates the turmoil in the Middle East and fears it will affect the price of oil

Reconstructing Capitalism - Peter Day hears all about the challenges to the way capitalism works.

All at Sea - Peter Day hears all about sea transport.

China Dispossessed - Peter Day hears about some of the problems caused by China's rush for prosperity.

Back on the Road - Alan Mulally tells Peter Day how he changed the way Ford works and how it is now back in the business of selling cars.

Asia Bling! - Peter Day ponders how the rise of the Asian comsumer will change business.

Euro on the Rocks - Peter Day asks what is the future for the Euro?

Bitter Pills - Peter Day looks at changing face of drug development.

Operation Robot - would you allow a robot to operate on you? Peter Day looks at robot-assisted surgery.

Growing Pains - Peter Day asks, what is the main component of growth?

After the Crunch - Government funding and regional development: the view from Newcastle.

Chips off the Old Block - Computing in the UK, past, present and future.

Hidden Depths - Graham Hawkes, DeepFlight and exploring the oceans.

Sociability - How social technology makes new business models possible.

Are CEOs Up to the Job? - Two thirds aren't according to Xinfu's Steve Tappin. Peter Day investigates.

In at the Start - Saeed Amidi and Silicon Valley

Power Play - Is the 'smart grid' the start of something big?

Now Wash Your Hands Please - How a simple idea can transform lives in the developing world

Coming Soon - What can the experience of previous financial crises tell us about the current one?

Ticking Over - Can the Isle of Man rejuvenate the business of watchmaking?

Not Just Silicon - what can Silicon Valley teach us about innovation?

Press under Pressure - what lies ahead for the world of newspaper publishing?

Remembering CK Prahalad - in a world of change and multiple opportunities, how does a company keep up?

Rwanda Rising - building a clean safe state where business can flourish.

Life Cycles - building businesses around the idea of new kinds of bikes.

Who Sets Our Standards - the business and social benefits of standardisation.

Ready to wear - the ethical issues of the international clothing industry.

Doing It Wrong - what's wrong with the way business works?

New Age - the business of aging.

Project Alcatraz - rehabilitating offenders in Venezuela.

Selling Salvation - Peter Drucker and the Salvation Army.

Let Me Entertain You - office parties and away days.

Brazil's Sugar Rush - Brazil.

Small Wonder - microfinance.

Unlimited Company - organizational models.

Credit Crunch - cash and credit.

Student Startups - student entrepreneurs.

Media Mayhem - changes in the newspaper industry.

Squeaky Clean - branding.

Battery Power - Bolivia.

Women's Work - women in the city.

Hell For Leather - John Timpson and Timpson's Shoes.

Learning Curve - organisational culture.

Let's Start a Bank - banking.

Goodbye to Intel - Craig Barrett and Intel.

Location Location - So?

Iceland feels the Heat - the credit crunch in Iceland.

The Cisco Kid - Mike Lynch and John Chambers.

Grand Design - business schools.

Power Drive - the car industry.

All New - innovation.

Europe on the edge - What is this thing called "Europe"?

For more programmes visit the In Business programme archive.

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