An alternative way of banking

Rhys Essien

OP,Did you see 'The Bank of Dave'.It was on Channel 4 a few months back.You could probably find it on Youtube or the C4 player.Basically he is sick of how banking is done in the UK and sets up his own bank.Its a good watch.

Fukuyama

IceFjoem wrote: »

Maybe I wasn't clear actually, the running costs would need to be paid, this would be absolutely minuscule to the interest we pay at the moment, it could even be paid for through taxation, but what I'm proposing is a bank that's not designed to make a profit, only to provide a service.

Go look at the balance sheets of any bank. Even a healthy one in Canada. Running costs are not as small as you imagine.

What you seem to be suggesting is a big money jar where everyone can put their savings. But they can borrow for free

So. I'll lodge my €100. Then borrow €1000. When its time to be repaid I'll borrow another €1000. Even if you put in place controls to stop me borrowing more it won't matter because the jar will be empty. Why? Because everyone else will have borrowed €1000 too.

Assuming your miraculous bank cant itself borrow from the big bad evil ECB then money will run out rather quickly. Only 10% of depositors will have been able to raid the savings of the rest. Now the bank owes a load of money to 90% of depositors, is unlikely to ever see much of the money that the loaned out initially every again as there's no incentive to pay it back, while their running costs are mounting up in the form of staff, energy, accounting, IT, security.

Your idea is flawed on the most basic of levels.

If it was implemented we'd have around two days of Nirvana, then the country would decent into ww3.

Plazaman

schnitzelEater wrote: »

Yeah, better to go for Bitcoin.

I'd probably be struck by lightning whilst holding a lightsabre and riding a unicorn quicker than be able solve the algorithims to mine bitcoins.

Hide the cash under you bed OP, the only way.

schnitzelEater

Plazaman wrote: »

I'd probably be struck by lightning whilst holding a lightsabre and riding a unicorn quicker than be able solve the algorithims to mine bitcoins.

Hide the cash under you bed OP, the only way.

You don't need to mine them...you can buy them from someone who mined them (or brought them from someone else)...

schnitzelEater

Solair wrote: »

We had several public banks in the recent past:
ACC Bank (Agricultural Credit Corporation) - now owned by Rabo Bank
ICC Bank (Industrial Credit Corporation) - was purchased by Halifax (HBOS).

They were setup in the 1920s and 30s to provide credit to the agricultural and agribusiness sector (ACC) and the industrial sectors (ICC).

So, we've used that model before (quite successfully).

The state has also also become the rather unenthusiastic owner of AIB and PTSB.

So it's not THAT unusual in an Irish context to have had state owned banks.

Did ACC and ICC charge interest? All 4 examples are completely different from the OPs proposed public bank.

Fukuyama

schnitzelEater wrote: »

You don't need to mine them...you can buy them from someone who mined them (or brought them from someone else)...

:rolleyes:

BitCoin is a cool currency experiment that I can see having some use in the future. For now people are riding the Euro bubble that has been created.

It's an investment currency that depends on REAL currencies for their value. As the value of the currency is only there when people assign value to it. Bitcoin is valuable because there was a run from Cyprus banks.

I really think your economic 'theories' stem form adolescent angst and rebelliousness rather than anything of substance. Most teenager go through the red flag socialist phase. Its normal.

IceFjoem

Anyone wrote: »

Who is going to put money into this bank to allow it to lend, when they get nothing in return? No profit=no payment of interest/dividends.

How do you propose to pay staff,provide services(cards,atms,online banking).

That's a great question actually.

I believe that many people would gladly forfeit earnings in interest in return for the safety assured of their private savings. Their reward, too, would be a functioning economy, as there wouldn't be an incentive to keep money locked away, it would be invested straight back into the economy promoting growth in that way instead.

The services the bank provides could still be paid for with a small levy.

Who will take a mortgage from your bank while paying the 10% interest you propose? With mortgage arrears hitting 16% what impact will this have on the costs of providing those loans?(you are aware of loan provisions right?)

With non mortgage debt in arrears hitting over 20%, what impact will this have on your costs as above?

To give you an example....any debt that goes over 9 weeks in arrears has to incur a provision in case it goes bad. Its a % of the overall debt, and starts at a minimum of 10%(thats the interest you are charging so every loan that goes into arrears will no be incurring a loss). This charge is made on your P+L so it wipes away the profit that you arent making.

What are your capital structures? And how do you plan to structure the liquidity of this bank?

What will you do with surplus funds that are deposited within your bank? Will they just sit there doing nothing? Earning nothing?

There would be no interest charged on loans of any kind.

Any savings would indeed 'just sit there', if people wanted to 'invest' elsewhere and take on risk they very well could.


I'd imagine arrears could be managed in a similar way to the way to which they are dealt with now, the threat of repossession would still exist.

smash

Phoebas wrote: »

The money supply is increased by an additional €80 whenever I lodge €100 cash.

This is news to me - was the system changed last night while I was sleeping? :pac:

No, you just haven't been paying attention all along!

true

schnitzelEater wrote: »

Anyone that trusts the (Irish) public sector to run a bank needs their head examined I'm afraid. The same crowd of mandarins that regulated the banking sector and were at the heart of the bank guarantee.

Sounds like a plan. Sign me up please.

Presumably this bank doesn't pay interest on my savings either. Or are savings forbidden in this socialist utopia you are proposing?

+1.

And how would this new bank pay its staff, its overheads , its electricity, its computers, its rates , its government charges, its advertising, its accountancy and audit costs, its administration etc?

Experience has shown worldwide that public sector is generally less efficient than private sector. What we have at the moment in Ireland are banks which are basically public sector, as they are paid and guaranteed by the taxpayer. Mo wonder they are ******.

Anyone

IceFjoem wrote: »

That's a great question actually.

I believe that many people would gladly forfeit earnings in interest in return for the safety assured of their private savings. Their reward, too, would be a functioning economy, as there wouldn't be an incentive to keep money locked away, it would be invested straight back into the economy promoting growth in that way instead. Its not safe though, you are giving it away to people and expecting them to pay it back. Your view of people is very idealistic, but very very wrong.

The services the bank provides could still be paid for with a small levy.-So...you mean....bank charges? Would it be the same "levy" for everyone, or would they pay a higher "levy" if they use more services? What about people who have given you money for nothing, do they need to pay you the levy? Wait...if they receive no interest, but pay a levy for the services, aren't they losing money?



There would be no interest charged on loans of any kind. You need to look into the cost of lending, it costs money to lend.

Any savings would indeed 'just sit there', if people wanted to 'invest' elsewhere and take on risk they very well could. But how can they get the money out, you have given it away to people?


I'd imagine arrears could be managed in a similar way to the way to which they are dealt with now, the threat of repossession would still exist So you are willing to take someones home and make them homeless for a non mortgage loan?

I could go on and on about how this wont work.

schnitzelEater

Dean0088 wrote: »

:rolleyes:

BitCoin is a cool currency experiment that I can see having some use in the future. For now people are riding the Euro bubble that has been created.

It's an investment currency that depends on REAL currencies for their value. As the value of the currency is only there when people assign value to it. Bitcoin is valuable because there was a run from Cyprus banks.

I really think your economic 'theories' stem form adolescent angst and rebelliousness rather than anything of substance. Most teenager go through the red flag socialist phase. Its normal.

I fear you missed the sarcasm of my original Bitcoin post...Sorry, it may have been too subtle...:D

schnitzelEater

IceFjoem wrote: »

That's a great question actually.

I believe that many people would gladly forfeit earnings in interest in return for the safety assured of their private savings. Their reward, too, would be a functioning economy, as there wouldn't be an incentive to keep money locked away, it would be invested straight back into the economy promoting growth in that way instead.

The services the bank provides could still be paid for with a small levy.



There would be no interest charged on loans of any kind.

Any savings would indeed 'just sit there', if people wanted to 'invest' elsewhere and take on risk they very well could.


I'd imagine arrears could be managed in a similar way to the way to which they are dealt with now, the threat of repossession would still exist.

What about inflation or has it gone away?

schnitzelEater

Dean0088 wrote: »

Most teenager go through the red flag socialist phase. Its normal.

:eek: I think that's the first time anyone has EVER called me a socialist...

smurgen

I thing some one should set a bank which has a baisic, simple input/output function. As in you can get wages paid and lodge money and you can with draw that money. You pay a annual fee but you are sure that the money is closer to being safe than if it was in an investment and commercial bank. Banks are essentially a utility comapany and a bank like this could be ran like any other utility company and investors would only only require a smaller return on this bank than high flying investment banks due to the stability of such a system.The only issue would be offering a lower saving rate to people than investment and commecial banks and you would have to convince people that the offset for these lower savings was the added safety guarateed to their deposits.

Irishcrx

Yeah.......That won't really work. It's a simple business in theory that will always bring in business. Someone has 100 million , they open a 'bank' or a 'loan facility' they loan out 60 million to people , people want capital to buy thing's they can't afford to buy outright , it's human nature to want thing's now and pay back over time. So you lend the money and they agree to pay interest if you loan them the capital, you make profit. Repeat process.

The problem is when I have 100 million , I loan out 400 million , 300 of which I don't actually have to loan out we'll call it the 'thin air' fund , the interest isn't making up my repayments and I've well and truly bitten off more than I can chew. So then I just claim I'm smashed and beg for someone else to bail me out of it, sure society can suffer I'd a good time while it lasted.

Now I don't loan any money , I just have to pretend to be trying to by putting stupid adds on TV telling people my business depends on it. But really , I just want to keep my money I've made back.

OP you should look into the credit union movement and the history of building societies.

They were created nominally for the benefit of their members.

I think conditions are ripe for the establishment of a new building society in this country.

smurgen

Deleted User wrote: »

OP you should look into the credit union movement and the history of building societies.

They were created nominally for the benefit of their members.

I think conditions are ripe for the establishment of a new building society in this country.

I'm moving back to Ireland shortly and the only things stopping me from now reopening a bank account and just switching to a credit union is the limitations of their online banking.They all seem to have terrible system.If they had good online systems i'd avoid all banks.

demanufactured

gregpalms wrote: »

your an idiot

You 're

studiorat

bluewolf wrote: »

It's expecting to use a service for free, same as anything else



^

Being a customer is providing the bank with a service also. A service which the bank use for free. But anyhow, charging interest encourages growth compulsion. Perpetual economic growth is unsustainable and unnecessary.

Horst Köhler - German President

"We have convinced ourselves that permanent economic growth is the answer to everything,"

Interest free loan arrangements with banks and financial services have also been shown to prevent wealth from leaving declining areas, most often rural, to more prosperous areas.

There are hundreds of banks all over the world that disprove the myth which financial services should be provided by the mainstream financial services industry dominated by large capitalist institutions.

@OP Have a look for the JAK members bank. Apparently they are one of the safest banks around right now. They don't charge interest.

Mr.David

studiorat wrote: »

@OP Have a look for the JAK members bank. Apparently they are one of the safest banks around right now. They don't charge interest.

So how do they make money? Given that a loan will cost the bank approximately the rate of inflation plus all the administrative costs?

Mr.David

IceFjoem wrote: »

T

I believe that many people would gladly forfeit earnings in interest in return for the safety assured of their private savings. Their reward, too, would be a functioning economy, as there wouldn't be an incentive to keep money locked away, it would be invested straight back into the economy promoting growth in that way instead.

The services the bank provides could still be paid for with a small levy.

There would be no interest charged on loans of any kind.

Any savings would indeed 'just sit there', if people wanted to 'invest' elsewhere and take on risk they very well could.

So does this model propose lending to customers at 0% using money that has been placed on deposit at 0%? But as you point out above, due to the fact that there would be no incentive to save money (devaluation due to inflation) then surely the deposits would be much less than the loans.....so where does this bank then get the capital to loan? From another bank at 5%? You can see where this is going surely.....it won't work!

The model you are proposing has a great cost to the individual. Firstly, assume I have 10,000 to deposit. I am earning 0%, so say inflation is 2.5% that means it is costing me 250 euro a year plus whatever 'levy' you propose.

On the other hand I could put my money in a proper bank and earn 3% i.e. 300. And pay no levy. The net difference being 550 euro per annum plus levy saving.

Anyway, the safety of our private savings is assured as far as I am concerned. I think there is far too much hysteria out there. Yeah yeah Cyprus rabble rabble.....different situation.

Wacker The Attacker

smash wrote: »

I saw an ad on TV for a new reality show, can't remember what station but I think it was called 'the bank of Dave' or something like that. A guy in the UK set up his own bank and was issuing loans etc. within a week he was getting cease and desist letters from natwest and other lenders.

David Fishwick was the guys name.

He's a well known local businessman from Burnley. There was a documentary on him setting up a modest savings and loans type bank for the main purpose of lending to local businesses where the bigger lenders wouldnt.

He guaranteed savers a 5% return on their savings and a sizable portion, if not all the profits were diverted to a designated charity.

As close as you'll get to a win win scenario when it comes to banking.

Retrovertigo

OP, you should be more worried about the fact that the world economy is run by a group of skin changing lizards from the constellation Draco!

studiorat

Mr.David wrote: »

So how do they make money? Given that a loan will cost the bank approximately the rate of inflation plus all the administrative costs?

It's owned by it's customers, administration and development is paid by membership and loan fees. I guess they are a cross between a credit union and a cooperative bank. It's primary mission is to provide a service rather than make a profit, obviously an anathema to some here.

According to people who support the idea, inflation of 2.5% would be enough to allow the ratio between outstanding loan and income to be held constant.

According to Wiki in 2011 JAK in Sweden had 114 Million on deposit and 98 Million on loan.
I can't see why so many find the thought of financial services without interest so incredulous and seem almost indignant that a poster would want to discuss an alternative.

Mr.David

studiorat wrote: »

I
According to people who support the idea, inflation of 2.5% would be enough to allow the ratio between outstanding loan and income to be held constant.

So the proposed institution's economic feasibility relies upon the rate of inflation over which it has no control?

Sounds anything but rock solid to me!

studiorat

Mr.David wrote: »

So the proposed institution's economic feasibility relies upon the rate of inflation over which it has no control?

Sounds anything but rock solid to me!

No I don't believe it does. The argument of inflation I believe is concerned with banking across the whole system.

Here's some links about them and ethical banking :

http://jak.se/english/english

http://www.jak.se/sites/default/files/international/dokument/Ethical%20Banks.pdf

I hope you find it interesting.

niallu

A number of flaws with your argument.

We pay interest not for the sole reason of making bankers rich....

-Lets say the bank is making 10% profit on every loan, what percentage of those loans will never be paid back? Plenty of people are skipping the country and not honouring their credit cards / overdrafts etc and the interest premium you pay is to cover for those guys who choose to skip off.

-100€ today isn't worth €100 next year. If inflation is 8% in the country, then your 100€ will buy you alot less this time next year....so why should you get to borrow free of charge?

-Also this interest you pay back also covers multiple costs of staff admin, online services, ATM's around the country, and solicitors to draw up legal notices which enable you to sign a contract?

What kind of person thinks they can borrow for free or has such simplistic ideas?

studiorat

niallu wrote: »

What kind of person thinks they can borrow for free or has such simplistic ideas?

About 38,000 of them in Sweden it seems. You should have a look at their site too Nialleu

Antar Bolaeisk

Valetta wrote: »

The Italians have this sussed from long ago.

In all their chip shops they use the batter system.

Some loan sharks operate on that system as well, ie. pay us back the money or we'll batter ya.

Mr.David

Mr.David wrote: »

So how do they make money? Given that a loan will cost the bank approximately the rate of inflation plus all the administrative costs?

Looking into it you don't earn interest on deposits either.

You earn savings points on your deposits which you can then use to borrow. The levy covers admin costs.

Mr.David wrote: »

The model you are proposing has a great cost to the individual. Firstly, assume I have 10,000 to deposit. I am earning 0%, so say inflation is 2.5% that means it is costing me 250 euro a year plus whatever 'levy' you propose.

On the other hand I could put my money in a proper bank and earn 3% i.e. 300. And pay no levy. The net difference being 550 euro per annum plus levy saving.

You suffer from inflation either way - the net difference is the 300 interest you earn.

Edit: that Swedish bank looks about the size of an Irish credit union - St Anthony's and Claddagh here in Galway has €168 million in assets.