Monday, 27 January 2014

Changing How Britain Banks

We all know something needs to be done to regain the high street banks credibility, and to restore some of the public's trust. Banking services must face reform in order to shape a new, more stable economy in Britain.

Its dubious whether or not David Cameron and the Conservatives will implement any significant changes changes, so far they're focuses have been lobbying with the EU to keep ridiculously high bonuses for bankers, to the displeasure of more or less every other person, ever. At the moment they seem to offer little policy in order to fix the broken system, and I personally wouldn't be surprised if they subtly dismiss any legislation on banking reform in order to stay in the good books with their 'big business' allies who help with party funding.

In his speech on banking reform, Labour leader Ed Miliband said that “Under a Labour government, you will no longer be serving the banks. Instead, the banks will be serving you.” Everyone can agree, that this is ultimately the most important change we must achieve from reform, however the method Ed Miliband believes is the best to adopt to achieve this is much more controversial. Mr Miliband wishes to split the big five banks up, forcing them to sell off a number of their branches, and to put in place a cap on market share, in order to create a more competitive market. After the announcement share prices in several banks fell, all be it marginally, but if that is the kind of reaction shareholders have merely after Labour's proposal of the policy, surely that proves it would not fare well for our weak economic recovery if a Labour government implemented this policy, thus scaring the banks and their shareholders further. In addition to this, its also doubtful what affect two new banks would have in the industry.

I take my inspiration for what I would change in the banking system, from Dave Fishwick, from the TV series and book 'Bank Of Dave' After a long struggle Dave set up his own little community bank in his home town of Burnley. He wanted to take on the big banks, taking it back down to a basic, human level, where loans where given to people not on their credit score, but on a personal level. His shop was plain and cheap, and he wasn't greedy. He wanted to help people who needed loans, and whom he could trust. The people and businesses got the money they needed, he made some money off their loans, and then he reinvested it into the local economy. Simple. 

It would be naive for me to propose that every town in the country should get a little community bank like Dave's. That just wouldn't work in the 21st century. Neither would I expect for the owner of any bank to forget about making profit, and to work purely in the interest of their community (as Dave did, giving all profit to local charities). However I do think it would be possible to introduce several small, regional new banks who offer a philosophy more comparable to Dave's, in the sense that it serves the best interest of the local economy, offering simple, understandable loans to small business on a personal level. 

These banks wouldn't drag all the business away from the big banks, they wouldn't be able to. But due their refreshing, and different approach they would still have relevance, and a role to play in the industry. Not only this but they would set a standard of expectation amongst customers that the big banks would be forced to meet. Thus we would see an increase in overall customer satisfaction with banks, and maybe restore some of their credibility.

I don't know a lot about banking, but it seems to me, that although the size of such a project would be vast, and it would require state funding and private investment, it could help in forming a more diverse, mixed banking industry, where the mainstream banks are checked by the standards set by the smaller localised banks, who only offer the simplest banking services on a lower scale. 

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