Bank of Dave: Money to Burnley

What can we learn from one man's attempts to set up a bank of his own?

9pm on Channel 4 tonight sees the first episode in a two-part documentary called Bank of Dave. It follows Burnley businessman David Fishwick as he attempts to open his own bank to serve the people and businesses of his home town.

The programme will undoubtedly provide more than a few salutatory lessons for British banks. I know this, not because I have been fortunate to witness an early screening but because I have read David's book Bank of Dave: How I Took on the Banks, which chronicles his endeavour.

David’s attempt at setting up a bank and turning a profit in 180 days is fascinating, and makes one wonder whether we need more Banks of Dave. I think we do.

The total start-up costs for Dave’s bank, including premises and equipment, were £9,000 and his weekly overheads came to £396. Some will argue that Dave’s costs are not indicative of what is required, and in some respects they are right. Banks probably need more than one laptop and a couple of notebooks. Even then, Dave shines an unforgiving light on the high overheads, including inflated salaries and cumbersome, out-dated IT systems, that burden many British banks.

Dave also shows that nowadays banks no longer have a monopoly on the services they provide. Dave's bank does almost everything a high-street bank does: it makes loans, takes deposits and even makes investments in property, stocks and shares. But because he wasn’t granted a banking licence by the FSA he can't call his bank a "bank" or say that he takes "deposits".

Increasingly people are choosing to avoid banks when accessing financial services. Dave himself gets advice from Giles Andrews, CEO of peer-to-peer lender Zopa. The government and regulators should not stand in the way of innovation and regulators could do more to ensure that people feel confident using new financial services that meet appropriate standards.

Dave’s most important insight, and this comes on page one of the book, is that "all banks are about people". This is something forgotten by many of Britain's large banks. Dave meets the people he lends money to, and he knows the property he invests in. His decisions are based on more than just credit scores or the value of the security. A bank that adopted Dave’s practices would have lower default rates, higher customer satisfaction, and greater ability to cross-sell products to loyal customers. The recent growth of Metrobank and Handselsbanken in Britain is testament to this.

The Bank of Dave not only casts many of Britain’s banks in a dim light but, perhaps inadvertently, it also demonstrates one of the inherent weaknesses in our banking system. Dave promises to guarantee every deposit in his bank with his own money. He also makes it clear that "we wouldn’t be lending what we hadn’t got", not leveraging the assets of his bank.

In these two respects Dave’s bank is relatively unique, and therein lies the dilemma. People want security but many also want leverage with the risk and reward this entails. Regulators would love it if all deposits in every bank were guaranteed by their owners but this would come at a price. Leverage and debt is now a sin under the government’s austerity drive but one of the commonest criticisms of the banks is that they are not lending.

In preparing to set up his bank, Dave meets David Buik, a market analyst, who tells him: "you’re not going to stop the banking system blowing up from time to time". Dave disagrees; his bank would be 100 per cent guaranteed. As Britain looks to reform its banking system it would do well to learn from Dave, but some of the lessons may be harder to swallow than others.

Dave Fishwick, in his bank. Photograph: Channel 4

Selling Circuits Short: Improving the prospects of the British electronics industry by Stephen L. Clarke and Georgia Plank was released yesterday by Civitas. It is available on PDF and Amazon Kindle

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This is no time for a coup against a successful Labour leader

Don't blame Jeremy Corbyn for the Labour Party's crisis.

"The people who are sovereign in our party are the members," said John McDonnell this morning. As the coup against Jeremy Corbyn gains pace, the Shadow Chancellor has been talking a lot of sense. "It is time for people to come together to work in the interest of the country," he told Peston on Sunday, while emphasising that people will quickly lose trust in politics altogether if this internal squabbling continues. 

The Tory party is in complete disarray. Just days ago, the first Tory leader in 23 years to win a majority for his party was forced to resign from Government after just over a year in charge. We have some form of caretaker Government. Those who led the Brexit campaign now have no idea what to do. 

It is disappointing that a handful of Labour parliamentarians have decided to join in with the disintegration of British politics.

The Labour Party had the opportunity to keep its head while all about it lost theirs. It could have positioned itself as a credible alternative to a broken Government and a Tory party in chaos. Instead we have been left with a pathetic attempt to overturn the democratic will of the membership. 

But this has been coming for some time. In my opinion it has very little to do with the ramifications of the referendum result. Jeremy Corbyn was asked to do two things throughout the campaign: first, get Labour voters to side with Remain, and second, get young people to do the same.

Nearly seven in ten Labour supporters backed Remain. Young voters supported Remain by a 4:1 margin. This is about much more than an allegedly half-hearted referendum performance.

The Parliamentary Labour Party has failed to come to terms with Jeremy Corbyn’s emphatic victory. In September of last year he was elected with 59.5 per cent of the vote, some 170,000 ahead of his closest rival. It is a fact worth repeating. If another Labour leadership election were to be called I would expect Jeremy Corbyn to win by a similar margin.

In the recent local elections Jeremy managed to increase Labour’s share of the national vote on the 2015 general election. They said he would lose every by-election. He has won them emphatically. Time and time again Jeremy has exceeded expectation while also having to deal with an embittered wing within his own party.

This is no time for a leadership coup. I am dumbfounded by the attempt to remove Jeremy. The only thing that will come out of this attempted coup is another leadership election that Jeremy will win. Those opposed to him will then find themselves back at square one. Such moves only hurt Labour’s electoral chances. Labour could be offering an ambitious plan to the country concerning our current relationship with Europe, if opponents of Jeremy Corbyn hadn't decided to drop a nuke on the party.

This is a crisis Jeremy should take no responsibility for. The "bitterites" will try and they will fail. Corbyn may face a crisis of confidence. But it's the handful of rebel Labour MPs that have forced the party into a crisis of existence.

Liam Young is a commentator for the IndependentNew Statesman, Mirror and others.