An Excellent Comment on Banking
The banks should be compelled to offer all their customers a facility called a good neighbour account. The customer would receive a guarantee that all the funds from such an account which are available for investment by the bank would be lent exclusively to local people and local small and medium-sized businesses. They would not be lent to foreign dictators or racketeers and they would not be used to speculate in fantasy financial products which their bank cannot value or even understand.
The bank in question would not have to track its use of every single such account. But it would have to publish accounts to show that all the available aggregate funds in such accounts had at least been matched by aggregate local lending to individuals and qualifying businesses. There seems to be a market for this kind of lending, as witnessed by the recent growth of peer-to-peer financial institutions. Britain’s largest such company, Zopa, had its best-ever month in January. But no one has yet tried to bring the concept into a current account.
If demand for good neighbour accounts really took off, it could force the banks to revive the old model of Captain Mainwaring banking. The hero of Dad’s Army received money from local people and businesses in Walmington-on-Sea. He kept some of this in cash or at call. He lent the rest to other local people and businesses in Walmington-on-Sea. Captain Mainwaring, and others like him, helped Britain to finance the huge demands of the Second World War and then to finance a generation of recovery and growth. All this was achieved with the minimum of government regulation or support.
In contrast with the Mainwaring era, too many of Britain’s modern banks have been run by Private Walker, the spiv, or worse still by Private Pike, the stupid boy.
He mentions Zopa as nearest to this ideal of banking, which certainly our parents would have recognised.
Zopa of course has paid me a lot more in interest, than ever I would have got from a reputable bank.
No comments yet.