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How to become a bank (2016)
- arca_vorago 9y agoOh you mean use your network of contacts to entangle governments in wars while financing both sides and then stretch the wars out so the government has no choice but to accept your private banking control of the country? The Rothschilds figured out a long time ago that lending to governments is almost always a win.
- mattpkobus 9y ago...and in 80 years they dead. Just like everyone else :)
- MistahKoala 9y agoI wasn't expecting to see such a low-quality comment like this on HN.
- arca_vorago 9y agoI know it's not on topic for the link itself, but I think it's on topic for discussion of the BoE. That said, point taken. Perhaps waking up and posting captured my grumpy and ot side. More on topic then, this seems like a very interesting and useful document not just for aspiring UK fintech startups (The City is having a boom in fintech) but just as a general document for startups. It's also probably useful for those going for VC funding because at the end of the day bankers touch all your deals so you might want to know a bit more about what they do.
- edisms 9y agoWhat makes it a low quality comment? Because you disagree? Seems like you lowered the bar.
- AnimalMuppet 9y agoNo, because it's a rant, and it's an off-topic rant to boot. It's like someone has an axe to grind, and takes a slightly-related topic as an excuse to try to hijack the discussion onto their pet hobby horse. That doesn't contribute to a good discussion. Also, it's borderline paranoid conspiracy theory drivel.
- arca_vorago 9y ago>it's an off-topic rant The article title is "How to become a bank", and it was written by the bankofengland.co.uk by a glance at the url, so the first question is: "How did they become a bank?", is it not? It's not like HN is devoid of WallStreet'rs or City'rs, among them this is just standard knowledge. I mean of course it's a bit of a stretch to say the bankers financed the Jacobin revolution which was a large precursor event (except they sorta did but it was different bankers etc), but instead of getting into the history, I have a real feeling your snide remark at the end is largely due to you viewing any mention of the name Rothschild as being done by "paranoid conspiracy theorists". The Rothschilds have been a powerhouse of interconnected banking families for a long time, and have been open about it, including for example how they aren't aristocrats in the UK for various reasons. Their strategic brilliance in business is an inspiration for the cunning businessman, and they still are doing business around the globe today, and the fact that they very largely got there by lending to governements and creating central banks is also well known as fact. So it gets very tiring when any mention of them is so tainted by ones preconcieved disdain for anything perceived to be "drivel of a conspiracy theorist" that their response becomes such an attack. The reality of banking is so much more personal and good old boys than any document could ever show. This is obviously a move to pull in the fintech and other tech startups that want to function as a non-traditional bank ala paypal, probably due to cryptocurrency and algorithms taking over the world. That said, I have heard talk that the UK has been lowering the barrier of entry to traditional banking as well. I still see, systematically, the central bank by fiat as one of the core problems we need to overcome as a species. All banks (traditional, fintech or otherwise) will be subservient to that central banking system until it changed, and I think some of the crypto-startups may have taken a poison pill by adopting into the traditional banking infrastructure so quickly (and largely due to regulatory fears, etc) instead of working on a purely internet-ized solution. (which is also why I think the big btc jump the last few years has actually been due to central fiat actors trying to see if they could execute the ~50% attack. A nice side benefit is that btc is easily traceable, which is what makes it superior in their eyes (not to users/consumers though)to cash) My point is, that in the end, the real discussion we ought to be having as a matter of fact is very much about the core fundamentals of the banking system, which I think ergo includes discussion of it's origins, that I think it's great potential discussion matter, and that I very much disagree with your flippant dismissal of my post as "paranoid conspiracy drivel".
- avn2109 9y agoIn general I'd dispute that a comment regarding the possible failure modes/malfeasance of banks should be regarded as "low quality" on a thread about starting lots more banks. Also, I find the comment civil and made in good faith (regardless of whether or not I personally agree with it).
- MistahKoala 9y agoIt wasn't the comment about banking itself, but invoking the (debunked) trope about the Rothschilds that I took exception to.
- simonvc 9y agoThe UK regulators have done amazing work making it possible to start new "challenger" banks. We started 3 and a half years ago, so this kind of guide would have been super useful for us at the beginning. It was a bit more opaque back when we did it, before us only a handful of new banks had been created since Metro bank, and that was the first in 125 years..
- cpach 9y agoCool! May I ask what bank you are referring to? :)
- tpurves 9y agoHow does the regulatory environment in NA (USA/Canada) compare vs UK when it comes to starting a challenger bank?
- otoburb 9y agoCanadian banking is a protected industry. It is fiendishly difficult to set up a new bank due to Canada's proximity to the United States and the fear that larger international banks will (eventually) swallow up the Canadian banking system. US banking is slightly easier, in the sense that one may be able to either go through the tortuous process of setting up your own bank, or buying a corporation with the requisite licenses and (ideally) existing customer base. EDIT: Rogers Communications (a Canadian telecommunications provider) applied for a banking license in September 2011 and launched in 2013[1]. I believe the bar is somewhat lower for existing domestic/Canadian companies. [1] https://en.wikipedia.org/wiki/Rogers_Bank https://en.wikipedia.org/wiki/Rogers_Bank
- pjc50 9y agoAfter Northern Rock, it seems fairly reasonable that companies starting a banking operation be decently equity-funded and organised. Liquidity requirements for all banks were raised by European financial regulators after the crisis. There's even a "mobilization" phase where a new bank is allowed to run with looser compliance for 12 months while they get started. "To authorise a bank we must consider it resolvable (in bankruptcy)" is also a sensible bit of planning: you're not allowed to dump a toxic collapse on the central bank and run away. The bit about "calling yourself a bank" reminds me of https://en.wikipedia.org/wiki/Banknotes_of_the_Black_Sheep_Company_of_Wales_Limited https://en.wikipedia.org/wiki/Banknotes_of_the_Black_Sheep_C...
- Sniperfish 9y agoVery interesting content and I hadn't encountered it before, but can we get a (2016) tag as it's not 'new'.
- uhnuhnuhn 9y agoThis seems to be a great balance between helping new banks get off the ground while keeping a tight oversight regime in place. For an interesting example of what happens when you deregulate your banking sector too much: I remember doing research on the Ukranian banking sector about 10 years ago, there were over 900 banks in operation. Many of them seemed to be oligarchs setting up banks and leveraging their capital to lend their own/their friend's corporation a ton of money. The borrower would then simply default on the loan and the bank would go bankrupt...
- TazeTSchnitzel 9y agoI suppose https://en.wikipedia.org/wiki/Albanian_Civil_War https://en.wikipedia.org/wiki/Albanian_Civil_War would be the extreme worst case?
- ChrisSD 9y agoI do wonder about some of the new digital banks. For example, Atom Bank PLC requires all banking be done via smartphone. I'd not be comfortable doing banking on my smartphone but even if I was their Terms and Conditions make me nervous[0]. It's the usual stuff about the customer being responsible for everything and they can change the terms at any time without option to accept or reject them. But beyond that it also appears to say that you're responsible for using a smartphone that supports their app. Given they can drop support for a device at any time, this has the potential to lock you out until you get a new phone. I'm also not sure about their use of biometrics for security. I wouldn't use an ordinary front facing camera to unlock my phone so why would I use it to secure my bank account? [0] https://www.atombank.co.uk/application-terms-and-conditions https://www.atombank.co.uk/application-terms-and-conditions
- 21 9y agoYou should see the Revolut (they are applying to become a bank) terms. Mind-boggling stuff like you being responsible for their bugs: > 24.14. To the extent permitted by applicable law, Revolut is not liable, and you agree not to hold it responsible, for any damages or losses (including, but not limited to, loss of money, goodwill, or reputation, profits, or other intangible losses or any special, indirect, or consequential damages) resulting directly or indirectly from: > glitches, bugs, errors, or inaccuracies of any kind in the Revolut Services; > 17.2. If for any reason (including, but not limited to, any technical errors on our behalf or on behalf of our third-party providers) you have a negative balance in your Revolut Electronic Money Account, you agree to immediately Top-Up the required amount to correct the negative balance, such amounts being due without the need for previous notification. If you fail to do so: Banks are notorious for their terms, but this is taking it to a new level. Move fast, break things, and don't be responsible. To be fair, I'm not sure how enforceable these clauses are, I find it hard to believe that a judge would side with them if a customer's money suddenly vanish.
- alexbilbie 9y agoThe FCA are very consumer conscious - look at the threats of significant fines towards TSB for just a few days of their app and website being offline.
- pbhjpbhj 9y agoThere was the Bank of Dave, an interesting experiment a few years back in the UK; I read the book, I think they made a documentary movie too.
- ryanmarsh 9y agoDoes such a guide exist for the US? An investor in a startup I was working for made his way onto the board of a local (small town) bank. He was already very wealthy from real-estate. He was quite proud of himself for making it onto the board of that small bank. It seemed odd to me because he was already so wealthy, he didn't really need to be on that tiny bank board. I asked him about what it took to get onto the board, how one starts a bank and so forth. I'll never forget what he said: "Owning property is a right, owning a bank is a privilege". In retrospect that does seem to be in line with how one gets into banking (as an owner) in the United States.
- venantius 9y agoWe're about to start the process of getting authorized as a bank in the UK (we want to be a digital-only bank that handles client money for companies like Coinbase, PayPal, etc). The Bank of England and the FCA's resources on how to go through the process have been invaluable. The founding team is American and we've literally relocated to the UK because of the friendlier regulatory environment in order to do this.
- osrec 9y agoNice. I'm looking to work with a company like yours in the near future. Are you guys based in London by any chance?
- tixocloud 9y agoI tried signing up for early access but seems like it’s not working?
- venantius 9y agoHmm, sorry about that. Feel free to shoot me an email (David at griffin.sh); would love to chat about your needs.
- leonjohnson1 9y agoThis looks really cool and i'm glad someone is working on this. This is definitely a service I'll be keeping an eye for.
- stephen_g 9y agoSeen this before, but it's very cool. The sector in the UK seems a lot better than Australia - here you need a minimum of $50 million in Tier 1 capital (share capital and retained income) to even start the process to become an Authorised Deposit-taking Institution. Sure, banking is a serious business, but I think it'd be beneficial to have a special category for small startup banks only requiring $5 to $10 million or so, with adequate supervision etc. The problem we have though is that the culture of our banks is rotten to the core, and dominated by four main players. The regulators (ASIC and APRA) are underfunded and mainly turn a blind eye to a lot of what goes on (mainly going after smaller financial services companies who can't afford the same kind of lawyers as the banks). We're only finally having a proper enquiry now after investigative journalists having uncovered a lot of this years and years ago, and most people are pretty shocked at what's going on. I think the sector could benefit from smaller players coming in (hopefully with better morals), but the regulatory requirements are helping to protect the big banks' strangleholds.
- sanbor 9y agoSorry if this is offtopic, but this was one of the aspects that I found very interesting about Bitcoin. Because it's a protocol, in theory you just need to have the software installed in your computer and you can start being a bank. This is similar to the web for publishing. You just need to plug your computer to the internet and start serving your website. Before this if you didn't have the time, energy and luck of finding a publisher it was hard to publish a book. This is a huge simplification but I just wanted to highlight one interesting aspect of cryptocurrencies.
- neffy 9y agoThere was a short period in the USA, known as the wildcat banking era in the 1840's, when it was indeed possible for anybody to setup a bank. There's quite an entertaining paper from the time that describes the resulting chaos: http://www.jstor.org/stable/2338493 http://www.jstor.org/stable/2338493 And yes, it pretty much describes the current crypto scene as well.
- twic 9y agoThis is a terrific little read, thanks!
- PeterisP 9y agoBitcoin software on your computer allows you to start being a bank in the exact same manner that a table in a public place and an advertising banner is sufficient for being a physical bank. You technically can provide banking services (the core one, of course, being moneylending) with that, and this has been traditionally done that way since literally biblical times, but nowadays that would be just as illegal as doing the same with Bitcoin.
- sanbor 9y agoRight, we still have to deal with local laws anyway. However, consider that technically I could create a "New PayPal" as I could receive digital payments and give cash to my customers. Of course this doesn't cover the legal aspect. If you'd want to release something like PayPal in 1998, the only possibility is being rich or having rich friends. That's the only way credit card companies are going to consider doing business with you. Now with Bitcoin you're relieved of that obstacle but of course you have to still deal with the law.
- sjreese 9y agoI agree the entry fee of $50,000 is 1/3 of the cost in the US - I hope a lot of start-ups will add banking services to their business models as such (cash -> bitcoin <-> cash and in any amount giving payments to 3rd world partners for goods and services) Thus the Belt&Road project would have one currency
- paulcole 9y agoFrom the headline I thought this was going to be one of my favorite stories: "How I set out to simplify ordering Starbucks and created an internal banking system." http://royrapoport.blogspot.com/2011/05/coffee-and-its-effects-on-feature-creep.html http://royrapoport.blogspot.com/2011/05/coffee-and-its-effec...
- LeoPanthera 9y agoI'm a British citizen but I live in the USA. I want to maintain an account in the UK - but this is becoming harder and harder. The mainstream banks want a balance of tens of thousands of pounds, often hundreds of thousands of pounds, before they'll allow it. Currently I have an account with [large famous bank] who think I'm still living in the UK. If they ever find out I'm not, the terms of my account say they're allowed to close it. So this is one thing I'd love to see from "new" banks - services for people who are UK citizens but do not reside in the UK.
- commandlinefan 9y agoI thought about this when Bank of America stopped offering loans to gun manufacturers who sell assault-style weapons to civilians - my first thought was, well, there's a market opportunity for a "startup" bank.