You don't even need $500m to start a "real" bank. The problem is that banking is a business for suckers. Banks only make money because, theoretically, they hav

You don't even need $500m to start a "real" bank. The problem is that banking is a business for suckers. Banks only make money because, theoretically, they have low capital costs. But these days there are many, many entities flush with capital and eager to lend and they certainly don't care about actual cash flows or hard assets. In a world with 100B VC funds and SBICs and sovereign funds all desperate for any kind of real growth only suckers actually go to the bank for loans. And actually loaning real money to such people won't move the needle. This makes banking an inherently risky, and very boring commodity business. In the UK everybody's constantly asking why banks won't lend to anybody but real-estate developers and real-estate investors. What else are they supposed to do to pay their rent? Finance another kebab shop? China, frankly, has done the right thing and fully embraced shadow banking. Having the economy held hostage by a bunch of golfers is insane. Extend the special privileges enjoyed by banks to a wide array of institutions and you will see capital find its way to the best allocators. This isn't about deregulating banks. This is about recognizing there are wide array of lenders out there who are ready to invest. Bring the shadow banks in from the cold.