
How to become a bank (2016) - hestefisk
https://www.bankofengland.co.uk/-/media/boe/files/prudential-regulation/new-bank/seminar-slides-1010.pdf?la=en&hash=CC03BF5728A8DD96D28AE26DEFB3E95BF1F03333
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simonvc
The 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..

~~~
tixocloud
What you guys are doing is quite interesting and it’s made my job all the more
interesting.

I do wish I could do the same as what you’ve done and disrupt the Canadian
banking system.

The UK banking system seems incredibly more efficient and fair to consumers
than the Canadian banking system does.

~~~
moltar
Lets do it!

\- fellow Canadian annoyed by our banking system

~~~
tixocloud
I'd be happy to have a chat if you're interested.

~~~
moltar
Let’s have a chat at a minimum.

~~~
tixocloud
Do you have an email address?

~~~
moltar
moltar at moltar dot net

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ChrisSD
I 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
You 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.

~~~
robinson-wall
It doesn’t have to be this way - e.g.
[https://monzo.com/terms/](https://monzo.com/terms/)

Disclaimer: I work for Monzo

~~~
SubMachineGhost
Hey there!

Do you guys have some Scala in your code base ? or do you strictly use Go?

~~~
robinson-wall
We have just one Scala service - it's not a language we use day to day.

We're almost entirely Go, but do use other languages where it makes sense to -
usually because there's a useful library, or great tooling / community for a
particular use case. For example we have a handful of Python services for ML.

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venantius
We'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
Nice. I'm looking to work with a company like yours in the near future. Are
you guys based in London by any chance?

~~~
venantius
We are! Feel free to shoot me an email - david at griffin.sh if you want to
find a time to connect.

~~~
osrec
Done! Btw, Griffin looks cool!

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stephen_g
Seen 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.

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uhnuhnuhn
This 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
I suppose
[https://en.wikipedia.org/wiki/Albanian_Civil_War](https://en.wikipedia.org/wiki/Albanian_Civil_War)
would be the extreme worst case?

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pjc50
After 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_C...](https://en.wikipedia.org/wiki/Banknotes_of_the_Black_Sheep_Company_of_Wales_Limited)

------
ryanmarsh
Does 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.

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LeoPanthera
I'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.

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pbhjpbhj
There 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.

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Sniperfish
Very interesting content and I hadn't encountered it before, but can we get a
(2016) tag as it's not 'new'.

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sanbor
Sorry 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
There 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
This is a terrific little read, thanks!

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paulcole
From 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-
effec...](http://royrapoport.blogspot.com/2011/05/coffee-and-its-effects-on-
feature-creep.html)

------
sjreese
I 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

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commandlinefan
I 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.

