Question
Is it possible to get better returns for my money by opening my own bank compared to the traditional savings accounts?Answer
The concept of running your own retail bank is simple: lend to your customers at a higher rate than you pay on their savings then bolt-on as many extra fees as you can get away with. But in practice you'll probably need millions of pounds to set up the infrastructure and the ability to jump through lots of regulatory hoops if you're to launch a 'proper' bank.
There are other more accessible options though, which retain some of this concept.
You could lend out money to individuals, which should earn you a better rate of interest than you'll get on your savings via a bank. The drawback with this approach is if you lend to someone and they don't pay you back you'll lose your savings - potentially high risk.
Web based services such as Zopa try to match up lenders and borrowers and help reduce risk by spreading your money across lots of borrowers, reducing the impact of bad debts. It's still not without risk and the interest you receive is taxable, but it's an interesting idea that can work for some - read our full review for more info.
If you don't mind a lot more work then you could consider setting up a credit union. These are local co-operatives owned and run by their members, which focus on savings and loans. There are already a number of these dotted around the UK, providing services to an estimated three quarters of a million people. Launching one is no walk in the park, as you'll need to be regulated by the Financial Services Authority and it could take a year or more to set up. But if you know a group of like minded people in your local community it can work well. You can read more on the Association of British Credit Unions website.
Setting up a bank is a nice idea though. Let's face it, most of us could probably do a better job than those bank bosses who've pocketed millions over the last few years while running their businesses into the ground.
Is it possible to get better returns for my money by opening my own bank compared to the traditional savings accounts?Answer
The concept of running your own retail bank is simple: lend to your customers at a higher rate than you pay on their savings then bolt-on as many extra fees as you can get away with. But in practice you'll probably need millions of pounds to set up the infrastructure and the ability to jump through lots of regulatory hoops if you're to launch a 'proper' bank.
There are other more accessible options though, which retain some of this concept.
You could lend out money to individuals, which should earn you a better rate of interest than you'll get on your savings via a bank. The drawback with this approach is if you lend to someone and they don't pay you back you'll lose your savings - potentially high risk.
Web based services such as Zopa try to match up lenders and borrowers and help reduce risk by spreading your money across lots of borrowers, reducing the impact of bad debts. It's still not without risk and the interest you receive is taxable, but it's an interesting idea that can work for some - read our full review for more info.
If you don't mind a lot more work then you could consider setting up a credit union. These are local co-operatives owned and run by their members, which focus on savings and loans. There are already a number of these dotted around the UK, providing services to an estimated three quarters of a million people. Launching one is no walk in the park, as you'll need to be regulated by the Financial Services Authority and it could take a year or more to set up. But if you know a group of like minded people in your local community it can work well. You can read more on the Association of British Credit Unions website.
Setting up a bank is a nice idea though. Let's face it, most of us could probably do a better job than those bank bosses who've pocketed millions over the last few years while running their businesses into the ground.
Read this Q and A at http://www.candidmoney.com/questions/question316.aspx
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