"My Perfect Bank" is a bank that takes no risks and still makes money. Ideally this bank can give loans to customers at an agreed rate and then bundles all the loans/mortgages together each quarter off to other investors looking for yield. My bank should take no risks, and is simply rewarded with margin on origination of the new lending. This securitisation process turns the banks’ collection of mortgages into Mortgage Backed Securities (MBS) .
"My Perfect Bank" has no branches at all. They are just expensive monuments, a relic from the old world of retail banking. My bank will have no legacy issues for pension liabilities, or bank branches to maintain by way of expensive long term leases.
"My Perfect Bank" will mostly likely be an internet bank with clever software where customers can do business transactions when they want in electronic format rather than face to face. A few trained bank officials answering questions on-line or phone for that occasional necessary human interaction will suffice.
“My Perfect Bank” should specialise in certain areas where it has a competitive advantage. Converting debt into cash receivables could be one area. This is where “My Perfect Bank” buys blocks of stressed debt upfront from other financial institutions at a discount. Buying the debt requires money. “My Perfect Bank” could sell retail bonds to investors to raise cash to buy the stressed debt.
What about actually taking deposits as a bank? A novel idea indeed! Don’t touch demand accounts. Too much hassle. Better to offer attractive rates for deposits held for extended periods greater than one year. “My Perfect Bank” would be in an excellent position to provide medium term loans for major consumer purchases like car loans, furniture etc. Obviously grateful consumers would expect to pay for interest for credit. “My Perfect Bank” sees fat margins in this area.
To succeed, the bank would need to have one of the lower bank cost bases, so the bank can always compete effectively. If other Banks have 40% cost base, than I want “My Perfect Bank” to be have a much lower cost base.
The other banks, particularly the big banks, as an extra help to “My Perfect Bank” should be tied down with additional administration matters, including regulatory and capital ratio concerns for good measure!
Does “My Perfect Bank” exist?................... Maybe not!
Some of the new banks do certain things very well and better than bigger banks. However to …
.png)
