A Bank of Dreams

Saturday Guardian . Money 7/7/12

The banks are “shit”. According to Dave Fishwick, a Burnley businessman who has made millions as the biggest minibus supplier in Britain, “all they have done is shit on people”. It’s a crude assessment, but it’s one probably now shared by millions as the Barclays scandal unfolds and NatWest picks up the pieces from its service meltdown.

As he drives round his home town, all Fishwick sees are the relics of an industrial past, boarded-up shops and one To Let sign after another. But unlike almost everyone else, he has done something about it. In a unique model, that links savers in his home town earning paltry interest on their deposits with local businesses starved of cash, Fishwick has opened “Bank of Dave”. It’s already lending £25,000 a week, with hundreds of happy local customers and many more on the waiting list.

Pensioners earn 5% on their money – better than any best-buy deal on offer from the high street banks – while small business borrowers pay 8.9% to 14.9% a year interest, or less than the rates often charged by conventional banks.

All profits go to charity. “This is not about adding more zeroes to my net wealth. After all, you can only drive one car at a time or go on one holiday at a time. Sometimes you just have to stand up and make a difference.”

It’s not really called Bank of Dave, despite Fishwick’s best efforts. It’s the Burnley Savings and Loans and it will stay that way until City regulators, who have approved only one new bank in the last 100 years, grant the maverick 41-year-old a banking licence.

It will be a Herculean task, and not just because there are 8,000 pages of forms he has to fill in. Documentary makers for a Channel 4 series starting next week followed Fishwick around the City of London last year as he tried to make his case – with results that were as depressing as they were, perhaps, predictable.

One City expert after another battered and blunted Fishwick’s ambition. “They told me that if I use the word deposit or say I’m a bank then I will go to prison. Yet not one single banker in the City, the people who have pocketed millions in bonuses and let us all down so badly, has ended up in prison. God forbid that I should try to offer pensioners 5% interest.”

David Buik of City brokers BGC Partners, swiftly dismissed the idea of Bank of Dave obtaining a licence, saying: “You don’t have a chance.”

Another expert told him that, in the past, “if you went to the right school and had the right parents you might be considered a fit and proper person to go into the banking industry … there is no evidence you are.”

But there’s no bitterness from Fishwick, whose cheeky chappie, straight-talking Northerner schtick appears to come direct from central casting, although it’s no less real for that.

“I was bullied when I was 12 to 13 but then I started to fight back and learnt you can beat the bullies.”

The idea for the “bank” was sparked by the sudden withdrawal of bank loans to his customers in 2009 that almost wrecked Fishwick’s minibus firm. His own firm’s balance sheet was fine, but the small businesses who make up the bulk of his buyers found they could no longer obtain finance. “All of a sudden it just stopped. The banks kept declining my customers. The customers weren’t doing anything differently and were still able to repay. It was the banks who were having problems, and lowering the bar.”

So Fishwick started lending his own cash to minibus buyers, on his own terms. After six months, and with not a single customer defaulting on their payments, it struck him that running a bank couldn’t really be that difficult.

But, in reality, the hurdles are enormous. Obtaining a consumer credit licence to lend is relatively straightforward – after all, it’s the lender who is putting their money at risk. But obtaining a deposit-taking licence is an altogether different matter. Regulators are understandably concerned that any business seeking to take deposits from the public meets strict criteria, above all the ability to repay on demand.

In Fishwick’s case, he was told he needed to keep a minimum of £10m in reserve. “They said I needed that amount in reserve but that I could never, ever use it. How come? Surely it should be pro-rata to the size of what you’re doing?”

Yet he managed to open for business in September 2011. “The world and his wife were telling me I couldn’t be a bank if I didn’t have a banking licence, that preserve of the stinking rich and the banking elite. I was determined to show that I could,” he said in a book he has written on his experiences.

So how did he do it? He rented a vacant shop in Keirby Walk in the town centre for under £100 a week, determined not to have the huge overheads that traditional banks pass on to customers. He gave his time for free, as did local enthusiasts who helped paint, decorate and fit out the branch. Above the entrance it says Bank on Dave! but it’s an advertising slogan, not the firm’s legal name.

He could have opted to open a credit union, but he feels they remain hamstrung by rules and regulations about who, where and how they can lend. Instead, Fishwick adopted a peer-to-peer crowdfunding model, of the type pioneered by Zopa.com. It’s why he talks about “achieving” a 5% interest, rather than paying it as interest on a deposit.

As his website explains: “You lend your savings to a borrower, and that borrower then becomes responsible for the paying of the loans. Burnley Savings and Loans does the administration around this and is responsible for vetting applicants for loans.” So, legally speaking, savers are not actually putting down a deposit in BS&L, they are just being channelled by it to someone who needs the money as a loan.

Savers are allowed to lend from £50 to £1,000 on 30-day notice, or up to £15,000 with one year’s notice. There’s no protection through the Financial Services Compensation Scheme so savers have to rely on Fishwick. Every £1 put in, he personally guarantees. In other words, he puts down £1 of his own cash for every £1 brought in by a customer. Borrowers are credit checked in the usual way through agencies such as Equifax.

His borrowers are not, he insists, the more desperate types who would otherwise resort to payday loan merchants. “We’re all about helping real businesses. I had an accountant who came to us needing to borrow £10,000, as he was buying his partner out. Yet, even though it meant his income would rise and his record was impeccable, the banks wouldn’t lend him the money. So we did. If a local accountant in Nelson (Lancashire) can’t borrow from a bank, what hope does Mark the builder or Gary the plumber have?”

But has it all been about the TV cameras? Fishwick’s layer upon layer of northern grittiness versus southern sniffiness will be grating for some. His assertion in interviews that the borrowing rate is 8.9% to 14.9% is also a little bit cheeky. That’s only if you calculate it as a flat rate (ie, you pay £89 interest on a £1,000 loan over one year). On an APR basis, used by the banks, the interest rate on his loans is a decidedly less attractive 17.4% to 29%. But, to be fair to him, that is stated upfront on the BS&L website.

“This is not about trying to be bigger than the banks or about lining my pockets. Someone, somewhere has to take the first step and take them on,” said Fishwick. He dreams of many more independent savings and loans across the UK. “Other people up and down the country can do the same as me. We could have something like Burnley Savings and Loans in every community. You just need like-minded individuals to come together.”

But if you’re dreaming of 5% interest, guaranteed pound-for-pound by Fishwick, dream on. The Burnley Savings and Loans is open for business, but having reached its £25,000-a-week target, is only accepting new customers on to a waiting list. Unlike Northern Rock, people are queuing to put money in, rather than take it out.

• Bank of Dave starts next Thursday 12 July, 9pm on Channel 4. A book to accompany the series is available now (Virgin) £12.99.