Business Model, etc. for starting up a New Bank

All sorts of strange things flitter through my head and I was thinking of the future when I'm a debt free billionaire what to do with the billions. Maybe buy an existing bank but you could be buying a lot of problems and legacy issues.
So maybe start my own bank. What products would I offer? Interest on loans makes the money in banks so I suppose I'd be thinking of offering loans. The higher the interest rate I could get the better so credit cards would definitely be considered. Small personal loans with high interest rates should be good earners too. Anything above 15 or 16% Apr should be good earners.
I don't think I'd touch the mortgage market for a chance to make 1 or 2% per annum.
Consolidation loans to people with slightly adverse credit histories and with high interest rates maybe?
Commercial loans and financing maybe?
I don't have many ideas about the deposit side of my bank, try and pay as little interest as possible while still being attractive maybe?

assuming you will be granted a licence...............

RichInSpirit said:

So maybe start my own bank.

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STEINER said:

assuming you will be granted a licence...............

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STEINER said:

assuming you will be granted a licence...............

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It can't be that hard to get a licence?

It would be very difficult to get a banking license which allowed you to take deposits.

But as you are a billionaire, you should be able to lend your own money and CB approval for this is much easier to get.

Your loan losses on credit cards and personal loans would be huge. Your loan losses on mortgages would be lower.

The best market would probably be to offer low Loan to Value mortgages at 3%.

Brendan

Irish banks/UK banks harp on about their loan books.... Mainland European bank talk about assets under management (AUM) I always go for the AUM model when investing..

Brendan Burgess said:

But as you are a billionaire, you should be able to lend your own money and CB approval for this is much easier to get.

Your loan losses on credit cards and personal loans would be huge. Your loan losses on mortgages would be lower.

The best market would probably be to offer low Loan to Value mortgages at 3%.

Brendan

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Hi Brendan!
I'm not quite a billionaire yet, I'm still only "nearly a millionaire"
Just thinking about these things in advance now while I'm still poor

Brendan Burgess said:

The best market would probably be to offer low Loan to Value mortgages at 3%.

Brendan

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Interesting Brendan. Since the money would be my own your talking about a 3% return. And I think the 3:1 ratio on earnings would be a must for me too. What LTV would you suggest? Under 80% for definite.?

Well, you only earn a 3% return if you assume zero defaults, operating costs, cost of funds (bear in mind that your billions could be invested elsewhere)...

RichInSpirit said:

Anything above 15 or 16% Apr should be good earners.
I don't think I'd touch the mortgage market for a chance to make 1 or 2% per annum.

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Risk and return

Unsecured debt with a high chance of default? or secured debt with a much lower chance of default (forget about the recent defaults in Ireland, money was loaned out without adequate risk assessments).

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

SBarrett said:

Risk and return

Unsecured debt with a high chance of default? or secured debt with a much lower chance of default (forget about the recent defaults in Ireland, money was loaned out without adequate risk assessments).

Steven
http://www.bluewaterfp.ie (www.bluewaterfp.ie)

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Ok Risk Assessment is another item to add to my business model.

Given a new bank and a clean sheet what would people like to see in a new bank?

Hmmm ... a counter, some forms and staff.

But seriously;
- ATMs on every steet corner, a branch in every town
- loans to those-in-need, in priority to people who can easily afford to repay loans
- easy access to loans, with paperwork to be completed at a convenient later date
- early openings, late closings and open on weekends & Bank Holidays incl Christmas
- contact between customers & banks to be initiated by customers only, and stopped at their request

All taken on board Newbie-employee. As long as I can take some other days off instead of bank holidays and Christmas!

Newbie-employee said:

ATMs on every steet corner, a branch in every town
- loans to those-in-need, in priority to people who can easily afford to repay loans
- easy access to loans, with paperwork to be completed at a convenient later date
- early openings, late closings and open on weekends & Bank Holidays incl Christmas
- contact between customers & banks to be initiated by customers only, and stopped at their request

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Is the 2nd one not an oxymoron. I.e. those most in need are likely to be those at the higher risk level re meeting repayments!
The convenient later date has been tried before. One of the main reasons behind the default ratio was that paperwork was deferred and inevitably never completed.
So, you would like your bank to not bother customers on loan arrears!!
As a potential borrower you have me hooked! As an investor, I think I'll hold out to see how you get on

Newbie-employee said:

- easy access to loans, with paperwork to be completed at a convenient later date

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2005 rang, they want their banking practices back

(Other items for the list)
- Banks should provide guarantors where borrowers have none, or do not want to provide one
- There should be a discount of 5%-10% on the capital amount borrowed if the borrower meets his obligations (this should be front-loaded into any loan agreement on the presumption of two-willing parties to the loan)
- 'Payment holidays' should be automatic in every loan agreement especially around the times of Christmas, Ibiza-holidays and bar-mitzvahs