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Bank 19 - a brave new bank for a brave new world?

In common with many others, I too was relieved when the government introduced a variety of fiscal measures designed to support the UK economy and the wider population as we navigate our way through this global pandemic. Finally, after a nerve-racking delay, an increasing number of small-to-medium-enterprise (SME) businesses have now received the government’s ‘bounce back loans’ which will hopefully help them to weather this tragic situation. SMEs are the backbone of our society and with so many struggling for their very survival, in my view, this is a much-needed intervention.

Sadly, to some extent, the unacceptable delays were caused because so many of the banks are still too dependent on ageing, creaking IT systems and outdated risk assessment policies upon which they have to make potentially life-changing decisions. See part two of the Bank of Tomorrow blog series here. Yet again, their continuing reliance on outdated technology infrastructures has been brought into sharp focus as they have severely limited their ability to quickly and accurately evaluate the eligibility of each applicant. And because the government guarantees were originally set at 80%, the banks were exposed to some £5,000 of risk for every loan they were asked to write. It’s no wonder they have taken so long to authorise and distribute these life-saving funds.

Wholesale economic fallout 

When confronted by such a mountain of activity, the scale of the issues we all face cannot be underestimated. Whilst laudable, the consequences of a mass deferral policy do not actually address the potentially devastating economic hit that’s coming our way. In reality, this is just a temporary bridge and drastic steps are needed which will enable us to recreate a solid foundation upon which to rebuild our future. Today’s situation is nothing like the 2008 financial crisis which was ultimately ‘fixed’ by quantitative easing. It is very different. This is wholesale economic fallout and currently the ‘best’ scenario in town is a shallow recession followed by a rapid and strong recovery. To achieve this, we desperately need businesses of all shapes and sizes to get back to work as fast as is humanly possible. And we need a modern technology-driven, robust banking system which underpins the recovery process. So, what will it take to make this a reality?

Bank 19 for the post-pandemic world

One answer would be the formation of a national ‘COVID-19 Bank’. Let’s call it Bank 19. The new bank would consolidate all the C19 related bail-out lending schemes, from all business sectors with 0% interest rates over a lifetime term (say 20 years plus). This would have two impacts, First, it would alleviate the debt overhang from such schemes on business, and second it would free up liquidity for Banks, taking these unprofitable debts from the banks' balance sheets and allowing them to use this freed-up liquidity in support of the recovery.

Bank 19 could go a long way in helping to alleviate the caution, business stress and the debt overhang - boosting confidence. It would also pave the way for a faster recovery and, at the same time, blunt the dangers to our economy of wiping out those small and mid-tier businesses that are unable to compete with larger global plays with liquidity and access to capital.  

The news that UK banks continue to report falling profits, compounded by enormous debt write-offs and plummeting market values is very worrying, to say the least. With so much of our economy, apart from a few exceptions, pretty much on hold, it’s still too early to predict what the true impact of the almost nationwide business suspension on the banking sector will be. Initially, most of the financial firms suspended many of their long-overdue restructuring programmes as they scrambled to construct their own future survival plans. Fortunately, there are now indications that some of the suspension measures are starting to be relaxed. So, with light showing at the end of the tunnel, my best guess is that their post-pandemic revival plans, alongside some stringent cost-cutting, will hopefully be offset by an urgent and reinvigorated policy of increased investment in new technology.

Interestingly, a stand-out success in all of this has been everyone’s ability to, almost seamlessly, switch over to a highly productive home working environment.  A previously unimaginable situation which would have been impossible to achieve without the cloud, modern collaboration tools, improved communications and a more flexible approach to modern working. Unsurprisingly, this is now calling into question the validity of large corporate offices and the associated cost burdens.

Creating Bank 19 is not as crazy as it might sound

The adoption of modern technology and processes is key to building a sustainable future. Within the banking arena, the ability to very quickly stand up a new technology infrastructure, albeit on a smaller scale, is already proven. Based on a simple operating model, the key components are on-boarding (off the shelf, fully automated, compliant SaaS BBLS solutions) or data transfer from banks to the new entity. A great example of this is where we have seen multiple firms go through the building of customer data transfer to facilitate the RBS Incentivised Switching Scheme. The integration of payments solutions, to take advantage of the proven, low-cost, latest faster payments offerings. Lending product lifecycle solutions, again, proven ready-made SaaS solutions, are there for the taking. The utilisation of any number of call centre service offerings and companies provide human service capabilities, where necessary. All facilitated by APIs which enable the rapid integration of new components, hosted on a highly cost-efficient, robust and secure cloud infrastructure able to scale up or down during Bank 19’s existence – the epitome of the much talked about bank as a platform. So, what’s stopping us?

Bank 19 could be part of the answer

According to recent data from the International Labour Organization, as a direct result of this virus, it is estimated that some 1.6 billion people could lose their livelihoods. As members of a global family, we have a combined responsibility to do everything in our power to help avert this terrifying statistic. I strongly believe that desperate times do not need desperate measures. They require a swift but carefully considered strategy that is designed for the common good. Creating a new type of financial institution, in the shape of Bank 19, based on a modern technology foundation and a new approach to how banking services are delivered, designed to withstand the most dire economic circumstances, could very well be an important part of the answer. Discuss. 



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