The entrepreneurs’ bank

By: Mike Southon

Date: 16 May 2011

Banks put profit before customers. This was a headline in March, based on an interview with Mervyn King, Governor of the Bank Of England.

Resisting the urge to look for shock news about the religious convictions of Pope Benedict XVI and the toilet habits of woodland bears, I filed this link in the folder marked 'things most entrepreneurs know already'.

Here is some simple and practical advice for senior people in the high street banks. First, you should understand that entrepreneurs are very angry about how the banks behaved then and are even more incensed about how you behave now.

We note that you "respect" Mervyn King but "do not agree" when he questioned the bonus system, while dismissing his warning that failure to reform the sector could result in another financial crisis.

Angela Knight, Chief Executive of the British Bankers Association claimed that the industry had reformed itself and pointed out that it was the government, not they, who had run the economy poorly with lax banking regulations. This is equivalent to a recidivist thief blaming the government for not having enough police on the streets.

As entrepreneurs, we understand and respect people who take enormous risks, and expect them to be rewarded for what they do; this is how we run our own businesses. What we find deeply offensive is when banks are greedy and stupid, and then make us pay for their excesses with increased taxes and reduced public services.

The solution is simple, and self-evident. The banks should spin off those risk-rewarded entities and let them stand and fall on their own merits. They should not prop them up with taxpayers' money while offering thinly veiled threats about the collapse of the whole banking system if they are allowed to fail.

Then, the banks can start lending money again to small businesses. Now that they have rebuilt their balance sheets at our expense, they can help us rebuild ours.

I expect that this advice will probably fall upon deaf ears. But this time, we entrepreneurs have a chance to make a real difference. We can start by moving our accounts immediately to banks that offer free, on-line banking services so long as we keep our accounts in credit. We can then start looking for, and then moving en masse to what we decide truly represents 'The Entrepreneurs' Bank'.

This would be a bank that does not have a Las Vegas-inspired gambling division that could again bet our houses on bad loans and then cause the next recession. It would instead be a bank that lends freely to entrepreneurs, giving priority to those that have a qualified finance director to provide regular, accurate and transparent reporting of the company's performance.

The Entrepreneurs' Bank would also favour those enterprises that plan to grow by ramping up their service revenues, not by constantly leveraging their debt. These companies would always have assets greater than their liabilities, and thus would never have to provide the entrepreneurs' houses as surety.

And most importantly, The Entrepreneurs' Bank would favour social enterprises, companies that are not charities, but proper businesses that make proper profits while their day-today activities result in a real social benefit to society in general.

As John Lennon famously said, "you may say I'm a dreamer; but I'm not the only one." There are potentially seventeen million entrepreneurs out there and we all need bank accounts.

I will, of course, do one last trawl around the high street banks to see if they finally "get it". But if I get the usual, arrogant brush-off, there is another option: we can always start our own entrepreneurs' bank.

Originally published in The Financial Times. Copyright ©Mike Southon 2011. All Rights Reserved. Not to be reproduced without permission in writing. Mike Southon is the co-author of The Beermat Entrepreneur and a business speaker.

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