Bank of London launches Easy Access Savings account
London, 23 April 2024 –
When you think of the phrase ‘safer banking’,’ what comes to mind?
You may think whichever bank holds your money is a simple decision. Whether it is one of the big players around for so many decades or a digital disrupter, it is a bank, isn’t it? What could go wrong with your money in that one bank your firm trusts and uses?
Bank industry issues played key roles in two of the biggest economic crises of the past one hundred years – the Great Depression of 1929 and the Global Financial Crisis of 2008. A year earlier, the first bank run on a British bank in 150 years occurred.
When Northern Rock failed in 2007 it faced daily outflows of 5% of its deposits. When Silicon Valley Bank failed last year, it saw a single day outflow of 25% of its deposits.
Today, businesses and consumers are paying more attention when it comes to the question of: How safe is my money?
Businesses are looking at risk mitigation: multi-bank partners, rather than relying on just one bank. With geo-political, interest rate, supply chain and technology disruption risks, they see this approach as helping to reduce their primary bank exposure, and to stay competitive in an increasingly challenging environment.
One factor behind bank collapses relates to how they lend, invest and loan out deposits.
“We have entered a new, dangerous era for finance where the centuries-old banking practice of investing in long-term assets backed by short-term deposits is failing,” wrote Alex Lipton and Alex Pentland in a viewpoint for Scientific American after the SVB collapse: Social Media is Rewriting the Banking Playbook.
The “first part of a cure,” Lipton and Pentland say, is to break commercial banks into narrow and fractional banks, separating day-to-day financial services from the business of making loans.
A different way to bank
Integral from the outset with Bank of London was a desire to better manage complexity and risk.
The business model is simple. We offer our clients Financial Services Compensation Scheme-protected (FSCS) savings accounts. We take those deposits and place them on reserve, in full, at the Bank of England. We don’t loan, lend or leverage them like other banks do. This means savings are protected from bank runs because when people want their money back, they can have it. This provides peace of mind for businesses and a level of security against financial crises. We are one of the very few principal clearing banks in the UK that offers this to regulated and non-regulated companies - businesses and corporates.
Should all banks be like Bank of London? No. People and business need access to credit and lending. It is an important driver, helping businesses and economies to grow.
However, while business can have FSCS-protected bank accounts, large and complex businesses have cash management needs that extend far beyond deposit insurance limits. That is why large businesses invest in repurchase agreements, short-term commercial paper and other forms of short-term debt that blew up in the 2008 financial crisis. Yes. these assets are safer than typical bank accounts, but, as we saw, not completely safe.
As a Harvard Business Review viewpoint said in the same month SVB collapsed: “… the truth is that we don’t need more traditional banks - we need different kinds of banks.”
Since launching in the UK last year, we have seen how our bank licence, expertise in holding and moving money and focus on making and taking the time to listen to actual client needs, has helped businesses with sometimes complex needs get to a simpler place.
This is not actually radical or disruptive. We are talking about fundamentals. We are talking about what a good banking partner should be.
One example of this involves our Easy Access Savings product. Easy Access is the first savings account we have launched that can be opened directly from our website.
It evolved from seeing both start-ups and corporates wanting a safe and convenient place to store their funds, earning a competitive rate of interest.
The accounts also work for those that already have a banking partner but want a secondary option to diversify risk, and again keep money safe while earning a market-leading interest rate.
Deposit Protection Key
While we have an operating model that is safer by design since we do not lend or invest client money, we also as noted earlier provide protection through the FSCS, the United Kingdom’s deposit guarantee scheme. This means eligible deposits with us are protected up to a total of £85,000, or £170,000 for joint accounts.
Our Easy Access Savings account can be set up directly online in 20 minutes.
There is a competitive interest rate tracking the Bank of England base rate and businesses do not need to lock in their money.
For start-ups and mid-sized businesses, we believe our new account offers a level of safety and convenience with interest rates that make a positive difference to the bottom line.
About Bank of London
Bank of London is a principal UK clearing bank. With a ‘safer by design’ approach different to other banks, no deposits with the bank are loaned, invested, or leveraged. All client money is held securely at the Bank of England, available on demand.
The bank provides business-to-business banking solutions including:
Clearing, payment and settlement solutions with real-time access to payment infrastructure and interbank networks though API or Online Banking
Embedded Banking (BaaS), making it possible for companies to embed regulated banking products into their own customer offerings, under their own brand and powered by the bank’s licence and platform
Commercial & Corporate Banking with next-gen payment and cash management solutions
Bank of London is authorised by the Bank of England’s Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority.
For more information visit: www.bankoflondon.com, contact us at client.partners@bankoflondon.com or follow us on X or Instagram at @thebankoflondon.
