As regular readers of my and / or Brendan’s blog and twitter feeds may know, we have been looking into how to set up a bank. The primary reason being that if the Bank of England embarks on a policy of quantitative easing (otherwise known as printing money / helicopter money), then we want to get a piece of the action. We certainly have plenty of ideas for cash yielding investments to spend it on!

Anyway if we get past the formalities and set up our bank, how do we go about borrowing money from the Bank of England?

Unfortunately, I couldn’t quite find a simple answer to this on the Bank of England’s website, but I think the process comes down to the following 3 steps:

• Become a Bank.
• Have some eligible securities to use as collateral.
• Swap your securities for cash.

If you read through the eligible securities section on their site, you will see that it basically just includes things like government bonds. This is not really much good to us, as we would need to use our cash to buy the bonds in the first place, in order to borrow the same amount back. However, there may be a solution, the Discount Window Facility (DWF).

The purpose of the DWF is to provide liquidity insurance to the banking system. The Discount Window Facility is not intended for firms facing fundamental problems of solvency or viability. Eligible banks and building societies may borrow gilts, for up to 30 days, against a wide range of collateral in return for a fee, which will vary with the collateral used and the total size of borrowings.

Institutions eligible to participate will be banks and building societies that are required to pay cash ratio deposits (CRDs) and which otherwise meet the requirements for eligibility, as determined by the Bank, for the Bank’s Sterling Monetary Framework facilities.

The key point here is that they say they will accept a wide range of collateral in exchange for government bonds (gilts). Presumably, the gilts could then be used to borrow hard cash using their standard lending facilities.

If they are willing to accept poison assets such as dodgy loan books from mortgage lenders, then I don’t see why they wouldn’t accept shares in companies, or loans to businesses.

Issues to solve:

• What is required to become a bank (or more correctly, a monetary financial institutions)?
• Will the bank accept shares in private companies as collateral, or a loan book that is made up of advances to start ups and other small businesses?
• If the loans are for 30 days, can they be rolled over each month?
• Are there any other schemes to borrow money from the BoE on a longer term basis?

Here’s the application form.

I just found a cool tool on the Bank of England site for anyone interested in financial / monetary stats. Basically the Interactive Stats Tool lets you search through a huge amount of statistical releases and then download them in either CSV, Excel, XML or HTML formats.

Here’s some examples of what you can get:

• Average 3-month Libor Rate by Month - Going back to 1978, this is the figure that is often quoted in the press as LIBOR.
• Average interest rate of base-rate tracker mortgages by UK Banks by Month. - Shows you the rate that Banks and Building societies are charging on their tracker mortgages.
• Official Bank Rate - The main central bank interest rate, by day, going back to 1975.
• Monthly Bank Rate - The main central bank interest rate at the end of each month, going back to 1975.

You can even merge multiple datasets together in the same results page:

• Office Bank Rate vs Monthly Interest Rate of Tracker Mortgages - Compare the Bank’s official base rate with the average tracker mortgage rate. Notice how the spread increases as the credit crunch bites.
• Bank of England’s Consolidated Balance Sheet: Assets - Short Term Open Market Operations, Longer Term Sterling Reverse Repo, Ways and Means advances to HM Government, Bonds and other securities acquired via market transactions, Other Assets
• Bank of England’s Consolidated Balance Sheet: Liabilities - Notes in circulation, Reserve Balances, Short Term Open Market Operations, Foreign Currency Public Securities Issued, Cash Ratio Deposits, Other Liabilities.

Here’s some figures on the Money Supply:

• Monthly M4 Money Supply - monetary financial institutions’ sterling M4 liabilities to private sector (notes, coins, reserve balances, plus all bank deposit balances).
• Notes and coins in circulation - All notes and coins in circulation outside of the Bank of England.
• Central Bank Sterling Reserve Balances - Monthly average amount outstanding of Central Bank sterling reserve balances for monetary policy.

If you find any more interesting ones, be sure to post them as a comment!

Ways and Means Advances to HM Government is an entry that appears on the Bank of England’s Balance Sheet. As of the end of 2008, the figure stood at £369,847,840. Prior to 2000, this was basically the Government’s overdraft facility. The Bank of England provided a short term loan to balance the governments day to day spending.

An extract from the Treasury archives says:

When daily central government expenditures, receipts and net borrowings produce an end-of-day shortfall, the fine-tuning is provided by overnight borrowing from the Bank. Essentially this ‘Ways and Means’ advance is made by running down other assets held by the Bank that back the note issue. A daily surplus in turn reduces outstanding Ways and Means borrowings. (If there were no Ways and Means borrowing outstanding, a surplus would be put on deposit with Banking Department). Changes in the level of the Ways and Means advance happens automatically at the end of each day as the Bank calculates central government’s final cash position and adjusts the Ways and Means advance accordingly. Both borrowing and lending is done at the Bank’s 14-day repo rate.

In April 2000 the responsibility for government cash management moved from the Bank of England to the Debt Management Office. The balance of the “Ways and Means” account was frozen and is gradually being repaid. More info can be found in the 2008 Debt and Reserves Management Report:

The Ways and Means Advance is the Government’s overdraft facility from the Bank of England. Before the responsibility for Government cash management was transferred to the DMO, in April 2000, the Bank of England managed the daily changes in the Government’s net cash position by varying the Ways and Means overdraft. To finance changes in the level of this overdraft, the Bank undertook daily operations in the short-term money markets.

However, once the DMO assumed the role of Government cash manager, it no longer needed to use the Ways and Means Advance for this purpose, as the DMO uses market instruments to manage the Government’s cash position. At the time of transition, the outstanding balance of this overdraft was £13.4 billion.

The amount of the Ways and Means Advance was frozen (as announced in 1997 ) at the time of the transition to the new cash management system. At the same time, the Government also expressed its intention to repay the balance of the Ways and Means Advance. This balance was left effectively unchanged at £13.4 billion until January 2008.

In 2007-08, the Government made a partial repayment of £6 billion of the Ways and Means Advance. The rationale for repaying part of the Advance was to provide the Bank of England with additional flexibility to manage its own balance sheet. From the Bank’s perspective, the presence of a large asset that cannot be traded limits its flexibility to manage its balance sheet.

The interesting part is that the BoE uses this asset to back it’s bank note liabilities. So when the government repays the money, it must switch to other assets. This is described in a treasure note as:

Prior to the transfer of cash management from the Bank of England to the Debt Management Office the Ways and Means facility had two functions. It was an overdraft facility for the Government’s cash management function. But it was also an asset backing the Bank’s note issue. The Bank still require assets to back the note issue and would replace a shortfall below £17 billion in the Ways and Means facility with other assets.

As part of my ongoing research into money I’ve been trying to understand the Bank of England’s balance sheet, and while looking through it I noticed an account called Cash ratio deposits.

At first I thought this was something to do with Reserve Requirements (sometimes known as the cash asset ratio or liquidity ratio), where banks need to keep a certain amount of their assets as cash reserves in their vaults or with the central bank in order to be able to service withdrawal demands. However, although the name sounds similar, it is actually something entirely different.

The Cash Ratio Deposit (CRD) Scheme was set up in 1998 as part of the Bank of England Act that passed into law during that year. The purpose of the CRD scheme is described by the Treasury as follows:

Under the cash ratio deposit (CRD) scheme, institutions place non-interest
bearing deposits at the Bank of England. The Bank of England invests these deposits
and the income earned is used to fund the costs of its monetary policy and financial
stability operations, which benefit sterling deposit takers.

It only applies to Banks who’s elligible liabilities exceed £500 million. They must place assets equivalent to 0.11% of these liabilities as non-interest bearing deposits with the Bank of England. As of the end of 2008, the total CRDs listed on the BoE’s balance sheet (the Bank Return) were worth about about £2.5 billion. They aim to make about £100 million a year from investing these funds in order to pay for their financial stability operations.

So why do we have this somewhat complicted scheme instead of a simple fee or using seigniorage income? The Treasury attempt to answer this in a review document from 2003.

Almost universally, central banks fund their activities from general income including that arising from seigniorage (no interest is paid to holders of banknotes) and foreign exchange reserves. In the United Kingdom the income from both these sources passes to the Government: theprofits of note issue are paid in full from the Bank of England to the Treasury, and the Exchange Equalisation Account belongs to the Government, not the Bank of England.

Interesting, the government takes all the profits from printing money in the UK. It would prefer the private banks to pay for these financial stability operations.

A change from cash ratio deposits to a fee-based scheme would require primary legislation.

Is it really that hard?

The BoE looks to make about 6% a year (good luck in 2009!) from investing their CRDs. Why not simply charge institutions with more than £500 million in eligible liabilities - 0.11% * 0.06% of that amount as a fee?

I’m sure it would be a lot less effort than than trying to invest these funds successfully.

It’s a pain if you ever forget your MySQL root password. Fortunately it’s a fairly straightforward process to reset it, here’s how:

pkill -9 mysqld;
echo "UPDATE mysql.user SET Password=PASSWORD('MyNewPass') WHERE User='root';
FLUSH PRIVILEGES;" > /tmp/reset-pass.sql
mysqld_safe --init-file=/tmp/reset-pass.sql &
sleep 10
pkill -9 mysqld;

To make the process easier, I’ve wrapped these commands up in a script and put it on our open source respository here:

mysql_reset_root_password.sh script

With all the bankruptcies and job losses of recent months, and as we watch sterling slide against all major currencies, you’d be forgiven for thinking that UK plc is heading for the economic scrap heap. And in many ways it is - just look at our total government and personal debt, and the predicted budget deficits over the next few years. Yet, despite all this doom and gloom, there are some areas of the economy that have a bright future.

It may seem that all the UK has exported in the past few years is an army of borrow-to-let investors, but rather than focus on everything that was wrong with that, I’d like to look at what we’ve done right - and to celebrate some of the successful businesses that have been created by the real entrepreneurial spirit that exists in our country.

So, here are some world class companies that I’m proud to say are British:

• Dyson - Reinvented the Vacuum Cleaner.
• Imagine Technologies - Makes graphics chips for mobile devices, including the iPhone.
• ARM - Makes microprocessors. Has gone from powering the humble Acorn computer, to nearly a quarter of all electronic devices in the world, including the iPhone.
• HSBC - Although a multi-national bank, they are headquartered and listed in the UK, and have British heritage (founded by a Scot). The only major UK bank not to need bailing out as a result of the financial crisis. They even sold their Canary Warf offices at the peak of the boom, and bought them back recently for alleged £250 million profit.
• Tesco - Like marmite, you’ll either love them or hate them, but there is no doubt they are good at what they do! Now the world’s fourth third biggest retailer, they have led the way in analysing their customer data (club card scheme) and retailing via the Internet. Watch out Wal-Mart!.
• BBC - Although owned by the British tax payer, and some might say a little on the bloated side, they certainly produce some world leading content (Top Gear, Blue Planet, BBC News Online) and have pushed out some innovative technology over the years (BBC Micro, BBC iPlayer, Dirac Codec).

The list is going to start small, so please send me your suggestions and I’ll try to add them. I’d like to stick to British firms who have been truly innovative in recent years, rather than just listing out the FTSE 100.

It’s actually incredibly easy to begin using a Content Delivery Network (CDN) such as Amazon’s new CloudFront service, and in this post I’m going to show you how.

Background

So what is a CDN and why use one? Well CDNs are essentially a global network of file servers that work together to serve static content such as images, flash, css and javascript files. They are useful if you want to serve up content faster to your users as the servers are strategically placed at edge locations all around the world and incoming requests are automatically routed to the server closest to the user. This reduces the latency of HTTP requests and makes pages feel “snappier”. They can also be useful to reduce load to your core servers.

Update!

Since writing this post I found there is a firefox extension which gives you a GUI interface into CloudFront. I haven’t tried it yet, but you can read about it here.

How to use Amazon’s S3 and CloudFront CDN

Simple Storage Service

If you haven’t already, signup for a CloudFront account with Amazon Web Services. You’ll also need an S3 account subscription, as the two work hand in hand, but Amazon should set this up automatically.

Download an S3 client / GUI such as:

• S3 Hub (OS X)
• S3 Browser (OS X)
• S3 Firefox Organizer (Cross Platform / Firefox) - works with CloudFront too.

Login to Amazon Web Services and download your access keys. There are two you need, the access key id and the secret access key. You can find these in Your Account > Access Identifiers.. You’ll then need to configure your chosen client to use these keys.

Open up our S3 client and create a new bucket. You should avoid using underscores in your bucket names (although they will technically work, you won’t be able to create a distribution later via CloudFront). You might want to read the full restrictions on bucket names first. I recommend you follow the additional instructions to conform with the DNS requirements.

Using the S3 client, upload some files. You should then be able to access them at either of the following urls (substituting your bucket name and filename as appropriate):

• http://bucket-name.s3.amazonaws.com/filename.jpg [example]
• http://s3.amazonaws.com/bucket-name/filename.jpg [example]

Cloud Front CDN

Now that your files are accessible on S3 the final step is to link your S3 bucket to a CloudFront “Domain Name”. This process is known as creating a distribution, and is actually pretty simple.

First download the CloudFront Curl Perl Script from here. Then set up a .aws-secrets file in your home directory that contains your account keys. Make sure it’s has 600 permissions. The contents of the file will look something like:

%awsSecretAccessKeys = (
    # primary account
    primary => {
        id => '<Your primary AWS Access Key ID>',
        key => '<Your primary Secret Access Key>',
    },

    # secondary account
    secondary => {
        id => '<Your secondary AWS Access Key ID>',
        key => '<Your secondary Secret Access Key>',
    },
);

Next create a text file with the XML instructions needed to create a distribution, it should look something like this:

<?xml version="1.0" encoding="UTF-8"?>
<DistributionConfig xmlns="http://cloudfront.amazonaws.com/doc/2008-06-30/">
   <Origin>mybucket.s3.amazonaws.com</Origin>
   <CallerReference>20080930090000</CallerReference>
   <Comment>Creating my first distribution</Comment>
   <Enabled>true</Enabled>
</DistributionConfig>

Replace the origin with your bucket’s url. You’ll need to use the bucket-name.s3.amazonaws.com format. The caller reference is just a timestamp.

Save this file as create_request.xml and then run the following command to execute it:

./cfcurl.pl --keyname  -- -X POST -i -H "Content-Type:text/xml; charset=UTF-8" --upload-file create_request.xml https://cloudfront.amazonaws.com/2008-06-30/distribution

This command will return some XML, which, if successful, will contain the domain name you can use to access your files via the CloudFront CDN. NB: It can take a few minutes for this domain to become active in the DNS and so you should wait a while before trying it.

You can then access your files at http://unique-id.cloudfront.net/filename.jpg [example]

And that’s it! You’re now ready to use this domain to host your static files for your sites. You could go a step further by pointing a subdomain of your site as a CNAME record to this domain.

To test the spam score for an e-mail without sending it, install a copy of Spam Assassin then run:

[root@mail ~]# spamc -c < testemail.txt
-1.0/5.0

Where testemail.txt is the raw message source.

We’ve been desperate for a centralised calendar solution that can sync with all our desktop PCs and iPhones for a while now, and yesterday one of our developers, Matt, found a solution for us.

It combines the following technologies:

• Google Calendar
• iCal
• calaboration
• Nuevasync
• iPhone
• MobileMe

Essentially Google Calendar is used to provide a central calendar, this is then synced to the iPhones via Nuevasync, which provides a free exchange interface. The calaboration tool makes it easy to sync your iCal with the Google Calendar, and then MobileMe is needed if you want to have a private calendar on your iPhone as well.

Matt has written some in-depth instructions on how to set up over the air calendar syncing on your iPhone, over on his blog.

Part of our strategy at Fubra is to invest a portion of our cash in business start-ups. In this post, I’m going to give you a few inside “secrets” as to our thinking when companies approach us for funding. If, after reading this, you think we sound like a good match then you should get in touch.

What we look for in an investment opportunity…

• An amazing unique product.
• Backed by a team of competent, motivated and hard working people who can deliver.
• The ability to build your product yourself. For web sites, this means you need a developer in your team as an equity partner. We’re not interested in ideas that someone else has to build, as costs will quickly escalate and we may as well do it ourselves.

What we can provide…

• Cash.
• Marketing assistance - We have a network of well over 100 websites, 6 million visitors per month and 3 million subscribers - so plenty of scope for cross promotion. We can advise on all aspects of online marketing e.g. PPC and SEO.
• PR assistance - We have an in-house PR team and press contacts database. Our sites regularly feature in the mainstream press; printed, radio and TV.
• Development assistance. We have Linux, PHP, MySQL and JavaScript gurus who can assist with complicated bits of coding.
• Data mining - We have web spider experts who can help analyse and extract data from around the web.
• Hosting - We have racks in several data centres, including our own 14 rack private DC at our head office in Aldershot. We have also developed a hosting cloud infrastructure to help scale web applications to meet demand and this would be available to you.
• First line customer support - When your product takes off, we can integrate it into our support system and provide first line customer service.
• Office space - We have a 4000 sq ft office in Aldershot, which has a few rooms to spare.
• Mentoring and advice - Fubra has been around since 2000 so we know a thing or two about building web businesses. We would make this knowledge available to you as needed.

What we ask for, from an investment…

• A Realistic Valuation - You shouldn’t be looking to get rich from the investment round itself. The cash is there to help the business succeed, and that’s the point where you will be financially rewarded. How is your business worth half a million pounds with no sales or customers?
• Thrift! - You should keep your overheads as low as possible for as long as possible. Do you really need to hire a PR agency? If you’re product is that good it should sell itself. Can you justify paying yourself a “market” salary? If you are paid a full market salary, what risk are you taking to justify your equity stake?
• Hard work and delivering on promises.

It could be argued that now is a better time than ever to start up a business. While established firms are more focused on cutting costs than delivering new products, start ups can seize the opportunities they miss.