A group of Cambridge entrepreneurs and businessmen are setting up their own bank.

Telecoms guru Dr David Cleevely said: "We are sick to death of the way the banks are operating. They are offering people almost nothing for deposits but charging small businesses up to 15% for their credit facilities. There is something fundamentally wrong." Dr Cleevely, the founder of Cambridge Wireless and Abcam, the world's biggest catalogue for antibodies, is working with a number of businessmen on plans for a bank serving depositors and commerce.

"Quite apart from the social issues, there is an arbitrage opportunity here to set up a bank because of the huge disparity between borrowing and lending" Dr Cleevely said. "Talk of their being no money around is nonsense. There is tons of money but no one wants to put it in the banks earning next to nothing."

"There is no doubt in my mind that the way the bankers were rewarded has led to their reckless lending. Big fat salaries distorted the risk and led them to take risks they shouldn't. We need to change this and it could be that commercial and investment banking must be separated by law."

They plan to set up the fund with a vehicle called Industrial Provident Society, which is regulated by the Financial Services Authority and requires €2m (about £1.8m) to start lending and taking deposits. It will be fascinating to see whether disenchantment with the banks a renaissance of the old co-operatives and mutual societies that became popular in the 18th Century.