In the age of the internet, all citizens and businesses could be provided with lightweight online central bank exchange settlement account at minimal cost. After paying any cost-reflective account keeping fees, your deposits with the central bank would earn the same overnight cash rate it pays commercial banks. And money in your account could be paid to anyone else’s exchange settlement account.
The central bank could also provide liquidity in a more competitively neutral way.
It couldn’t practicably assess everyone’s creditworthiness, but it could specify a set of super-safe assets against which it would automatically lend as a matter of right. I’d propose that you could borrow to fund your housing loan up to – say – 65 percent of its value or against prime commercial property up to say 45 percent of its value. This would entail far lower risks for central banks than the lending they currently advance to highly leveraged commercial banks.