Three people with knowledge of the situation say that the Bank of London board of directors and its new management team did not know about its unpaid tax debts until HM Revenue & Customs submitted a petition on Thursday to dissolve it holding company.
Over the weekend, the board of the holding, which includes Labour Party grandee Peter Mandelson and private equity executive Harvey Schwartz, scrambled to bolster the confidence of regulators, customers, and the newly-formed bank.
The bank announced that after days of unsettling news, it has raised PS42mn from investors led one of its directors.
The Bank of London said that the fundraising round closed in the last month. Mangrove Capital Partners was the lead investor. It is a Luxembourg-based company whose chief executive Mark Tluszcz sits on the holding company’s board of the Bank of London since 2018.
A spokesperson from the bank stated that the new investment had nothing to do with the petition for winding up filed by HMRC when a company fails to pay its debts. The spokesperson said that the petition had been filed due to a “administrative” problem and the money was recently paid.
The capital raising also came just a week after Bank of London announced its founder Anthony Watson will step down as CEO and transition into a new role of senior advisor.
Watson has a long history of ties with the ruling Labour Party in Britain, having served as its “business advisory council” during opposition.
A person with knowledge of the situation said that Sunday afternoon, board members of the holding company of the bank met supervisors of the Bank of England’s Prudential Regulation Authority in order to discuss governance issues at the bank.
Watson, a bank that launched with much fanfare in 2021 as a rival to the Big Four UK banks who dominate the clearing market, could have faced significant challenges from the HMRC petition.
Last year, the Bank of London Group Limited (a subsidiary of its holding company) received a license from the PRA that allowed it to begin signing up new clients. According to a source with direct knowledge, the company had operated on a hand-to-mouth basis up until this latest round of investment.
In a press release, the bank stated that it “has strong capital and liquid position and is well-funded to deliver its strategy growth plan.”
In its last set of published accounts for 2022, the bank reported a loss on assets totaling £17.6mn.
The bank announced on Sunday that its deposits for customers had risen to more than £500mn in the last month, and it has more than 4,500 total clients.
Stephen Bell, former head of the bank’s risk and compliance, who replaced Watson last week as CEO, stated that because the BoE holds all deposits, “businesses can have confidence that their funds will be available at any time”.
Tluszcz stated that the new injection of funds was a reflection of “the confidence investors place in its leadership and model”.
A spokesperson for HMRC said that it was unable to comment on specific cases. She added: “We work with our customers to find the best solution possible based on their financial situation.”
Watson, Mandelson, and the BoE declined to comment. Schwartz was not available for comment.
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