Bank of London facing regulatory probe and questions over financial stability

The Bank of London, a relatively new entrant to the UK financial market, is facing significant challenges as it comes under investigation by UK regulators. The Prudential Regulation Authority (PRA), part of the Bank of England, has launched an inquiry into potential breaches that occurred before the bank changed ownership in 2024. The findings could have serious implications, with auditors casting doubt on the bank’s ability to remain operational.

Once heralded as a disruptive force in the clearing bank sector, the Bank of London made history in 2021 by becoming only the second clearing bank to launch in the UK in over 250 years. The bank does not offer loans but focuses instead on providing essential transaction and settlement services for businesses, challenging the dominance of the UK’s traditional big four banks—NatWest, Lloyds, Barclays, and HSBC. However, recent setbacks have raised concerns over its future viability.

Accounts recently filed with Companies House reveal that in 2023, the Bank of London reported a loss of £12 million. The filings were delayed by seven months and include a qualified assessment from auditors at EY, who highlighted “inadequate historical records” concerning a share option plan. EY expressed concerns about both the ongoing regulatory investigation and the institution’s ability to secure sufficient funding going forward, citing material uncertainties that cast doubt on its status as a going concern.

The regulatory investigation is not the only challenge the bank currently faces. Since last autumn, the fintech has seen a series of high-profile departures, including founder and former Barclays executive Anthony Watson, along with major board members such as Peter Mandelson and Harvey Schwartz. The departure of its leadership team coincided with an embarrassing episode involving a winding-up petition from HM Revenue and Customs over unpaid debts. Staffing cuts have also halved the bank’s workforce in recent months.

Ownership of the Bank of London transferred in May 2024 to a Jersey-based entity now known as Fellesskap Group & Holdings. A spokesperson for the bank emphasised that the financial accounts related to a period under different leadership and insisted that steps were being taken to transform the institution. The bank also noted that existing investors have pledged a further £25 million in funding if necessary.

The ongoing situation has led to speculation about the potential financial and reputational fallout from the PRA investigation. While the Bank of London’s bold ambition to disrupt the UK’s financial system was initially met with much optimism, its future now hangs in the balance as it works to comply with regulatory standards and regain market trust.