Loss-making fintech challenger Bank North to wind down
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Startup challenger bank seeking to disrupt small business credit market throws in towel after failing to raise cash to keep it afloat
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A start-up challenger bank looking to disrupt the small business credit market has thrown in the towel after failing to raise cash to keep it afloat.
Bank North was trying to find £30 million to get a full banking license from the Bank of England, which would allow it to take deposits from private savers.
But in a letter to shareholders last weekend, seen by the Daily Mail, Ron Emerson, chairman of the stricken bank, said it “had been unable to complete this critical capital increase within the necessary timeline.”
Throwing in the towel: Bank North tried to find £30m to obtain full banking license from the Bank of England
“It is therefore with deep regret that I have to inform you that … the Board of Bank North has decided to initiate a solvent liquidation of the bank with immediate effect,” Emerson added. Bank North is in talks with an undisclosed third party to sell its £17m loan book and transfer its Manchester-based loan team – around a third of its 60 employees.
A deal could be closed in the coming weeks, but Emerson warned: “Completion of this transaction is critical to ensuring a solvent settlement, where the priority will be the full payment of our creditors, including staff, and that all outstanding debts have been paid.’
Whatever the outcome, the bank will return its license to the Prudential Regulatory Authority, which approves new banks.
The news is another headache for beleaguered Bank of England governor Andrew Bailey, who is already fighting to bolster confidence in mortgage, pension and currency markets amid ongoing turmoil. It is also a blow to the government’s ‘levelling’ agenda as Bank North focused on closing a gap in the regional credit market.
Founded in 2018, the fintech-enabled start-up specializes in lending to local small businesses between £500,000 and £5 million. It started lending them a year ago after obtaining a limited banking license.
Emerson, a former chairman of the state-backed British Business Bank, blamed “an emerging storm of economic uncertainty over the past six months” for Bank North’s failure. Latest accounts show it lost £1.9m in the nine months to March 2021.
The Bank of England declined to comment.