A start-up challenger bank that aimed to disrupt the small business lending market has thrown in the towel after failing to raise money to keep it afloat.
Bank North was trying to find £30m to secure a full banking license from the Bank of England, which would have allowed it to take deposits from private savers.
But in a letter to shareholders over the weekend, seen by the Daily Mail, the stricken bank’s chairman Ron Emerson said it had been unable to close this critical capital raising within the required timeline.
Throwing in the towel: Bank North tried to find £30m to secure full banking license from Bank of England
“It is therefore with great regret that I have to inform you that… the Board of Directors 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 unnamed third party to sell its £17m loan book and transfer its Manchester-based lending team – around a third of its 60 staff.
A deal could be done in the coming weeks, but Emerson warned: “Completion of this transaction is essential to ensure a solvent liquidation, where the priority will be to ensure full payment of our creditors, including employees, and that all outstanding liabilities are paid.’
Regardless of the outcome, the bank will return the license to the Prudential Regulatory Authority, which approves new banks.
The news is another headache for beleaguered Bank of England chief Andrew Bailey, who is already struggling to shore up confidence in the mortgage, pensions and currency markets amid ongoing turmoil. It is also a blow to the Government’s “reformation” agenda when Bank North focused on closing a gap in the regional lending market.
Founded in 2018, the ‘fintech-enabled’ start-up specialized in providing loans to local small businesses of between £500,000 and £5m. It started lending to them a year ago after acquiring a limited banking license.
Emerson, a former chairman of the state-backed British Business Bank, blamed “a growing storm of financial uncertainty over the past six months” for Bank North’s failure. The latest accounts show it lost £1.9m in the nine months to March 2021.
The Bank of England declined to comment.
