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The Bank of London is under scrutiny on two fronts from regulators as its auditor warned that there were “material uncertainties” over whether the ailing fintech could continue trading.
Regulators at the Bank of England’s Prudential Regulation Authority have put the clearing bank under so-called enhanced supervision due to inaccurate record-keeping, lax regulatory reporting and governance failures, TBoL disclosed in its financial accounts that were filed on Wednesday. The PRA has also launched a separate enforcement investigation into unspecified “historic” events, according to the filing.
The accounts, filed seven months late, were qualified by auditors at EY due to “inadequate historical records” concerning an employee share option scheme. EY also flagged concerns over whether TBoL “will be able to access new funds available at the levels required through future equity capital raising”, its ability to execute its business plan, and any “punitive outcomes” stemming from the PRA probe.
Enhanced supervision is when the PRA steps up its normal scrutiny of a bank after persistent regulatory concerns. An official investigation, meanwhile, can lead to a fine on the institution or key individuals.
The TBoL accounts also showed losses of just over £12mn for the year ending December 2023 and detailed “significant turnover of staff”.
The disclosures cap a heady 12 months for the fintech, which achieved a $1.1bn “unicorn” valuation in 2021 and until last year boasted grandees Lord Peter Mandelson and US private equity boss Harvey Schwartz on its board. TBoL was thrust into the spotlight in September by a winding-up order from UK tax authorities over unpaid debt. HM Revenue & Customs later withdrew the petition but questions over TBoL’s financial health remained.
The bank told potential investors earlier in 2024 that it had an “immediate” need to raise millions of pounds for regulatory capital, the Financial Times previously reported. TBoL also said it had prepared plans for a solvent wind-down in case the fundraising was not successful.
The bank then received a capital injection of £52.1mn from a group led by existing investor Mangrove Capital, whose founder, Mark Tluszcz, is also a non-executive director at the bank. The bank secured an additional £25mn from Mangrove earlier this month, according to a TBoL spokesperson.
Since last year’s equity raise, both Mandelson and Schwarz have quit. The bank’s founder and chief executive, Anthony Watson, left days before the capital injection was announced. The new CEO is Christopher Horne, a former Credit Suisse executive.
Founded in 2016, TBoL aims to make money from licensing its technology to corporate clients so they can offer regulated banking services under their own brands. It claims to be immune to bank runs because it parks deposits at the central bank rather than lending them out.
Rolling back on its expansion, the bank’s new management team has cut its headcount from a peak of about 200 to slightly more than 100.
Since the end of 2024 the bank has refiled a number of documents, including shareholder lists and equity injections, which had to be amended after previous filings were found to contain incorrect information.
Regulators had also received a formal complaint about the bank’s governance, including concerns around staff turnover and the vetting of new employees, the Financial Times previously reported.
TBoL did not give details of what the PRA was investigating.
The fintech is co-operating with the PRA and is also undertaking its own internal investigation, according to the accounts.
The PRA declined to comment.
TBoL said in a statement: “These accounts relate to a financial year in which the bank operated under entirely different leadership.” It added that it had since embarked on a “comprehensive transformation”, and that its governance had been “greatly strengthened”.
Additional reporting by Martin Arnold in London
