The Bank of London, the fledgling clearing bank formerly backed by Peter Mandelson, has revealed it is under investigation by UK regulators, with auditors saying the fallout could throw “significant doubt” over its ability to keep operating.
The news is a fresh blow for the troubled fintech, which has lost its founder and leading board members, including Lord Mandelson and US private equity boss Harvey Schwartz, and halved its workforce since being thrust into the spotlight in September over an embarrassing winding-up petition by the UK tax authority over unpaid debts.
The Bank of London (BoL) accounts, filed seven months late, now reveal that it is under investigation by the Bank of England’s regulatory arm, the Prudential Regulation Authority (PRA), over potential breaches that pre-date the autumn debacle.
“The firm has been notified by the PRA that it is under investigation in relation to certain historical matters that occurred prior to the change in ownership of the group,” accounts filed at Companies House said. A Jersey-based firm, now known as Fellesskap Group & Holdings, took over as its parent company in May 2024.
BoL said it was too early to say how much money it may have to put aside to deal with the continuing investigation. It said it was cooperating with the PRA and had launched its own internal investigation “into the matters in question”.
The revelations came as the bank reported a £12m loss for 2023, in accounts for which auditors at EY would only give qualified support, in part owing to “inadequate historical records” over a share option plan for staff.
Auditors are now concerned about the bank’s ability to keep operating. EY said there were questions over the potential fallout of the regulatory investigation and whether the company would be able to raise adequate funding in future. “There are material uncertainties relating to events or conditions that … may cast significant doubt on the company’s ability to continue as a going concern,” the accounts said.
As a clearing bank, the BoL does not offer loans but provides clearing and settlement services for business customers, providing the plumbing that allows transactions and payments to take place.
It became only the second clearing bank to enter the UK market in 250 years when it launched in 2021, with an aim of disrupting the big four – NatWest, Lloyds, Barclays and HSBC – which maintain a stronghold on this part of the UK financial system.
BoL was valued at $1.1bn (£826m) in 2023 and was previously known for its ties to the Labour party. Its founder, the former Barclays executive Anthony Watson, served on the party’s business and enterprise advisory council before last summer’s general election, while Mandelson, now Britain’s ambassador to the US, served on the board as BoL’s deputy chair before stepping down last year.
A spokesperson for BoL said: “These accounts relate to a financial year in which the bank operated under entirely different leadership … The bank has embarked on a comprehensive transformation.”
They added that existing investors had promised to put in a further £25m in funding if needed.
