Bank of London: Questions persist over unicorn’s finances and governance

In the span of just two weeks, fintech “unicorn” The Bank of London has gone from relative obscurity to being thrust into the public spotlight for all the wrong reasons.

After receiving its banking licence from regulators in November 2021, The Bank of London became the UK’s second new clearing bank in more than 250 years – after the launch of rival ClearBank in 2017.

It pitched itself as an alternative to big high street banks like Natwest and HSBC for clearing, payment and settlement services. The bank promised to “lift communities and power the borderless economic infrastructure of the future”.

Investors were sold, with the launch announced alongside a $90m funding round valuing the bank as a $1.1bn “unicorn” before it was even making any revenue. It maintained this valuation in a February 2023 funding round.

The November 2021 press release also touted the appointments of heavyweights to The Bank of London’s holding company board, including New Labour architect Peter Mandelson as deputy chair and Wall Street veteran Harvey Schwartz as chair.

Schwartz, who leads the world’s fifth-largest private equity firm The Carlyle Group, was quoted as saying that The Bank of London could help stave off another financial crisis.

The Bank of London’s founder is Anthony Watson, who also served as CEO until earlier this month. A former Barclays and Nike executive, he became known as a prominent LGBT campaigner and was awarded a CBE for services to the LGBT community in 2023.

He has also donated nearly £500,000 to the Labour party and politicians since 2015, according to official records. In 2016, Watson was appointed chair of Labour’s “business and enterprise advisory council” during its time in opposition.

Former colleagues highlighted his active social media presence, posting photos of jets, yachts and skiing holidays to his Instagram account – which is now private.

At launch, The Bank of London set lofty targets to expand into the EU and US, as well as claiming it was “on track” to hire more than 3,000 staff across the UK, the EU and North America over the next five years.

Three years later, it has come nowhere near this number. One insider claimed the bank had some 150 staff, while another person close to its new management said it had around 300.

The bank declined to provide a figure. It has offices in London, Belfast and New York.

Under the microscope

Until this month, media coverage of The Bank of London had generally been limited to successful fundraising, deposit growth or positioning itself as a bidder for Silicon Valley Bank UK last year.

But now its own balance sheet and corporate governance are under the microscope.

City A.M. first reported earlier this month that HMRC filed a winding-up petition against its holding company just two days after Watson stepped down as CEO.

The petition, which the bank blamed on an administrative error, has since been withdrawn. Watson remains a “senior adviser” at the bank, while chief risk and compliance officer Stephen Bell became its new CEO.

The bank has faced further questions after news that it tapped investors for an “immediate” cash injection in July. A presentation to potential investors claimed the bank needed £3.5m by 9 August and an extra £15m by 31 August to meet regulatory capital requirements.

Its latest accounts show the holding company’s pretax losses widened to £41.8m in 2022, from £15.7m in 2021.

As media outlets began covering the bank’s tax affairs, it publicised a £42m August fundraise led by Mangrove Capital, run by Mark Tluszcz – who sits on The Bank of London’s holding company board.

The bank’s new PR team also shared financial metrics celebrating it surpassing £500m in customer deposits in August, which had “more than doubled since the start of the year”.

However, a previous release circulated at the end of August 2023 said the bank had reached £310m in deposits since it started trading that April, claiming the title of “the UK’s fastest-growing challenger bank ever”.

Together, the two announcements suggest The Bank of London’s deposits fell nearly a fifth, or at least £60m, to below £250m over the course of just four months.

The bank declined to comment on the deposit figures. A source close to the firm claimed the numbers showed the “normal ebbs and flows” of a fast-growing start-up.

‘Toxic workplace’

Multiple former employees have told City A.M. that The Bank of London was a “toxic workplace” with a high turnover of staff.

This year alone, the bank has lost its chief technology officer, chief operating officer, chief information security officer, and head of compliance and money laundering reporting.

Between April and July, two non-executive directors resigned from the bank’s board. The Bank of London declined to comment on specific departures.

“The culture is terrible. They pretty much broke my mental health,” one former employee said. “There was a culture of live and breathe Bank of London, 24/7. I think that toxicity cascaded from the executives down.”

Ex-staff told of how they were enticed into joining the bank with the promise of a 10 per cent discretionary annual bonus which never materialised for most employees.

A source close to the bank said employees were made fully aware that the bonus scheme was subject to “individual and company performance”.

A company spokesperson said: “Under new leadership, The Bank of London is focused on the future, with a strategy centred around responsible growth, innovation and fostering a positive workplace culture.

“Our leadership is committed to ensuring that all business decisions align with our long-term vision and industry best practices.”

Watson did not respond to a request for comment.

Separately, the bank has laid off dozens of workers between the UK and US since May, according to a person familiar with the matter.

Several of the bank’s divisions have been affected, including financial crime and technology, with some staff told their redundancy was part of a cost-cutting exercise, the person said.

They added that some employees were let go over Microsoft Teams calls without any prior communication that the bank was making cuts.

The Bank of London declined to comment on previous job cuts. A source close to the bank claimed its financial crime unit was “being actively strengthened” through hiring and investment.

Investor-led restructuring

City A.M. learned over the weekend that The Bank of London was embarking on another round of job cuts mainly focused on the UK that will see it lay off around 20 employees, including at executive level.

The layoffs come as part of a wider restructuring, understood to have been pushed by the bank’s investors before they committed to August’s fundraise.

“Following its successful fundraising and under new leadership, The Bank of London is focusing on its home market of the UK and aligning its resources to support its strategic objectives,” the company said in a statement.

“As part of this process, the bank has launched a consultation that may result in a small number of roles being impacted, relative to the total number of staff across its three offices.

“This decision has not been made lightly, and the bank is committed to supporting affected colleagues through this transition.”

Despite the shake-up, scrutiny continues.

The Bank of England’s Prudential Regulation Authority, which authorises The Bank of London, met with the board of its holding company to discuss governance issues shortly after its tangle with HMRC, it is understood. The BoE declined to comment.

British regulators are now said to be examining a formal complaint about the bank’s governance, although it is too early to determine any outcome.

The Bank of London claims to have more than 4,500 business customers and expects to hit £1bn in deposits by the end of 2024.

July’s investor deck projected monthly profitability for the bank by August 2025 and that it would earn more than £1bn in income by 2030, from £11m in 2024.