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The Bank of London’s board of directors and new management team were unaware of its unpaid debts to UK tax authorities until HM Revenue & Customs filed a petition to wind up its holding company on Thursday, according to three people familiar with the situation.
The board of the holding company, which is chaired by private equity executive Harvey Schwartz and includes Labour party grandee Lord Peter Mandelson, was scrambling over the weekend to shore up the confidence of regulators and customers in the fledgling bank.
After days of unsettling events, the bank announced on Sunday that it had raised £42mn in fresh financing from investors led by one of its board members.
The fundraising round, which the bank said closed last month, was led by Mangrove Capital Partners, a Luxembourg-based investor that previously invested in Skype and Wix.com, and whose chief executive Mark Tluszcz has sat on the Bank of London’s holding company board since 2018.
A spokesperson for the bank said the new investment was unrelated to the winding-up petition from HMRC, which is filed when a business has failed to pay money it owes. The spokesperson added that the petition was down to an “administrative” delay and the money had recently been paid and the issue resolved.
The capital raise also came only a week after the Bank of London announced that its founder Anthony Watson would step down as chief executive and transition to a new role as senior adviser.
Watson has long-standing ties to Britain’s ruling Labour party, having previously headed its “business and enterprise advisory council” when the party was in opposition.
Board members at the bank’s holding company were meeting supervisors from the Bank of England’s Prudential Regulation Authority to discuss the bank’s governance on Sunday, according to a person briefed on the matter.
The HMRC petition could have presented significant challenges for the bank, which Watson launched in 2021 to much fanfare as a competitor to the Big Four UK lenders that dominate the clearing market.
The Bank of London Group Limited, a subsidiary of the holding company, gained a licence from the PRA last year that enabled it to start signing up clients. It had been operating on a “hand-to-mouth” basis until this latest investment round, according to a person with direct knowledge of its operations.
The bank said in a statement that it now “has a strong capital and liquidity position and is well funded to deliver its strategic growth plan.”
The bank had a loss of £12.7mn on total assets of £17.6mn in its last published set of accounts for 2022.
On Sunday, the bank said its customer deposits had grown to more than £500mn last month and it had more than 4,500 clients in total.
Stephen Bell, the bank’s former head of risk and compliance who last week replaced Watson as CEO, said that, because it held all deposits at the BoE, “businesses have full confidence in their funds being available at all times”.
Tluszcz said the fresh injection of funds reflected “the confidence investors have in its leadership and unique model”.
An HMRC spokesperson said it could not comment on specific cases, adding: “We take a supportive approach to dealing with customers who have tax debts, working with them to find the best possible solution based on their financial circumstances.”
Watson, Mandelson and the BoE all declined to comment. Schwartz could not be reached for comment.