Bank of London board caught off guard by unpaid tax bill

Stay up to date with free updates

Simply sign up to UK banks myFT Digest — delivered straight to your inbox.

The Bank of London’s board and new management team were unaware of the 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 holding company’s board, which is chaired by private equity executive Harvey Schwartz and includes Labor bigwig Lord Peter Mandelson, battled over the weekend to bolster regulator and client confidence in the fledgling bank.

After days of unsettling events, the bank announced on Sunday that it had raised £42m in fresh funding 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 was part of the board of directors of the Bank of London holding company. from 2018.

A spokesman for the bank said the new investment was unrelated to HMRC’s winding-up petition, which is filed when a company has failed to pay money it owes. The spokesperson added that the petition was due to an “administrative” delay and the money had recently been paid and the issue resolved.

The capital raising also came just a week after the Bank of London announced that its founder, Anthony Watson, would step down as chief executive and move to a new role as a senior adviser.

Watson has long-standing ties to Britain’s Labor Party, having previously chaired the “business and enterprise advisory board” when the party was in opposition.

Board members from the bank’s holding company met with supervisors from the Bank of England’s Prudential Regulation Authority on Sunday to discuss the bank’s governance, according to a person briefed on the matter.

The HMRC petition could have presented significant challenges for the bank, which Watson launched in 2021 as a competitor to the big four UK lenders that dominate the clearing market.

Bank of London Group Limited, a subsidiary of the holding company, obtained a license from the PRA last year that allowed it to start registering customers. It had operated “hand-to-mouth” until this latest round of investment, 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 on its strategic growth plan.”

The bank had a loss of £12.7m on total assets of £17.6m in its latest published set of accounts for 2022.

On Sunday, the bank said its customer deposits grew to more than £500m last month and it has more than 4,500 customers 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 the deposits at the BoE, “businesses have full confidence in their funds being available at all times”.

Tluszcz said the new injection of funds reflects “the confidence investors have in its leadership and unique model.”

A spokesman for HMRC 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 in their circumstances financial”.

Watson, Mandelson and the BoE declined to comment. Schwartz could not be reached for comment.