New FSA Rules Prompt Internet Bank Rethink
A new retail bank which has been struggling to secure funding and regulatory approval for more than three years has restarted talks with potential investors, buoyed by new rules governing start-up lenders.
I have learnt that Home & Savings Bank, which has been seeking as much as £250m of external capital since 2009, has in recent weeks resumed canvassing private equity firms, hedge funds and wealthy individuals about backing its launch plans.
The company, which would be a telephone and internet-based lender, is the brainchild of a group of former bank executives and Martin Finegold, the boss of Cambridge Place Asset Management, a London-based hedge fund.
People familiar with Home & Savings Bank's business plan said it had scaled back its ambitions and was now aiming to raise between £100m and £150m.
The nascent bank's management team includes Stuart Sinclair, former head of Tesco Personal Finance, and Peter Birch, one-time head of Abbey National.
Its new fundraising objective has been galvanised by the imminent publication of guidelines by the Financial Services Authority (FSA), which will allow banking start-ups to operate with much less capital than established high street rivals.
Mr Finegold's fund has already burned through millions of pounds in costs incurred by the development of Home & Savings Bank.
Over a three-year period it has held talks with dozens of possible investors, including Advent International and Blackstone, the buyout firms, and Magnetar Financial, the hedge fund. Home & Savings Bank also tried to pursue a stock market flotation but without success.
All of those discussions proved fruitless amid what many analysts see as a vicious circle hindering such embryonic projects: regulators will not approve new lenders until they have sufficient capital, while investors are reluctant to commit capital when there is uncertainty about whether a bank will receive regulatory approval.
Since the financial crisis a number of new retail banks have launched in Britain, the most prominent of which has been Metro Bank. Despite its public relations success, however, even it has made only modest competitive in-roads against the likes of Barclays, Lloyds Banking Group and Royal Bank of Scotland.
Last month, Sky News revealed that talks over the FSA reforms were being held up by demands from the Treasury to accelerate further the timetable for authorising new banks.
A spokesman for Home & Savings Bank declined to comment.