8.6 C
New York
Monday, March 4, 2024
Home Challanger banks Monzo capital requirement was raised by the Bank of England

Monzo capital requirement was raised by the Bank of England

Monzo bank is now obliged to have a capital worth of 13.6 percent of its risk-weighted assets to be protected against potential losses.

These capital requirements were increased by the Bank of England while Monzo was in the process of raising £60 million in top-up funding. But the paper value of the challenger bank dropped from £2.0 billion to £1.25 billion at that point.

Read also: Monzo’s valuation drops by 40% to £1.25B as it sealed a £60M funding round

Before the rule change, Monzo was required to have capital worth at 9 percent of its risk-weighted assets as a shield against losses.

Documents circulated to existing investors in May revealed that the backers were warned that the bank “needs at least £20 million to avoid breaching regulatory capital requirements”, the Financial Times reported.

Regulatory experts told FT the central bank was implementing higher standards among fast-growing, so-called challenger banks, the name given startup digital banks, as a condition of easing restrictions that have limited competition.

On the reported figures Monzo said: “All banks, including Monzo, must ensure they plan their capital requirements effectively and hold sufficient capital to meet their current and future needs. Monzo continually reviews its capital requirements as part of the Internal Capital Adequacy Assessment Process”.

Monzo bank’s losses jumped from £47.2m to £113.8m amid a hiring spree, marketing and US expansion. This sharp increase in losses is not getting covered by Monzo’s rise in revenues from 19.7m to £67.2m.

Monzo’s directors to compile its results under the basis of there being: “material uncertainties, which may cast doubt over the Group’s ability to continue as a going concern.”

Jan Cerny
Jan is an innovation enthusiast and Fintech news reporter. He specializes in news distribution, social media, and content analysis.

Recent posts

NEW Revolut UK CEO to make Conference Debut at MoneyLIVE Summit

MoneyLIVE has today announced that Revolut’s newly appointed UK CEO will be making her conference debut at MoneyLIVE Summit 2024, which is...

2024’s Financial Innovators: A New Era of Banking Startups 

In the wake of the COVID-19 pandemic, our world witnessed an unprecedented shift towards digitalization. The banking industry, in particular, has been...

C-suite Banking and Payments Leaders From Across Europe Set to Meet at London’s MoneyLIVE Summit in March

On the 6-7 March 2024 MoneyLIVE Summit will return to London’s QEII Centre to unite over 1000 banking and payments leaders from...

The Evolution of Digital Wallets: A Shift from Physical Cards by 2030

By 2030, we can expect digital wallets to become the preferred payment instrument, offering a myriad of non-payment-related services for consumers.