Bank of England relents and allows a new bank

One of the world’s most valuable fintechs is finally granted a partial banking license by a reluctant regulator A reversal of the banking concentration policy could solve the UK’s low productivity pro

26 July 2024, London. UK-based financial services company Revolut yesterday announced that the Prudential Regulatory Authority, based inside the Bank of England, had finally relented and granted the 9-year old start-up – one of the world’s most valuable fintech firms, based on stock market valuations – the first-stage banking license called “Authorisation with Restriction”. Having already undergone a lengthy “Applicant Journey” with the PRA and Financial Conduct Authority, in early 2021 Revolut submitted its application for AWR.

This restricted license does not sound impressive on the surface: The key aspect of a banking license is the permission to accept deposits from the general public. (This is indeed the crucial difference that allows banks to create money – see my theoretical and empirical work on this). The restricted initial license however only allows Revolut to gather a maximum of £50,000. –  No, not per day. In total. In other words: With the AWR, Revolut is still not allowed to take deposits in a meaningful way and in practice therefore is still not a bank in the UK. However, the award of AWR opens the prospect that the regulators will, after a further period that could last from a few months to a maximum of 12 months, and which is called the “mobilisation period”, award the full and unrestricted banking license to Revolut.

Doubling the number of bank regulatory agencies

In 2013, when the Financial Services Authority was renamed the Financial Conduct Authority, it was taken down a notch in terms of bureaucratic power and ranking in the hierarchy, as the Bank of England also reclaimed formal regulatory powers over banks (it has always had de facto regulatory powers). This power is located in the Prudential Regulatory Authority, which is situated inside the Bank of England. In practice, this means that the UK doubled the number of bank regulators from one to two: FCA and PRA are now jointly regulating banks, with the PRA being the higher-ranked entity.