The Bank of England is reportedly planning to reject Revolut’s application for a banking license in the UK, a significant setback for the fintech giant. The company has been campaigning for a banking license for two years, with hopes of expanding its services and offerings to include mortgages and loans in the UK market.

According to reports in the Telegraph, the Bank of England’s Prudential Regulation Authority (PRA) has expressed concerns about Revolut’s balance sheet and is planning to issue a statutory warning to the firm. These concerns arose after a six-month delay in the submission of Revolut’s accounts, which were eventually filed in March. Auditor BDO raised red flags about the inability to verify £477 million of revenue and expressed uncertainty about the completeness and occurrence of the reported figures due to issues with Revolut’s internal IT systems.

While the warning has not yet been issued, Revolut is engaged in urgent talks to salvage its banking license application. Reports even suggest that the company had considered withdrawing its application altogether at one point. Revolut’s CEO, Nikolay Storonsky, stated that the delay in the license issuance was a result of regulators being cautious following the banking crises involving Silicon Valley Bank and Credit Suisse.

If Revolut’s banking license is rejected, the company will still be able to operate in the UK but will be unable to offer mortgages and loans, which were among its long-term objectives. This setback adds to the challenges Revolut has been facing recently. In a separate development, the company’s CFO, Mikko Salovaara, resigned citing personal reasons. Salovaara joined Revolut in January 2021, around the same time the company submitted its banking license application.

Revolut has emerged as one of the leading fintech companies, providing innovative financial services and disrupting traditional banking models. It has amassed a large customer base by offering digital banking services, international money transfers, and a multi-currency wallet. However, obtaining a banking license has been a crucial milestone for Revolut, as it seeks to expand its offerings and gain a stronger foothold in the UK market.

The rejection of Revolut’s banking license application by the Bank of England would be a significant setback for the company’s growth ambitions. It underscores the importance of meeting regulatory requirements and maintaining transparent financial reporting for fintech firms seeking to operate as full-fledged banks. The concerns raised by the Bank of England highlight the need for robust internal systems and controls to ensure accurate and auditable financial statements.

As Revolut engages in urgent talks to rescue its license application, the company will likely face increased scrutiny from regulators. It will need to address the concerns raised about its balance sheet and ensure that its internal IT systems are configured in a way that allows for transparent and verifiable financial reporting. Furthermore, the departure of the CFO adds an additional challenge for Revolut in navigating these regulatory hurdles.

While the outcome of Revolut’s license application remains uncertain, the situation serves as a reminder that even successful fintech companies must navigate a complex regulatory landscape. Obtaining a banking license involves meeting stringent requirements and proving the ability to maintain financial stability. This incident also underscores the importance for regulators to ensure the integrity of the financial system while fostering innovation and competition in the banking sector.

Revolut will need to swiftly address the concerns raised by the Bank of England and demonstrate its commitment to meeting regulatory standards. The outcome of the discussions between Revolut and the regulators will have significant implications for the future trajectory of the company and its ability to achieve its long-term objectives in the UK market.

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