Fears for challengers as Bank North heads south

THE demise of Bank North is raising concerns about the financial strength of other challenger banks as they contend with the cost-of-living crisis and a near meltdown in financial markets.

Bank North had failed to raise enough cash to qualify for a full banking licence. Since 2013, the Bank of England has approved 54 new licences for banks including Monzo, Starling and Atom.

A recent report from EY found revenue and profitability for challenger and specialist banks had risen last year while provisions for bad debts fell.

It said banks remained well capitalised – meaning they had set aside sufficient reserves to deal with any downturn and to keep growing.

But EY added: ‘The geopolitical and economic picture may create significant challenges ahead.’

Judging from the bombed-out share price of Metro Bank – one of the least capitalised banks EY surveyed – investors may already be factoring this in.