Back in August, ‘challenger’ bank Tandem said that it had signed an agreement to acquire Harrods Bank, the banking arm of the U.K.’s most famous luxury department store, subject to regulatory approval. Today, the startup bank is announcing that it has now received the go-ahead from the Prudential Regulation Authority, a division of the Bank of England, and the Financial Conduct Authority, the two relevant U.K. regulators.
Tandem says this brings the deal much closer to completion, and when it does complete will give it access to a full banking licence. In addition, Tandem will gain 10,000 Harrods bank customers, Harrods Bank’s mortgage and savings books, as well as a significant capital injection.
Under the agreement, for which financial terms aren’t being disclosed, Tandem will acquire 100 percent of Harrods Bank, and has previously said it will benefit from around £80 million of capital coming into the business. At the time of the announcement, a spokesperson for the challenger bank said the £80m of capital is made up of the capital within Harrods Bank, as well as some additional investment from new and existing shareholders.
In a statement issued today, Ricky Knox, Tandem’s founder and CEO says: “This is a major step forward in our plan to acquire Harrods Bank. When the deal is finally done early in the New Year, it will transform Tandem into one of the UK’s leading digital challenger banks”.
The completion of Tandem’s acquisition of Harrods Bank would appear to draw a line under what has been a turbulent year for the burgeoning challenger bank. Last December it announced that it had secured a £35 million investment from department store House of Fraser, owned by China’s Sanpower. However, restrictions on capital leaving China led to part of the investment being withdrawn and Tandem eventually losing its own banking license and having to re-jig the business, including layoffs.
As we noted at the time of the Harrods Bank announcement, acquiring an existing licensed bank is effectively a short cut to Tandem getting its own regulatory status back on track. Those Harrods Bank savings deposits won’t do any harm, either.