How to get a banking licence

Hi @paul, nothing in particular, I’m just really intrigued by the whole process. It’s not something I’ve ever had a view on before.
Is there anything that’s surprised you about the process? Something you thought they’d focus on but haven’t and vice versa?

Hi @anon4562461 the 5 stages that I referred to earlier in this thread are a good reflection of the process and we are in stage 3 ‘application’ and still making good progress. :slight_smile:

I think the regulators have a very difficult job to do. On the one hand :hand_splayed: they are trying to keep the banking system safe and customer protected; at the same time they are required to support competition and I’m sure you’ve read lots about this in the media from politicians.

I’m not sure ‘surprised’ is a word I’d use. The two regulators, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) focus on the areas that their names suggest: prudential matters (capital, liquidity, management, business plan) and conduct matters (customer outcomes, customer protection) respectively.

The amount of content and paper produced is quite staggering. Considering we are going to have only one product, a personal current account with an overdraft, you might be surprised to hear that our banking licence application made on 23 December 2015 comprised around 2,500 sheets of paper since when we have probably provided another 1,000 pages of clarification and additional detail.

At :mondo: as you might expect we’re very eager to become a bank and so it is fair to say it can be frustrating on how slow the process feels :hourglass_flowing_sand:. That said, we have to remember that we are applying for the very rare and special opportunity to become a bank and to be responsible for depositors money :moneybag:.

Fingers crossed (and with a lot of hard work here at Mondo HQ) we’ll get our banking licence :soon:

9 Likes

Hi @paul, thanks for the answer. That’s a tricky balance for the regulators. When something is new and, to a certain extent, unproven, it must be difficult to assess. However, it must also be hard to get across exactly how everything works when you know they haven’t encountered some of the elements you’re introducing.
I’ve had the pleasure of searching through my Hospitals PFI contract so I can well imagine the 3500 sheets of paper.
I look forward to transferring my current account to Mondo.

1 Like

The simplest solution is to buy another co. that already has a banking licence, which is what Cashplus did!!

1 Like

Monese have a licence and very similar to Mondo but charge £5!

Hey, I noticed that on your Trello board this topic had moved up to the short term. Does this mean you are now further along in the process?

Thanks

1 Like

We believe so! We’re still talking and meeting with the regulators (PRA and FCA) and are optimistic we will get our :bank:licence :scroll: :soon: :grin:

8 Likes

What new things can you do when you get AWR status, and what can you only do with full bank status?

1 Like

When Mondo is Authorized with Restrictions (AWR), they are a fully authorized bank, but there will be limits on the levels of deposit they can hold. This is the “Mobilisation” stage. There is also much less burden on getting to this point, as a lot of it is deferred until Mondo apply to lift the restrictions.

During the Mobilisation stage, the limit on deposits held is typically around £50k. This is of course far less than Mondo’s customers currently hold on their prepaid cards, so I’d expect that only a very small number of people will have their money held directly by Mondo, with conservative limits on their balances.

As such, Mondo will want to progress through the “Mobilisation” stage as quickly as possible in order to lift the deposits limit. This must happen within 12 months, but can take a lot less time than that.

Full info is here: http://www.bankofengland.co.uk/pra/nbsu/Pages/mobilisation.aspx#different

3 Likes

I guess the main benefit (other than being a step closer to full bank status) is that they’ll be able to live test features like bank to bank transfers for those users. £50k total is nothing though for main current accounts, they can fit very few users on that, will definitely have to be limited people using it as a balance limited secondary account.

thats 50K per deposit account ? - if it were a total that M… could hold it would mean about £2.50 per card :wink:

That’s the problem, it’s £50k total that they can take as deposits into their bank. As such they can only put so many people on their accounts and with limited balances (e.g. 50 people with max balance £1k, or 100 people with max balance £500, or some kind of mix), and I assume the rest of us will stay on prepaid cards until Mondo is granted a full banking licence.
When I first read @billinghamj’s comment I thought it meant £50k per account and thought [quote=“billinghamj, post:29, topic:35”]
This is of course far less than Mondo’s customers currently hold on their prepaid cards
[/quote]
was a joke, but actually it’s quite a serious restriction.

"Typically we will cap the level of deposits that a new bank can accept to £50,000 " is a bit ambiguous Id say - with the current bank guarantee at £75K per deposit for a fully licenced bank - they would be restricting it to £50k per deposit account having gone through hoops to get to this “restricted” stage which is 4-6months prior to getting full cover for deposits up to £75K - hmmmm - even if most people had minimum of £50 on their card that would add up to more than double £50K total with 20,000 cards in issue

This quote from James definitely states it’s the overall total of all deposits with the bank.

If it were £50k per account that wouldn’t be much of a limit for a current account, and wouldn’t limit the number of people who could use it. The £50k total limit creates issues as if people are using it as a main current account and having salaries paid in then you will reach that limit incredibly quickly.

It almost certainly is the total - holding client money is the most sensitive thing you can do regulation-wise. It can be higher than £50k, but that’s just what is stated as usual. As such, Mondo likely won’t be offering current accounts to the masses until their restrictions are lifted post-Mobilisation.

I’d expect them to offer the accounts to internal staff, investors, and possibly a very small number of external users in a private-alpha manner.

It’s really more for testing and developing relationships which aren’t possible before you’re authorized - not for actually launching. For many financial systems/services, you can’t even see documentation or rules until you actually have your FCA/PRA firm reference number in-hand. We had similar issues with that at Cuvva.

2 Likes

but - if you can start a sentence with that - Mondo were holding more than £50k if thats total deposits before they get AWR, so they would be having to say to customers that they couldn’t top up their cards because we are over the £50,000 deposits - Mondo customers before AWR have spent £18,000,000 over the past 6 ish months that is more than £3,000,000 a month (Cumulative increases in card holders) already so logically it must be per account - ??? hmm I suppose holding cash and processing cash from customer to service provider is a different thing ? and presumably its wire card that is “holding” the cash at present

1 Like

Ok, I see the confusion.
Currently Mondo cards are technically prepaid Mastercards - Mondo doesn’t actually hold any of the money itself or have access to it, it’s all ringfenced somewhere else (wirecard are holding it I believe, as you said).
Once Mondo has AWR status it can hold up to £50k of depositor’s money in its own accounts (like a conventional bank). To stay within that limit they can continue to keep the rest of us on prepaid Mastercards.

2 Likes

Npt sure if its being held by wirecard as when you deposit money via bank transfer the sort code is a barclays sort code. This is quite common as its the same for most other Mondo rivals such as Revolut, they all goto a barclays account.

Hi all, just to be clear, AWR allows us to hold £50,000 in total for all customers. When we are happy that ‘mobilisation’ is complete we apply for a ‘variation of permission’ to the PRA to get this restriction lifted. Another interesting point is that during mobilisation we are not allowed to lend, which means no overdrafts on our current accounts until after mobilisation…

6 Likes

Well a lot of this goes over my head, or at least not over my head but over what I really want to know in technical details, but it’s still a generally interesting read. It may be ‘Day One’ for me but I’m facinared to be on the inside watching it all develop. And I never thought I’d learn how to start a bank ha ha
I hope you’re going to have some sort of Mondo club for those of us who were there before you came the great bank of Mondo lol? I haven’t got a shed load of money but I hope my little bit helps you achieve your vision

1 Like