I’m really very skeptical that anyone would sell shares in their business for less than they could actually get for them just to avoid some admin and make some investors happy 
Agree with you completely - this is spin.
“Demand is amazing and we’ve done so well over the pandemic that we’ve decided to extend our 40% discount offer”
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Yet still no dark mode in 2021.
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Problematic for the narrative that the bank is on its knees
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My apologies, I hope that didn’t appear to be patronising.
I’m not party to any specific Monzo/Regulator conversation but I expect the requirement to increase regulatory capital and buffers is based on a number of things such as the direction of travel of expected credit losses and non performing loans, a decline in revenue not sufficiently offset by additional revenue the paid plans are generating which exacerbate losses. Combine this with a consideration for the number of customers the bank has, while the bank is not going to be defined as ‘systemically important’, 5m customers = a lot of money that could be moved quickly in a panic would create a stress scenario which could hugely impact the bank’s operations. The regulator’s job is to work with banks to game various stress scenarios and come up with mitigatants that protect customers and the banking system and maintain confidence. The PRA may just be living up to their name.
Also bear in mind the regulator and the bank will be in frequent dialogue, and it would not surprise me if this occurred on a daily basis, especially given the current environment.
This years results will be very interesting, probably a tough read in places, which will no doubt be misinterpreted by many, particularly journalists. The newest pillar 3 disclosures and annual report will shed some light on requirement to increase capital/MREL if Monzo hasn’t made a public statement.
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Agreed on both fronts! We’re used to the latter by now.
Thanks for the detailed thoughts, pretty useful actually. I don’t think Monzo made a statement but I’m not sure. I know Starling had their capital requirements increased but not by nearly as much. Although their loans are mainly government backed business loans.
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But the bank has secured investment, people don’t invest these sums if they think the worst. So clearly investors still have faith in the bank.
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Yep tells us exactly the same as the last round. Monzo still investtible but not at the same level as 2019.
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It’s more monzos app combined with it’s ethics, it basically is if gen y and gen z built a bank monzo would be what you got.
No investment banking, no reckless lending, not too big to fail. A simple bank that serves it’s customers needs.
Yeah is this profitable I don’t know, co op bank ended up in the hands of hedge funds (yuck).
Other one is Nationwide being a building society but then look at it’s bank like fees on free accounts for overseas debit card spending.
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Monzo most likely need to move to more revenue streams such as credit cards and even mortgages on their own balance sheets.
Problem is capital, would paying way over market rates on savings pots that are stored with monzo a way of doing this. (this would be a very expensive way of raising the capital)
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Not if they then leant this money out in overdrafts/loans/credit cards at 20%…
What if people pay those credit cards in full.
Guessing it’s the risk all credit card lenders pay is needing to subside those who pay in full like myself. (You’d be mad not to pay in full)
:fyi: capital is unfortunately not the same as deposits.
A very simplified view with made up numbers might be: Monzo has £1 billion in customer deposits and £100 million of capital (Monzo’s own money from investors/ equity). When we lend out £1 million we need to hold £200k (20%) of capital (this is money we need to put aside and effectively do nothing with).
So you might think that Monzo can lend out £1.1 billion but this would mean we need to hold £1.1 billion * 20% = £220 million of capital which in this scenario we don’t have. 
So in this scenario we are capital constrained and whether we have £1 billion in customer deposits or £10 billion of customer deposits makes no difference. In fact, we actually need to hold capital on customer deposits as well so having savings pots and building customer deposits to £10 billion would actually be a bad thing.
Hope that makes senes - it’s a complicated topic!!
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Good post and backs up what I have been saying the only way Monzo can start to really reduce its losses is to move in to other products and to do that it needs big financial backing - hopefully a bug foreign bank or private equity business is waiting ready to make a bid.
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