In writing the story of successful bank authorisations, achieving an Authorisation With Restrictions (AWR), otherwise known as entering mobilisation, is the first step.
Whilst you have overcome the first and one of the more daunting hurdles of getting through the application journey, the second goal of exiting mobilisation is perhaps the most operationally challenging.
What is mobilisation?
Mobilisation is the ‘alternative route’ or ‘Route B’ to becoming a fully operational and authorised bank in the UK. Mobilisation grants an early authorisation to an aspiring bank with certain restrictions imposed on activities. This time in a sort of ‘sandbox’ positions aspiring banks to show investors their functional business plan, raise capital, build out and test IT systems, controls, risk management framework, take limited deposits, recruit staff etc.
In your pre-application stage you will have an initial meeting with the regulators and this will kick off the discussion around whether or not mobilisation is the route for you. Meeting two is typically focussed on feedback on your business plan and then meeting three is arranged if you choose to take the mobilisation route.
The mobilisation meeting will entail discussions with the regulator that will focus on “credibility of your mobilisation plans, how you expect to track and report progress, and identify and manage risks and issues”. So there is time and opportunity to have a think about whether mobilisation is the right path for you.
Some key pros and cons of mobilisation:
What are the restrictions during mobilisation?
The regulators may allow a bank in mobilisation to accept deposits but will limit the amount of deposits a bank can take. Typically the restriction on deposits is to the tune of £50,000 in aggregate.
Depending on the stage of operational a business model development of the new aspiring bank, the regulators may levy idiosyncratic restrictions in addition to the limitations placed on deposit taking. To avoid additional restrictions, aspiring banks should ensure that their plans are well developed, the operationalising of the business is thought through and that their regulatory relationship management is pragmatic, focussed and considered.
What are the information requirements for banks wanting to mobilise?
Provision of information to the regulator in a prompt, considered, detailed yet digestible manner is part of regulatory relationship management and key to achieving effective mobilisation. Furthermore, sharing information with the regulator in an open and transparent manner allows for both the regulator and the new bank to reach a mutual understanding of a clear road map to full authorisation. The following information is required by the regulator from banks intending to mobilise:
The opportunity to have time to build out risk management and controls structure, material outsourcing arrangements and policies and procedures in a controlled environment also means that the regulator has the expectation that these elements will meet good practice standards and will be scalable to accommodate the fast growth plans of the business.
What happens during mobilisation?
Mobilisation is the new banks incubator, so unsurprisingly the regulator is interested in your progress and would require regular updates. Progress will be measured against the new bank’s developing ability to meet all the regulatory requirements listed in the FCA and PRA handbooks applicable to fully authorised firms.
These regular touchpoints are an opportunity to inform the regulator of any slippages in the mobilisation exit plan and/or evidence the progress made against the operational plan to exit mobilisation. This is an opportunity because the regulators will provide feedback and clarify their expectations for your business.
Often banks underestimate the amount of time, money and resources required to fully build-out a bank, especially the time required to build out and test the systems and IT. These can cause slippages in the plans which may mean that the bank is up against the 12 months exit deadline without a cure plan. Therefore, it is imperative to draw realistic plans and leave enough time for development and testing.
If you have any concerns about your ability to meet the mobilisation conditions, speak to your regulator at the earliest possible opportunity. The regulator will also raise any concerns that they may have with you at the earliest possible time.
The relationship management aspect is key and could be the difference between negotiating a realistic plan B or revised mobilisation conditions and having to surrender the restricted banking license. The license may need to be handed back if the new bank will not be realistically able to exit mobilisation in 12 months or does not meet required standards. Therefore, mobilisation is a critical time and the build out period should be immaculately planned.
Mobilisation is not for an indefinite period of time.
It can be a little as three months or a maximum of twelve months. When the regulator is convinced that the bank is ready to exit mobilisation, you can expect your supervisor to help you by directing you to submit a Variation of Permission (VoP) to remove the restriction requirements. At this stage, the regulator will require a confirmation from the Board on the ability of the bank to assume full scale authorisation and trading without restrictions. This confirmation will need to be supported by evidence that all systems, controls, governance arrangements and prudential elements meet the expectations required for operating a fully functional bank. Furthermore, prior to exiting mobilisation the regulator may require external assurance on the supporting evidence.
The final step is the receipt of a letter from the regulators confirming your status as a fully authorised bank and the removal of restrictions.
Welcome – You are now a bank in the UK!
For more details on this, please reach out to the authors of this blog.
We also encourage you to read some of our other blogs on new bank authorisation in the UK: