Brexit Vote Derails Estonia Lender’s Plan for U.K. Expansion

Updated on
  • Consumer lender Bondora stops seeking FCA license, CEO says
  • Bondora drops plan to move HQ to London, may choose Berlin

Estonian consumer lender Bondora is no longer seeking a license from the U.K. financial watchdog and has dropped plans to move its headquarters to London after Britain’s vote to exit the European Union, its chief executive said.

Bondora, which obtained interim permission for consumer credit activities from the U.K. Financial Conduct Authority in 2014, notified the FCA in July that it isn’t interested in a license anymore, Chief Executive Officer Partel Tomberg said in a phone interview on Monday. The FCA has delayed steps to allow tax-free investment in consumer loans, further reducing the attractiveness of the U.K. market, he added.

“There is total uncertainty after the U.K. referendum, so it has become very hard to make any investments there,” Tomberg said. “The U.K. market, from a regulation and corporate headquarters stand-point, is not competitive anymore.”

Frankfurt, Luxembourg and other cities have looked for ways to profit from the expected erosion of London’s status as a financial hub within the EU. While the British Bankers’ Association said it aims to keep access to the single market, an ally of German Chancellor Angela Merkel warned last week that the bloc won’t bend its rules to preserve access for the City of London once Britain leaves.

Tallinn-headquartered Bondora, which has issued 65 million euros ($73 million) in loans to more than 182,000 customers in Spain, Finland and Estonia since 2009, is “well-capitalized” from its latest funding round and is focusing on maintaining profitability, Tomberg said. Instead of London, it may now opt for Berlin as the location for its corporate headquarters, he added.

“The German regulators are softening their stance towards financial innovation and taking steps to attract such start-ups to Berlin and rest of the country,” Tomberg said.

Bondora is among the few “crowdfunding companies,” which use capital from a pool of individuals, with cross-border operations in Europe, Tomberg said. Payment services companies, traditionally more regulated by the U.K., may feel the strongest impact in the financial technology industry from Brexit-related uncertainty, he said.

“For Internet companies, the common market is very important,” Tomberg said.

(Adds comment on payment service providers from seventh paragraph.)
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