Revolut considers auditor change amid UK banking license challenges

Revolut considers auditor change amid UK banking license challenges

Fintech giant considers dropping BDO following audit report in order to obtain clean bill of health from PRA

Revolut considers auditor change amid UK banking license challenges

Revolut, the London-based fintech giant, is currently facing challenges regarding its audit report, which has prompted the company to consider changing its auditors at a crucial moment in its pursuit of a banking license in the UK.

The audit report by BDO raised concerns about the completeness and occurrence of a significant portion of Revolut’s revenues, specifically highlighting £477 million in potential misstatements and IT control problems.

Despite the company’s confidence in its financial statements, the issues raised in the audit report have created uncertainty around the planned changes. While Revolut is contemplating switching auditors, it is expected to retain BDO at least until the end of its 2023 financial year.

Revolut’s official statement on the audit report was that it “confirmed that the financial statements give a true and fair view” but it would not comment on whether it will switch to a new auditor. In September, the firm was granted an extension to file its annual report with Companies House for the second year running.

The decision to change auditor could potentially impact Revolut’s quest for a British banking license, which it has been waiting for since 2021.

Pursuit of the UK Banking License

Revolut’s pursuit of a UK banking license has been marred by various challenges, including the complexity of its ownership structure.

The Bank of England has expressed concerns about multiple share classes, which has been an obstacle in granting the license. However, after months of negotiations between Revolut and SoftBank, known as “Project Swan,” an agreement was reached to address this issue. SoftBank relinquished its preferential rights without imposing any financial consequences on Revolut, and the company also consolidated shares held by other major investors like Tiger Global Management.

The consolidation of shares and the resolution of ownership concerns align with Revolut’s ambition to enhance its offerings and expand into new areas such as lending products. Additionally, it ensures the protection of customer funds under the UK’s deposit insurance scheme, further strengthening Revolut’s position in the market.

A clean bill of health in the fintech’s future audit reports is thought to be the last remaining hurdle for securing its licence from the Financial Conduct Authority and the Prudential Regulatory Authority. Switching to a big-four auditor might also be thought to bolster the firm’s credentials ahead of a final decision by the FCA and the PRA.

Securing a UK banking license is crucial for Revolut to operate more efficiently and effectively in the country, enabling it to offer a broader range of financial services to its customers. The license would also provide regulatory oversight and ensure compliance with the Financial Conduct Authority and the Prudential Regulatory Authority’s standards.

Revolut’s market expansion

In recent news, Revolut unveiled plans to grant retail investors access to bond trading in Europe, aiming to democratize the corporate and government bond market by lowering the minimum investment amount to €100. This move is significant as the bond market, with a valuation of approximately €122 trillion, has traditionally been challenging for retail investors to access.

Revolut’s foray into the bond market is not limited to Europe alone. The company also intends to encompass the US market, providing its retail investors with access to US government bonds and corporate bonds from major entities such as Wells Fargo and Apple. This expansion into the bond market is expected to attract a broader range of investors and further solidify Revolut’s position as a leading fintech firm.

Worth the disruption

Revolut’s consideration of changing auditors reflects the company’s commitment to maintaining transparency and ensuring the accuracy of its financial statements. But it is unclear whether the company has addressed the IT control problems that were cited in the audit.

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