Paragon Bank launches today after receiving a license from the authorities – the first new license since Metro Bank’s in 2010, making Paragon the second new bank in over 100 years.
The bank’s parent group was already engaged in specialist lending such as buy to let mortgages.
But this license allows it to go after retail deposits which it wants to use to make consumer and SME loans.
Paragon Bank begins with capital of £12.7m. It is the first to get a license under the new system introduced in March last year, which aimed to speed up the process.
Metro Bank took 18 months to get a license – by contrast Paragon managed in 11 months.
The new system allows banks to start with core capital of 4.5 per cent, below the seven per cent required by larger banks. However, it will have to increase its capital ratio to seven per cent before it can pay dividends, under rules coming in from January 2016.
The new approval system also aimed to give license applicants more information earlier in the process to speed up the system. Another 20 banks are currently going through the application system.
Paragon Bank will be run by Richard Doe who used to run ING Direct UK, the British arm of the Dutch bank. It was sold to Barclays last year.