Digital challenger bank Tandem has been rocked by news that Sanpower, the Chinese conglomerate which owns House of Fraser, has been forced to cancel a £29 million cash injection intended to help the startup meet regulatory capital requirements.
The pull-back from Sanpower, first reported on City AM, is understood to be connected with Chinese Government-led restrictions on outbound investment.
The news is a serious blow to Tandem's ambitions to launch as a full bank, forcing it to miss licencing deadlines imposed by the Prudential Regulatory Authority.
Speaking to City AM, Tandem chief Ricky Knox said the startup will go ahead with the launch of its mobile app under FCA rules, but without the planned savings product as its centrepiece.
Tandem has so far raised £28 million for its venture, including a £6 million investment from House of Fraser and a £1 million crowdfunded contribution from from its user community.
Knox says Tandem intends to re-apply for a licence with PRA, and will be returning to its original investors Omiday Network and Route 66 Ventures as it begin its search for fresh funding.
City AM says staff were appraised of the news this morning and that the startup is now "examining the structure of the business".