Future corporate titans of financial services may fail and never achieve their full potential due to a limited pool of later stage investment options in Europe, a bank CEO has warned.
Speaking at Money 20/20 Europe on Thursday (5 June), David Jarvis, chief executive of the UK licenced bank, Griffin, said Europe needs to get better at funding companies in the later stage of their growth cycle.
“We need more capital coming in,” he said. “The early stage capital in Europe is quite good now. You have good Tier 1 European investors and good Tier 1 American investors.
“Where things start to break down a bit are in Series B, Series C and D. That’s where you start to run out of options in Europe.”
Jarvis explained that in addition to a lack of capital, European investors were often too rigid with the parameters that guide where they place their investments.
“Within Europe, investors are often hyper constrictive with their LPs,” he said. “That can mean that a business then dies, even though it should have been funded.”
He said that these restrictions can manifest as strict rules relating to the turnover of the companies that investors are willing to entertain, even when the size of a company’s turnover is just outside their preferred investment size.
Despite these sobering observations, Jarvis was highly complimentary about his company’s experiences with the Bank of England’s Prudential Regulation Authority, but noted that the UK’s Financial Conduct Authority was obviously still struggling with workload and resources.
He said: “The UK has two financial services regulators, the PRA and the Financial Conduct Authority.
“Most people will only ever deal with the FCA. They are a lovely bunch of folks but they are very over-worked. That can mean a not great experience for the client – the financial services company that is trying to get authorised or manage their relationship. The manpower on the other side is not there.”
Jarvis, however, said that his experience with the Bank of England has been terrific which he said relates to the importance that the Bank places on ensuring UK banks succeed.
“The Bank of England is very involved and, critically, they do have a high barrier to entry. You have to prove that you deserve to be on the other side. Once you are on the other side they care, a lot, that you are successful.”
Jarvis said that in the first year of being authorised as a bank by the PRA, his lead manager at the regulator would “dunk on him” for not having a better revenue position.
“They are tough, but fair, and want you to win,” he said.
Jarvis’s endorsement of British banking regulation was a standout moment at this year’s Money 20/20 Europe where many of his peers have been quick to demand more from European regulators.
