(Bloomberg) -- Revolut Ltd.’s European unit faces the highest individual capital requirement set by the European Central Bank for significant lenders in the region, as the fintech pursues rapid growth to challenge traditional banks.
The ECB assigned Revolut Holdings Europe UAB a Pillar 2 Requirement equivalent to 3.7% of its risk-weighted assets, according to data published this week on the central bank’s website. The measure reflects risks that individual lenders take.
The average for the more than 100 banks overseen directly by the ECB is 2.3%.
“This decision reflects that we are a relatively new licensed full-service bank since December 2021, and our distinctive growth trajectory,” a Revolut spokesperson said in an emailed response. The financial strength metrics of the Lithuania-based unit are “well above” its minimum requirements, the spokesperson said.
Challenger banks like Revolut have taken business from established lenders by offering a better user experience, yet the pace of growth and their relative lack of experience has also sparked concerns among regulators. In July, Revolut received a long-awaited British banking license after first applying in 2021.
The Pillar 2 Requirement is one of several components that determine how much capital a bank has to hold to balance the risks it’s taking when making loans. As a fintech, Revolut’s business is more geared toward payments and less toward extending credit, which benefits its capital ratio.
Revolut Holdings Europe UAB had a total capital ratio of 29.5% at the end of September, compared with its requirement of 17.1%, according to the spokesperson.
The ECB assumed direct supervision of Revolut’s European Union subsidiary at the start of this year. The ECB’s requirement for next year is “consistent” with the level for 2024 set by the Bank of Lithuania, the spokesperson said.
An ECB spokesperson declined to comment on individual banks.
Overall, the watchdog slightly raised the bar for capital at European banks in 2025. Notably, several US investment banks that built out their units in the EU after Brexit will join a group of lenders subject to additional requirements for tackling what the ECB called “excessive leverage.”
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