Brexit provides opportunity for small banks: CEO

Justina Crabtree; special to
Brexit provides opportunity for small banks: CEO

While Brexit has brought about fears for the health of the financial sector in the U.K., one bank chief executive told CNBC that his small, new company has found opportunities in Britain's vote to leave the European Union.

Rishi Khosla, co-founder and chief executive officer of OakNorth Bank, told CNBC's Street Signs that his business "post-Brexit is actually going phenomenally well."

"One massive advantage of being a new bank in the current environment is that you don't have any of that backlog and legacy," he explained.

"Larger banks are actually pulling back," Khosla said, arguing that they are currently straddling obligations to both address the ongoing fallout of the 2008 financial crisis, and "determine how their book actually looks in a post-Brexit world."

Meanwhile, smaller, newer banks are more nimble and can simply "concentrate on business."

But, Khosla did concede that larger banks were crucial for providing the "route to market" for larger companies, and being able to meet their borrowing needs in a way that smaller lenders could not.

Martin Leissl | Bloomberg | Getty Images

Commenting on Deutsche Bank's recent troubles, Khosla said that, just like in 2008, the "connectiveness of the whole global financial system is so high that what is happening with Deutsche clearly is going to have ramifications across the financial sector."

With regards to the potential disruption Deutsche Bank might cause in the U.K., considering that it "headquarters its investment operations here in London," Khosla cited "the reliance for hedge funds on being able to trade with banks like Deutsche, (meaning that) they (might) start moving their business elsewhere."

While he acknowledged that this put the U.K.'s financial sector in a "fragile position," it was also "one which it's critical to step into."

Explaining the idea behind OakNorth, Khosla said that, "ultimately we started this business because we felt like there was a large problem in the U.K. … to find financing as a mid-market growth business."

"This (issue) continues to exist, therefore organic opportunity is very substantial," he said, adding also that the company would consider bolt on acquisitions in the future.

Smaller banks are more resilient to today's ongoing economic saga of negative interest rates, according to Khosla. They "don't have as large an impact" on his particular business because its clientele is so niche. "All of our lending is to the mid-market corporate sector," which is not as well serviced, he explained. It's "not so important (for us) right now."

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