The Bank of England (BOE) has raised the capital requirements for Monzo at a time when the challenger bank is trying to raise fresh funds this year, the Financial Times has reported.

Monzo’s capital requirements have been hiked to 13.65% of its risk-weighted assets so that the company absorbs potential losses.

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The move is part of the central bank’s promise to boost capital planning and governance at smaller banks, the report added.

Therefore, Monzo’s capital requirement has been twice as high as many big banks in the UK.

BOE’s involvement has affected Monzo’s latest fundraise in June when Monzo closed a £60m ($76m) funding round with 40% drop in valuation.

Previously, Monzo was required to have 9% of its risk-weighted assets in capital.

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In May, the capital requirements increased to 13.65%, plus a fixed amount of £21m has been mandated by the BOE.

An existing investor of Monzo noted that the bank “needs at least £20m to avoid breaching regulatory capital requirements.”

These standards that BOE laid for Monzo have surpassed the expectations the regulator has from more established banks like NatWest, Lloyds and Metro Bank.

However, the BOE’s arm Prudential Regulation Authority said it would consider new ways to “create a smoother path” for growing banks.

Monzo said: “All banks, including Monzo, must ensure they plan their capital requirements effectively and hold sufficient capital to meet their current and future needs.

“Monzo continually reviews its capital requirements as part of the Internal Capital Adequacy Assessment Process”.