The US Federal Reserve has ordered Oaknorth to establish a UK holding company as a condition for approving its acquisition of Michigan-based Community Unity Bank, according to reports on Monday.

City AM reported that the regulator told the digital lender it would not sign off on the deal unless Oaknorth shifts its holding structure from Jersey to the UK, prompting the bank to explore creating a new UK-domiciled parent entity. The company told shareholders it had received a “request” from the Fed tied to regulatory approvals and its broader US expansion plans.

Oaknorth said management “expects to propose the introduction of a new UK-domiciled holding company”, adding that further details would be shared in due course. The bank declined to comment further on regulatory matters or the status of the acquisition.

Bloomberg reported that the all-share deal for Community Unity Bank, announced last year, is still progressing through regulatory channels, with chief executive Rishi Khosla stating the transaction is “hopefully months away”. The lender is seeking approvals from both the Federal Reserve and the Office of the Comptroller of the Currency as part of its push for a US national bank charter.

Bloomberg also reported that Oaknorth is expanding its US presence through hiring across product, compliance and lending roles in New York and Michigan, as it positions itself for further growth. The move builds on its entry into the US market following the collapse of lenders such as Silicon Valley Bank and Signature Bank two years ago.

The bank’s latest results highlight the strategic importance of the US, where lending accounted for around 40 per cent of new originations and drove much of its growth. Total new loan volume reached 1.4 billion dollars over the past year, more than tripling from 400 million dollars in 2024, while pre-tax profit rose to 222.5 million pounds.

In contrast, Oaknorth described the UK environment as “subdued”, citing a more challenging lending backdrop. Khosla told Bloomberg that weaker domestic performance was partly deliberate, stating “what we experienced in the UK first half of last year was irrational behaviors,” with lending conditions improving later in the year.

The bank has also revised its sustainability targets, delaying its net zero goal by a decade to 2045 as it adapts to expansion and shifting regulatory priorities. It said the change reflects its growth into new markets and evolving political and regulatory expectations.

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