It has been almost a year since the firm first applied to the FSA to become a mortgage lender in May 2011.

A spokeswoman for the company said: “The board at Portillion confirm that the application to the FSA for a banking licence has been withdrawn.

“Difficult market conditions continue. However, it is the board’s belief that opportunities in the mortgage market remain and all options are being evaluated by the board and investors.”

At this time, Portillion could offer no further details on it reasons for the decision or the next steps it will take.

Around 20 people are employed by the firm.

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The FSA said it could not comment on individual applications. While the regulator aims to process complete applications within six months of receipt, it noted that this is dependent on the complexity of the case which can result in it taking longer.

The FSA currently processes more than 99% of applications within its target of six months.

Portillion was originally launched by former GMAC-RFC boss Stephen Knight under the name Checkmate Mortgages in 2007 and rebranded to Portillion in February 2010, aiming to launch in 2011 with mortgages and savings.

In February last year, Knight was forced to leave his role as CEO due to serious illness.

While Portillion struggled to obtain funding during the financial crisis, it is backed by Japanese financial services group SBI Holdings.