The would-be lender had instructed Citigroup to prepare for £250m fund raising from an AIM listing but it is now no longer working with the company.
Home & Savings Bank is still in the fund raising process and will now pursue solely private investors rather than considering a stock market listing in a tumultuous market.
The bank has all its systems, controls and staff in place but is also still waiting for Financial Services Authority approval having applied in May 2009.
Martin Finegold, founder of Kensington, is listed as a director and is believed to be making a smaller investment through his hedge fund Cambridge Place Investment Management.
Birch says the bank aims to provide a conservative approach to mortgage and savings products via internet, phone and post.