Metro Bank fined £10m by Financial Conduct Authority

Metro Bank has been fined around £10million by the UK’s financial services regulator for publishing false information to investors in its quarterly results four years ago.

Former chief executive Craig Donaldson and ex-chief financial officer David Arden have also been told to pay £223,100 and £134,600, respectively, for being aware of the transgression.

The high street challenger bank admitted in January 2019 that risk weightings on around £900million of commercial property loans and loans to commercial buy-to-let operators were incorrectly classified in its third quarter results in 2018.

Major error: Metro Bank admitted in January 2019 that risk weightings on around £900million of loans had been incorrectly classified in its third-quarter results

These errors meant the group had to put aside extra money to fund the loans and conduct a £375million capital raise from shareholders.

Many major customers withdrew their deposits as a consequence of the error, and investigations by the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) were opened.

Shares in the company spiralled even lower following the scandal, having already taken a battering in the previous months from heavy financial losses and intense competition in the mortgage market.

Since reaching a peak of more than £40 in early 2018, Metro Bank shares have plummeted by more than 97 per cent. They were up 3.4 per cent to 109.6p during the mid-morning on Monday.

The PRA fined the bank £5.4million at the end of last year for ‘failing to act with due skill, care and diligence’ in regards to the reporting of its capital position, governance and controls over a three-year period.

On the publication of its annual results two months later, Metro said it had taken a £5.3million provision in anticipation of a separate penalty from the FCA but declared last week that another £4.7million had been set aside.

In a statement, the FCA said the bank was aware of the inaccurate RWA figure in its October 2018 trading update and ‘failed to qualify it or explain…that it was subject to an ongoing review and would require a substantial correction’.

It added that the group did not seek legal counsel over the matter or take ‘reasonable care’ to ensure the third-quarter results were ‘not false and misleading and did not omit relevant information’.

On Donaldson and Arden, the financial regulator said the pair were ‘knowingly concerned’ about the breach of rules.

Metro has accepted the FCA’s findings, but the former executives have decided to appeal against their respective sanctions, where they will have the opportunity to present their case to the Upper Tribunal.  

They said: ‘While we’re disappointed by today’s ruling from the FCA’s regulatory decisions committee, we welcome the fact there is no finding of any dishonesty or criticism of our integrity.

‘We operated in full transparency with the board and the Prudential Regulation Authority and with the benefit of legal advice. We are appealing the decision, and until that process is complete, we will not be making further comment.’

This post first appeared on Dailymail.co.uk