The UK’s financial services regulator has fined Metro Bank around £10 million for providing incorrect information to investors in its quarterly results four years ago.
Additionally, former chief executive Craig Donaldson and former chief financial officer David Arden have been ordered to pay £223,100 and £134,600, respectively, for knowledge of the violation.
In its 2018 third-quarter results, the high street challenger bank erroneously categorized risk weightings on approximately £900 million of commercial property loans and loans to commercial buy-to-let operators. This admission was made in January 2019.
Due to these blunders, the business had to set aside additional funds to fund the loans and seek £375 million from shareholders.
As a result of the miscalculation, numerous big clients withdrew their money, and the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) launched investigations.
Following the controversy, the company’s stock continued its downward spiral, which had already begun in the preceding months due to massive financial losses and intense competition in the mortgage market.
Since reaching a high of over £40 per share at the beginning of 2018, Metro Bank shares have declined by more than 97 percent. Monday morning at midday, they were up 3.4% to 109.6 pence.
The PRA penalized the bank £5.4million at the end of last year for failing to report its capital position, governance, and controls over three years with “necessary skill, care, and diligence.”
Two months later, upon the release of its annual results, Metro disclosed that it had set aside £5.3 million in expectation of a separate penalty from the FCA, but this week it disclosed that another £4.7 million had been set aside.
The FCA stated in a statement that the bank was aware of the erroneous RWA statistic in its October 2018 trading update but “failed to qualify or explain…that it was subject to an ongoing examination and would require a significant repair.”
The group did not obtain legal assistance or take “due care” to ensure the third-quarter results were “not false and misleading and did not omit key information,” according to the statement.
The financial regulator stated that Donaldson and Arden were “knowingly concerned” about the rule violation.
Metro has accepted the FCA’s conclusions, but the former executives have elected to appeal their particular sanctions to the Upper Tribunal, where they will have the chance to submit their case.
They stated, “While we are disappointed with today’s judgment by the FCA’s regulatory determinations committee, we are pleased that there is no finding of dishonesty or criticism of our integrity.”
“We operated in complete transparency with the board and the Prudential Regulation Authority, and with the assistance of legal counsel.” We are appealing the ruling and will have no further comment until the appeal is resolved.’
