The Financial Conduct Authority has fined Metro Bank £10mn and censured two former top executives for misleading investors on a key risk measure ahead of a 39 per cent collapse in the challenger bank’s share price, drawing a line under the four-year-old reporting scandal.
The FCA said Metro Bank knowingly published an incorrect figure for its risk-weighted assets — a risk measure that is a key input to the bank’s capital adequacy — in an October 2018 trading update. When Metro Bank admitted its £900mn error, mostly related to the riskiness of its commercial property and buy-to-let portfolios, shares fell 39 per cent.
Metro Bank’s former chief executive Craig Donaldson and former chief financial officer David Arden were aware the risk-weighted assets figure was wrong and would require “substantial correction”, the FCA said, as it fined them £223,100 and £134,600 respectively.
The two executives referred the FCA’s findings to its appeals mechanism, known as its upper tribunal. Metro Bank, one of the UK’s earliest and most successful challenger banks, did not. The Prudential Regulation Authority (PRA) has already fined Metro Bank more than £5mn for issues related to the risk-weighted asset misstatement.
“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,” the two bankers said in a statement.
“We operated in full transparency with the board and the PRA, 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.”
When the correct risk-weighted assets figure was announced in January 2019, the FCA said the news “contributed” to a sharp fall in Metro Bank’s share price that day.
“Listed firms must ensure that the information they are disclosing to the market is right,” the FCA’s head of enforcement Mark Steward said. “This is what investors are entitled to receive.”
Twelve-year-old Metro Bank said it had “co-operated fully with the FCA investigation” and accepted the outcome, which “brings the RWA (risk-weighted assets) legacy issues to a close”. “The £10mn fine is within the range outlined at the company’s full-year 2021 results and has been fully provided for,” the bank added, detailing the “extensive remediation work” it had carried out on its regulatory reporting processes, risk-management framework and governance and compliance culture.
The bankers were fined for their conduct as directors under the UK’s listing regime, and not under the senior managers regime, the tough post-crisis conduct rules which the UK government is considering relaxing as part of its bid to boost the City after its Brexit losses.
Arden stepped down from Metro’s board in February and left Metro Bank completely in April. Donaldson resigned in December 2019.
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