Metro Bank fined £ 5.4million for reporting and governance failures
Metro Bank fined £ 5.4million for reporting and governance failures as Bank of England PRA penalizes second-largest bank this week
- Metro Bank’s mistakes came as it was undergoing a massive expansion program
- The company misclassified the risk weights of around £ 900million of commercial loans
- Standard Chartered was fined £ 46.6million by the Bank of England on Monday
Metro Bank this week became the second financial institution to be fined for regulatory and governance violations.
After penalizing Standard Chartered on Monday, the Bank of England’s Prudential Regulation Authority (PRA) imposed a penalty of just under £ 5.4million on the challenger bank for defaults it committed between May 2016 and January 2019.
Meanwhile, Metro Bank embarked on a massive expansion program that boosted its retail outlets and customer base, as well as major deposits and credit levels.
Bank fine: The Prudential Regulation Authority (PRA) imposed a penalty of just under £ 5.4million on Metro Bank for defaults it committed between May 2016 and January 2019
But at the end of the period, he revealed he had misclassified the risk weights of around £ 900million of commercial real estate loans and loans to buy-lease commercial operators.
The revelation deepened the spiral in the company’s share price, falling 40% on January 23, 2019 after the major mistake was made public.
Its share price is now around 98% below its peak of over £ 40 in May 2018.
Although the PRA acknowledged that Metro Bank had met its regulatory capital requirement, it said the use of the wrong risk weight had led to an “inaccurate picture” of the bank’s capital situation.
Sam Woods, Deputy Governor of the Bank of England and Managing Director of the PRA, said: “We expect companies to invest appropriate and adequate resources to ensure that they submit accurate regulatory statements.
“In this case, Metro Bank failed to live up to expected standards of governance and control, resulting in today’s enforcement action.”
Just two days ago, the biggest fine ever imposed by a PRA-only enforcement case was imposed on banking giant Standard Chartered for misrepresenting its liquidity position and failing to cooperate appropriately with regulators.
The listed company was fined £ 46.6million for committing five breaches in communicating its ‘liquidity measure’, including one case where it failed to report an error to the PRA before the end of a four-month internal investigation.
In response to today’s PRA ruling, Metro Bank said it had “fully cooperated with the PRA investigation and agreed to the resolution of this matter with the PRA.”
“Since the RWA (Risk Weighted Asset) errors that served as the basis for the PRA’s investigation were identified, Metro Bank has made significant improvements and made substantial investments to its regulatory reporting processes and controls.
“It has also strengthened its risk management and broader governance, demonstrating its commitment to accurate regulatory reporting and consistent growth. “
Shares of the company closed up 7.2% at 94.25 pence on Wednesday.