London, The UK : The Financial Conduct Authority (FCA) fined Metro Bank $12.2 million (£10 million) and sent a notice for violation of the rules by publishing invalid information to the investors back in October 2018. The FCA claimed that the bank “was aware at the time” that the data it published was false. Additionally, the FCA has decided to sanction former Metro Bank CEO Craig Donaldson and former CFO David Arden, who were both knowingly involved in Metro Bank’s violation, by amounts of £223,100 and £134,600, respectively.
What did the FCA find?
Originally appointed to the Official List of the London Stock Exchange in 2016, Metro Bank is a dual-regulated company that was a member of the FTSE 250 at the moment of the announcement.
Leading executives resigned as a result of the news, which reduced the company’s share value by millions of millions of pounds. The hefty penalties imposed on the CEO and CFO are temporarily pending a formal hearing because they have sent their cases to the upper tribunal for review.
The market received regular updates from Metro Bank on its prudential situation, including the Risk Weighted Assets (RWA) that serve as the foundation for its regulatory capital requirements. This information was provided to the market as part of its quarterly financial results. On October 24, 2018, in its October Announcement, Metro Bank released inaccurate information about their RWA statistic in its third quarter trade report.
The FCA stated that while the Bank was aware of the fact that this number was incorrect, it did not qualify it or state that it was being reviewed and would need to be significantly corrected. Additionally, Metro Bank neglected to evaluate whether the inaccurate RWA figure needed to be adjusted or clarified in the October Announcement and did not seek legal counsel on the matter. In light of this, Metro Bank did not use due precautions to guarantee that the October Announcement was accurate and truthful and contained all necessary details.
When the accurate RWA statistic was revealed in January 2019, it caused Metro Bank’s share price to drop by 39%.
Metro Bank released a statement in which it acknowledged complete cooperation with the FCA inquiry and acceptance of the findings. The lender told investors last week that it has increased its contingency for the penalty from £5.3 million to £10 million in consideration of the FCA fine, noting that it was still within the previously specified range of up to £13 million.
Metro Bank fined in 2021
Although, this is not the first time that Metro Bank has been presented with a fine. The Bank of England’s Prudential Regulation Authority (PRA) had imposed a £5 million charge because of deficiencies in its regulatory reporting, governance and controls in December 20021.
Metro Bank had specifically erred in its Common Reporting (COREP) obligations by failing to take the necessary steps to ensure that it followed its obligations to the PRA to submit accurate reports; devising and optimizing controls for understanding pertinent regulatory directives and norms; and alloting suitable and sufficient resources so that it can fulfil its reporting requirements.