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Metro Bank fined £10m for misleading investors

Nick Cheek
Written By:
Nick Cheek

Metro Bank has been hit with a £10m fine for publishing incorrect information to investors, the city watchdog has confirmed.

The regulator, the Financial Conduct Authority (FCA) has also fined Metro Bank’s former chief executive Craig Donaldson and former chief financial officer David Arden £223,100 and £134,600, respectively, for “being knowingly concerned in the breach”.

As part of historic quarterly financial results, Metro Bank included so-called Risk Weighted Assets (RWA) on which its regulatory capital requirements are based.

The lender was found to have given false information regarding the RWA figure in its third quarter trading update on 24 October 2018.

The FCA said Metro Bank was aware at the time that this figure was wrong and failed to qualify it or explain that it was subject to an ongoing review and would require a substantial correction.

Metro Bank also failed to seek legal advice over the figure, and therefore, was not taking due care to not mislead investors.

Major fall in Metro Bank’s share price

When the correct RWA figure was announced in January 2019, it contributed to a 39% fall in Metro Bank’s share price. The FCA said it considers that Donaldson and Arden were aware of the breach in the listings rules.

Metro Bank has not referred the decision to the Upper Tribunal but Donaldson and Arden have and will each present their case.

It means decision notices for the pair are provisional and reflect the FCA’s belief as to what occurred. The Upper Tribunal will determine whether to uphold the FCA’s decisions.

The FCA considers that Donaldson and Arden were knowingly concerned in Metro Bank’s breach of the Listing Rules. It suggested they were aware that the RWA figure in the October announcement was wrong and would require substantial correction. Despite this, they failed to consider whether the figure ought to be qualified or explained and failed to seek legal advice on this question, the regulator added.

Mark Steward, executive director of enforcement and market oversight at the FCA, said: “Listed firms must ensure that the information they are disclosing to the market is right. This is what investors are entitled to receive.

“The UK’s Listing Rules impose high standards on issuers and their officers which Metro Bank, Mr Donaldson and Mr Arden failed to meet in this case.”

‘Metro Bank accepts the outcome’

In a statement, Metro Bank, wrote: “Metro Bank has cooperated fully with the FCA investigation and accepts the outcome. The £10m fine is within the range outlined at the company’s Full Year 2021 results and has been fully provided for.

Since 2018, Metro Bank has completed extensive remediation activity and made substantial investment to improve its disclosure procedures as well as enhancing its regulatory reporting processes, risk management framework and governance and compliance culture more broadly.

The conclusion of these proceedings and of the Prudential Regulatory Authority’s investigation in December 2021 brings the RWA legacy issues to a close. Moving forward, this represents an important milestone and allows the company to remain focused on supporting its colleagues and the customers and communities it serves, and sustaining its profitable growth trajectory.”