The City regulator has fined Metro Bank and its two of its former top executives more than £10m for misleading investors.
Metro Bank would pay £10m, while the former chief executive Craig Donaldson and former chief financial officer David Arden would fight fines of £223,100 and £134,600 respectively, the Financial Conduct Authority (FCA) said on Monday.
The challenger bank was launched by a US billionaire in 2010 as the first new high street chain in the UK for more than a century. It rapidly grew its market share through heavy investments in upmarket branches.
However, it was rocked in 2019 by an accounting scandal after misreporting assets used to calculate how much capital it needed to hold. The scandal prompted the biggest single-day collapse in a UK bank’s share price since the global financial crisis a decade earlier. From its peak of nearly £40 in February 2018 Metro’s share price dropped by more than 98% to 60p by October 2020. Donaldson was forced out in December 2019.
Metro’s share price rose by 4% to 110.5p on Monday morning. However, it has struggled since the scandal to persuade investors to back its “bricks and clicks” model. Talks last year with the private equity investor Carlyle were rapidly abandoned.
The FCA was scathing about the bank’s failure to inform investors that it knew its figure for risk-weighted assets reported in October 2018 was incorrect. The FCA said: “Metro Bank was aware at the time that this figure was wrong and failed to qualify it or explain in the October announcement that it was subject to an ongoing review and would require a substantial correction.”
Mark Steward, the FCA’s executive director of enforcement and market oversight, 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.”
A spokesperson for Donaldson and Arden confirmed they would appeal. He said: “While we’re disappointed by today’s ruling […] we welcome the fact there is no finding of any dishonesty or criticism of our integrity. We operated in full transparency with the board and the PRA, and with the benefit of legal advice.”
Metro Bank said it had provided for the costs of the fine, and that it “has cooperated fully with the FCA investigation and accepts the outcome”, in a statement to the stock market on Monday.
“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,” it said.
