Why Metro Bank has been fined £5.4m by the Bank of England

The Bank of England has fined Metro Bank almost £5.4m over the quality of its reporting and governance failures.

Metro Bank was fined over the quality of its reporting and governance failures.
Metro Bank was fined over the quality of its reporting and governance failures.

The central bank's Prudential Regulation Authority (PRA) watchdog confirmed it imposed the penalty on the challenger bank over failings between May 2016 and January 2019.

On January 23 2019, Metro Bank saw its shares plunge after confirming to investors that it had been forced to make corrections to the risk weightings of certain commercial loan portfolios on its balance sheet.

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Sam Woods, deputy governor for prudential regulation at the Bank of England and chief executive officer of the PRA, said: "We expect firms to invest appropriate and adequate resources to ensure that they submit accurate regulatory returns.

"In this case, Metro Bank failed to meet the standards of governance and controls expected of it, resulting in today's enforcement action."

The PRA said the bank adjusted its reporting of risk weighted assets for December 2018 by around £900 million after applying incorrect weighting to some loans.

The regulator said that, as Metro Bank expanded its high street portfolio across the UK in recent years, it "failed to ensure the commensurate development" of its governance arrangements and reporting systems.

It added that the bank failed to "take sufficient care to ensure that it complied with its obligations to make accurate reports to the PRA".

Metro Bank also failed to "allocate appropriate and adequate resources to enable it to comply with its reporting obligations", the central bank said.

In a statement, Metro Bank said: "Metro Bank has co-operated fully with the PRA's investigation and agreed the resolution of this matter with the PRA.

"In the time since the RWA (risk weighed asset) errors that were the basis of the PRA's investigation were identified, Metro Bank has made significant improvements to, and substantial investment in, its regulatory reporting processes and controls.

"It has also strengthened its broader risk management and governance, demonstrating its commitment to accurate regulatory reporting and compliant growth."

The fine comes just days after the Bank of England hit Standard Chartered with a £46.5m fine for misreporting its liquidity position and controls failures.

The PRA said the fine related to failings made at the bank between March 2018 and May 2019.

It said Standard Chartered made five regulatory reporting errors over the period, during which the PRA had imposed a temporary extra liquidity requirement of the bank due to outflows of dollars in the previous year.

The watchdog said the bank had only told it about one of the mistakes following an internal four-month review process.

Sam Woods, deputy governor for prudential regulation at the Bank of England and chief executive officer of the PRA, said: "We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case.

"Standard Chartered's systems, controls and oversight fell significantly below the standards we expect of a systemically important bank, and this is reflected in the size of the fine in this case."

The PRA added that its investigation found that Standard Chartered also failed to implement a documented policy setting out when liquidity errors should be notified to the regulator.

It also found the bank failed to maintain and operate adequate controls testing and checks over liquidity.

The bank did not ensure it has appropriate human resources to investigate potential misreporting, the PRA added.

Standard Chartered saw its potential punishment reduced by 30 per cent from £66.5m after agreeing to resolve the matter.

A spokesman for Standard Chartered said it "accepts the findings" of the PRA related to liquidity reporting errors it said it "self-identified and self-corrected in 2018 and 2019".

"These errors did not affect Standard Chartered's overall liquidity position, which remained in surplus throughout the period," it added.

"Standard Chartered has cooperated proactively and fully with the PRA's investigation and has made significant improvements to and substantial investment in its liquidity and regulatory reporting processes and controls and remains committed to accurate regulatory reporting."

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James Mitchinson