Metro Bank PLC has been fined £10,002,300 ($12,287,612) after breaching the Listing Rules by publishing incorrect information to investors. The Financial Conduct Authority (FCA) has also published Decision Notices on Metro Bank’s former Chief Executive Craig Donaldson and former Chief Financial Officer David Arden for being “knowingly concerned” in the bank’s breach. The two executives have been fined £223,100 ($274,074) and £134,600 ($165,361), respectively.
The punishment comes after Metro Bank was found to have published incorrect RWA figures in its Q3 trading update on October 24, 2018. The bank regularly reports to the market on its prudential position, including the RWA, on which the bank’s regulatory capital requirements are based.
Failed to qualify figure
The FCA claims that the bank knew that this information was wrong, and that Metro Bank “failed to qualify it or explain in the October Announcement that it was subject to an ongoing review and would require a substantial correction.” The bank also failed to seek legal advice on the matter.
“Listed firms must ensure that the information they are disclosing to the market is right. This is what investors are entitled to receive,” said Mark Steward, Executive Director of Enforcement and Market Oversight.
“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.”
Mark Steward, Executive Director of Enforcement and Market Oversight, FCA
By that, the FCA states that Metro Bank failed to take reasonable measures to ensure that the October Announcement was not false and misleading, and that no relevant information was left out.
“Metro Bank failed to take sufficient skill, care and diligence to ensure that it had implemented the relevant systems and controls appropriate for a firm of its size and complexity,” the Decision Notice states.
Share price drops
The FCA believes that both Donaldson and Arden were knowingly concerned by the bank’s breach of the Listing Rules, that they were aware of the faulty RWA information, and that it required considerable correction.
Despite knowing of the faulty figure, both directors still failed to consider whether the figure ought to be qualified or explained, and didn’t seek legal advice on the matter. When the correct RWA figure was published in January 2019, it contributed to a 39% fall in Metro Bank’s share price.
“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,” said Mark Steward.
Both Mr Donaldson and Mr Arden have referred their Decision Notices to the Upper Tribunal where they will each present their case. Metro Bank has however not referred the FCA’s decision to the Upper Tribunal.
This is the second time that Metro Bank has been fined over RWA failings. On December 22, 2021, the Prudential Regulation Authority (PRA) published a Final Notice against it and imposed a penalty of £5,376,000 ($6,606,761) for failings associated with the bank’s Risk Weighted Assets (RWA) reporting to the PRA between May 13, 2016 and January 23, 2019.