These relate to the bank’s requirements to report its capital position as well as its governance, controls and investments between 13 May 2016 to 23 January 2019.
On 23 January 2019, Metro Bank announced it was adjusting the assessment of its risk weighted assets (RWA) for December 2018 for £900m, as it applied the incorrect risk weighting to certain commercial loans.
Although its actions were within its regulatory capital compliance, the incorrect risk weight resulted in an inaccurate representation of its capital position.
In the years before this, the bank had also increased its number of high street branches and customers as part of a rapid growth plan. However, it failed to ensure it had equivalent development and investment into its governance arrangements, systems and controls relating to the Common Reporting Framework.
It also failed to implement these effectively, the PRA found.
As a result, Metro Bank breached Fundamental Rule 2 and Fundamental Rule 6 of the PRA Rulebook. Rule 2 requires that a firm conducts its business with due skill, care and diligence and Rule 6 requires that a firm organises and controls its affairs responsibly and effectively.
The failings impacted the PRA’s ability to promote the safety of the bank.
As Metro Bank agreed to resolve the matter, its fine was reduced by 30 per cent. The original fine would have been £7,680,000.
The Financial Conduct Authority (FCA) is also investigating the bank over the incorrect risk weighting of loans.
A statement from Metro Bank said: “The Board of Metro Bank notes the conclusion of the Prudential Regulation Authority’s investigation, imposing a financial penalty of £5,376,000 for breaching Fundamental Rules 2 and 6 of the PRA Rulebook prior to 23 January 2019. Metro Bank has cooperated fully with the PRA’s investigation and agreed the resolution of this matter with the PRA.
“In the time since the RWA 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.
“There is no update on the Financial Conduct Authority’s investigation at this time.”
Sam Woods, deputy governor for prudential regulation and chief executive 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.”