Obtaining the AIRB approval would mean Metro is allowed to use its internal risk models to determine how much capital it needs to set aside. 

Metro made an application to be able to apply this to its residential mortgages but in an update yesterday, the bank revealed that the PRA indicated more work was needed and its approval would not be gained this year. 

The bank said it would continue to engage with the PRA regarding the application and noted there was no certainty that this would be approved, no confirmation of the timing or the level of any reduction in risk weighted assets and regulatory capital requirements. 

Metro said the board had “conviction in the merits” of its business model and said there was a “significant opportunity” that it could capitalise on. 

The update continued: “The company continues to consider how best to optimise its capital resources to allow it to take advantage of the deposit and asset origination platform that has been built.” 

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Metro submitted its AIRB application to the PRA at the start of 2018. 

However, a year later, the PRA and Financial Conduct Authority launched an investigation into Metro Bank over concerns it was miscalculating its mortgage book risk and assigning a lower weighting. 

This led to the bank selling off some of its loan portfolio and last year it was fined £10m for misleading investors.