Banking

BoE Regs Find Accounting Mistakes At Metro Bank

Metro Bank is dealing with the fallout from the revelation that it misclassified a large number of commercial loans, with many predicting the resignation of some of the financial institution's senior executives. According to Financial Times (FT), investors, industry figures and regulatory experts have said senior executives will need to resign after the error, which exposed the fact that the bank did not have as much capital against them as it should have.

Metro's CEO Craig Donaldson initially said that the mistakes were “something we found as we went through our end-of-year reviews." However, the bank admitted on Thursday (Jan. 31) that the problems had actually been discovered by regulators at the Bank of England's (BoE's) Prudential Regulation Authority (PRA). In fact, analysts raised concerns more than 18 months ago.

“It’s a pretty untenable situation," said one of the bank's shareholder. “There has to be some accountability. That would normally be the CEO.”

A fund manager added that “there has to be a new chief executive. The regulator spotted this, but now they need to follow through." The CEO of a rival bank agreed, adding that “if the PRA had any balls, they’d get rid of Vernon [Hill].”

Hill, who founded Metro in 2011, has also been called out for activities, including paying tens of millions of pounds to his wife's firm.

“You would expect the PRA to be pretty annoyed," said a former BoE official. "The firm has put them in a position where the PRA has come in for criticism when, actually, they were the ones to point out the error. ... In terms of follow-on enforcement action, the question is when do you pull the trigger. Supervisors will always want to remediate the problem before they refer the matter to enforcement.”

Shares in Metro fell almost 40 percent when the mistake was first reported, the biggest one-day drop for a British bank since the financial crisis. While Metro managed to slightly recover, its shares dropped another 11 percent on Thursday.

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