Metro bank fined 5 4 million pounds for loan default

Metro bank fined £5.4 million over embarrassing accounting debacle.

The lender had a disastrous year in 2019 after admitting to underestimating risk on a number of commercial and buy-to-let property loans.

This in turn led the bank to present an inaccurate picture of its capital holdings. In 2019, it announced that it had made a £900 million adjustment to fix the problem, sending shares sharply lower.

Ousted: Metro Bank founder Vernon Hill (pictured with Yorkshire terrier Sir Duffield) was forced to step down after a disastrous year

To make matters worse, it tried to claim the error was discovered by its own employees. In fact, as the Mail revealed, the error only came to light when it was discovered by the Bank of England's regulator, the Prudential Regulation Authority (PRA).

After a long-running investigation, the PRA announced yesterday that Metro had failed to "act with due skill, care and diligence" in the reports it submitted to regulators.

It also accused Metro of governance shortcomings and a lack of investment in its reporting system. But it reduced the fine by 30 percent because of the bank's cooperation. Otherwise, the penalty would have been £7.7 million.

Sam Woods, deputy governor of the bank and chief executive of the PRA, said: 'We expect companies to invest adequate and appropriate resources to ensure they submit accurate regulatory statements.

'Metro Bank failed to meet governance and control standards expected of it'.'

The debacle led to the ouster of Metro's former CEO Craig Donaldson and its flamboyant founder, U.S. businessman Vernon Hill, a dog lover often seen with his Yorkshire terrier Sir Duffield, who stocked stores with dog cookies and water bowls.

Investors had become increasingly concerned that there were too few strong, independent voices on the board to challenge it.

At the time, Metro had been sharply criticized for making £25 million in payments to an architectural firm owned by Hill's wife.

When the lender entered the market in 2010, it was the first to be granted a high-street banking license in the U.K. for 150 years.

Metro has pledged to open more branches while others reduce their networks, and typically keeps its branches open longer than traditional banks.

Their stock is still 94.5 percent lower than it was at the beginning of 2019.

Shares fell in November as talks with U.S. private equity group Carlyle over a possible takeover ended.

When it had to borrow shortly after the accounting error to build up its buffers, it had to offer bond buyers a high interest rate – or "coupon" – of 9.5 percent.

Russ Mould, investment director at AJ Bell, said: 'Shareholders won't be smiling at the regulator's £5.4m fine, but they still seem relieved as the shares are still up for grabs.

"The levy is not a big burden, although the bank is making losses and investors hope the regulatory misstep belongs to a different era under the old management than the new one, which has been led since the beginning by Daniel Frumkin." 2020.'

Frumkin has overhauled the bank to reduce its dependence on expensive fixed deposit accounts, deposits and unprofitable low-risk mortgages.

It bought online lender Ratesetter and sold a mortgage portfolio worth £3 billion to Natwest.

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