Metro Bank fined £5.4m for failures in regulatory reporting

The Prudential Regulation Authority (PRA) issued Metro Bank a £5,376,000 penalty for failing in its regulatory reporting and governance and controls.

The UK financial watchdog said that the bank failed to act with due skill, care, and diligence in relation to the reporting of its capital position.

It added that Metro Bank had failed in its regulatory reporting governance, controls, and investment in relation to its Common Reporting returns (COREP) sent to the PRA between 13 May 2016 to 23 January 2019.

On 23 January 2019, Metro Bank announced that it had adjusted the risk weightings of certain commercial loan portfolios on its balance sheet, to reflect corrections that it had made.

Firms are required to submit periodic financial information to the PRA, including reports as part of the COREP framework, which is a reporting framework introduced to standardise the reporting of capital requirements and prudential regulatory information.

These COREP returns include quarterly reporting on a firm’s current assessment of its risk weighted assets

On 23 January 2019, Metro Bank announced to the market that it was making an adjustment to its assessment of its RWA for December 2018 of approximately £900 million as a result of Metro Bank having applied the incorrect risk weighting to certain commercial loans.

The PRA said that whilst Metro Bank remained in compliance with its regulatory capital requirement, the application of the incorrect risk-weight resulted in an inaccurate picture of the firm’s regulatory capital position being presented to the PRA.

The regulator explained that during this time, the firm failed to ensure the commensurate development of, and investment in, governance arrangements and systems and controls relating to its COREP reporting, which it said “failed to design, implement or operate effectively in a number of respects”.

“We expect firms to invest appropriate and adequate resources to ensure that they submit accurate regulatory returns,” said Sam Woods, deputy governor for prudential regulation and chief executive of the PRA. “In this case, Metro Bank failed to meet the standards of governance and controls expected of it, resulting in today’s enforcement action.”

The bank agreed to resolve this matter and therefore qualified for a 30 per cent reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been £7,680,000.

Metro Bank said in a statement: “The Board of Metro Bank notes the conclusion of the Prudential Regulation Authority's ("PRA") 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.”

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