PRA fines Metro Bank £5.3m for reporting failures

PRA fines Metro Bank £5.3m for reporting failures

The Prudential Regulation Authority (PRA) has fiend Metro Bank £5,376,000 for failing to act with due skill, care and diligence in relation to the regulatory reporting of its capital position.

The bank has also been fined for failings in its regulatory reporting governance, controls and investment with respect to its Common Reporting (COREP) returns sent to the PRA between 13 May 2016 to 23 January 2019.

In 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 loan.

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.

Firms are required to submit periodic financial information to the PRA, including reports as part of the COREP framework, a reporting framework introduced to standardise the reporting of capital requirements and prudential regulatory information. These COREP returns include (amongst others) quarterly reporting on a firm’s current assessment of its risk weighted assets.

In the years before the 2019 Announcement, Metro Bank pursued a rapid growth and expansion plan and increased its number of high-street branches and customers, growing core deposits and lending.

However, during this time, Metro Bank failed to ensure the commensurate development of, and investment in, governance arrangements and systems and controls relating to its COREP reporting, which it failed to design, implement or operate effectively in a number of respects.

In particular, in relation to COREP reporting, Metro Bank failed to take sufficient care to ensure that it complied with its obligations to make accurate reports to the PRA while also failing to ensure effective oversight, challenge and to establish effective, clear and documented escalation routes in respect of reporting.

The PRA also said the bank failed to establish and implement effective controls in interpreting relevant regulatory rules and guidance and did not allocate appropriate and adequate resources to enable it to comply with its reporting obligations.

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

Sam Woods, deputy governor for prudential regulation and chief executive officer 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.”

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