Access the Editor’s Digest for free
Roula Khalaf, the Editor of the FT, curates her top stories in this weekly newsletter.
A tribunal in London has determined that the previous top executives of Metro Bank were accountable for a £900 million accounting mistake at the UK lending institution.
Craig Donaldson, the former CEO of Metro, along with ex-CFO David Arden, had contested fines imposed on them by the Financial Conduct Authority (FCA) in 2022 for supposedly misclassifying a significant number of business loans.
The Upper Tribunal, which hears appeals against the decisions made by the UK financial regulator, concluded that the two were “knowingly concerned” in Metro’s violation of FCA listing regulations after the bank released misleading information regarding its loan and asset portfolios.
The tribunal dismissed Donaldson and Arden’s defense that they were not culpable since they had sought legal advice and informed the Bank of England’s Prudential Regulation Authority as well as Metro’s board about the information.
Judge Anne Redston of the tribunal decreased the fines for Donaldson and Arden by 25 % to £167,325 and £100,950, respectively, noting that they did not financially benefit from the FCA rule violation and had no previous disciplinary records.
In early 2019, Metro disclosed a £900 million accounting error, primarily related to the risk associated with its commercial property and buy-to-let loan portfolios.
The company’s growth suffered following the revelation of this significant miscalculation, which indicated the lender lacked sufficient regulatory capital, resulting in total fines of £15 million from the FCA and the PRA.
The FCA penalized Donaldson and Arden after they had already left the bank in 2022.
The tribunal noted that while the two did not act recklessly, Arden was “often hesitant to provide clear answers on crucial evidential matters,” and suggested that both executives’ recollections appeared to be “revised,” though not with an intent to mislead.
Donaldson and Arden stated they felt their challenge to the FCA’s fines was justified.
“The Upper Tribunal found that the FCA’s initial penalty was excessive and incorrect. It significantly reduced the penalty. The FCA did not acknowledge the genuine efforts made to address the issue at that time and our cooperation,” they stated.
“The Upper Tribunal concurred that there was no recklessness . . . We believed we acted appropriately, guided by the advice of others, but we respect the tribunal’s conclusion that an error occurred.”
Steve Smart, FCA executive director of enforcement and market oversight, remarked: “Investors rely on the information provided by listed companies to make decisions. It is essential that this information is trustworthy. Mr. Arden and Mr. Donaldson permitted incorrect information to be published.”
