The Prudential Regulation Authority (PRA) has slapped Metro Bank with a fine of £5,376,000 for deficiencies related to the governance and controls of its regulatory reporting.
According to the Bank of England, Metro failed to act with due skill, care and diligence in relation to the regulatory reporting of its capital position and for failings in its regulatory reporting governance, controls and investment with respect to its Common Reporting returns sent to the PRA between 13 May 2016 and 23 January 2019.
On 23 January 2019, Metro revealed it had adjusted the risk weightings of certain commercial loan portfolios on its balance sheet in order to reflect corrections it had made.
Companies are required to submit periodic financial information to the PRA, such as reports as part of the COREP framework, which is a reporting framework introduced to standardise the reporting of capital requirements and prudential regulatory information. Amongst others, these COREP returns include quarterly reporting on a company’s current assessment of its risk weighted.
While Metro remained in compliance with its regulatory capital requirement when it adjusted its risk weightings, the application of the incorrect risk-weight resulted in an inaccurate picture of the company’s regulatory capital position being presented to the PRA.
During a period of growth, Metro failed to ensure the development of and investment in governance arrangements and systems and controls relating to its COREP reporting. In relation to COREP reporting, Metro failed to take sufficient care to ensure it complied with its obligations to make accurate reports to the PRA, ensure effective oversight, challenge and to establish effective, clear and documented escalation routes in respect of reporting.
The bank also failed to establish and implement effective controls in interpreting relevant regulatory rules and guidance and allocate appropriate and adequate resources to enable it to comply with its reporting obligations.
Metro agreed to resolve the matter quickly, therefore qualifying for a 30% reduction in the fine imposed by the PRA. Without this discount, PRA would have fined Metro £7,680,000.
PRA deputy governor for prudential regulation and CEO Sam Woods 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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