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Regulators are calling for an overhaul of Metro Bank's board, as investors increasingly criticize the lender's weak corporate governance.
Metro, shaken by a serious accounting error in January, announced last month that Ben Gunn, former principal independent director of Metro, would badume the position of newly-created vice president in April, when he had already pbaded the mandate maximum of nine years recommended by the board of directors. the corporate governance code.
Although Gunn's appointment does not require formal approval by regulatory authorities, senior officials of the Financial Conduct Authority are seeking ways to counteract this decision and advocate for broader reform of the regulatory council. nine members. It is unclear whether FCA's advice has been communicated to the prudential regulator, which oversees Metro's oversight.
Investors have long been critical of Metro's governance under the chairmanship of co-founder Vernon Hill. "The board is jam-packed with his pals," said one of the top 20 shareholders, adding that an injection of "new blood" was urgently needed. "It's a real test for regulators," said another major investor.
Criticisms of the FTSE 250 lender have intensified in recent weeks after revealing that a major miscalculation in part of its loan portfolio had left it with a position of capital lower than previously thought. The company was forced to adjust its long-term growth plans and prepare a share issue in the amount of £ 350 million in response to this error.
The FCA and PRA are investigating this case, which has resulted in a 60% drop in its stock since its first announcement.
CEO Craig Donaldson has offered to resign as a result of this news, but the bank has so far made no major staff changes in response to the crisis. When the new role of Gunn was announced alongside its annual results, the bank announced that the changes had been planned since last year.
Mr. Gunn's long tenure means that he can no longer be considered an "independent" director, but a person close to Metro Bank said the lender "did not want to lose [his] advice and knowledge of the company's history ", has therefore chosen to promote him to the position of vice-president.
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FCA does not have the power to unilaterally block appointments, even though the roles fall under the new senior management regime for regulatory approval. It is rare that the ARP explicitly rejects the candidates. However, candidates who encounter difficulties are usually informed before a final decision is made, prompting most of them to withdraw their candidacy.
According to someone familiar with PRA's thinking, the company will face new regulatory pressures in governance in the coming months. Six of the nine non-executive members have been on the board since shortly after its founding nine years ago.
"Many board members are coming to the end of their term," said the person. "There will be pressure from the regulators to look into the [governance] code. They will look at him seriously. "
Howard Flight, who has also been a member of Metro's board of directors for nine years, will be retiring next month. The bank said it was looking for a new independent director. Keith Carby, another long-time non-leader, has announced his intention to step down, according to a person informed of the situation.
A spokesperson for Metro Bank said it "regularly cooperates with its regulators and shareholders in several areas. We always listen carefully and seek to resolve the issues raised. "
FCA and PRA declined to comment.
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