Metro Bank lays out plans for orderly wind-down should it fail, bringing it in line with Britain’s biggest lenders
Metro Bank has laid out plans for an orderly wind-down should it fail, bringing it in line with Britain’s biggest lenders.
The troubled bank, whose share price has fallen 97 percent over the past five years, has been told by regulators to take steps to avoid taxpayer debt if it goes bankrupt.
Losses totaling £627 million over the past three years have sapped Metro Bank’s strength. Its shares are down 30 percent in the past month alone in the wake of the collapse of Silicon Valley Bank and UBS’ bailout of Credit Suisse.
Metro Bank is one of the most thinly capitalized of the smaller challenger and specialist banks, according to a recent survey by EY consultants.
A proposal to create a “clean” holding company for a so-called “bail-in” if the lender fails will be presented to shareholders next month. It also needs court approval.
Sign of the times: Metro Bank is one of the least capitalized of the smaller challenger and specialty banks
The move is part of the Bank of England’s effort to ensure taxpayers don’t get booed by the biggest banks and building societies if they fail – to avoid a repeat of the Lloyds and Royal bailouts Bank of Scotland, now NatWest, that followed the 2008 financial crisis.
It comes at a time of renewed turmoil in the industry. Silicon Valley Bank’s UK subsidiary was sold to HSBC for £1 after uninsured depositors suddenly began withdrawing money in droves.
Bank of England governor Andrew Bailey told MPs last week the run was the fastest since Barings failed in 1995. But he insisted that the British banking system was “very strong” and rejected comparisons with the crisis of 15 years ago.
Metro Bank was founded in 2010 by American entrepreneur Vernon Hill when it became the first new high street bank in over a century.
But in December, the Financial Conduct Authority fined the company £10m for misleading investors about its capital position in 2018. It grew rapidly by investing heavily in its branches, which became famous for providing dog biscuits. Most of its 76 branches are in London and the South East, but it wants to open 11 branches in the north of England.
A spokeswoman said the bank had remained above minimum capital requirements during the turnaround and its capital strength was twice the legal minimum.