The allegations and the Aftermath

Craig Donaldson, who stepped down from Metro Bank in 2019, is contesting a 2022 ruling by the Financial Conduct Authority (FCA). The FCA alleges that Donaldson allowed Metro Bank to disseminate inaccurate financial details to investors in 2018, specifically concerning the level of risk the bank was undertaking with loans and mortgages.

The core issue revolves around the misclassification of £900 million in loans. These loans were categorized as less risky than they were, leading to a breach of regulations requiring banks to maintain sufficient capital reserves to offset potential losses. The revelation triggered a important drop in Metro Bank’s shares, plummeting nearly 40%. This financial instability incited a “mini-bank run,” as business clients withdrew £235 million, and account holders lined up to withdraw cash and empty safety deposit boxes.

Donaldson, 52, is challenging the FCA’s claim that he knowingly released inaccurate financial information. He stated:

It is simply not correct, as the FCA alleges, that both the bank and I were aware at the time that the size of any adjustment would be ample.

Personal and Professional Repercussions

Donaldson asserts that the FCA’s allegations have had a devastating impact on his career.He argues that he should be at his peak earning potential, holding significant leadership roles. Though, he claims he has been unable to secure a permanent position, only finding “interim, transient” jobs that offer a “fraction of my previous earnings.”

The former CEO believes the FCA ruling has made him “untouchable” in the job market. he explained:

I have been informed on many occasions that the innuendo and the fear of the FCA’s likely approach to me holding a senior, authorised position has effectively made me untouchable for a permanent role in the market.

Adding to his woes, Donaldson says he has been advised to consider relocating to Australia or seeking employment in a different sector to escape the FCA’s influence. He stated:

I have variously been advised by headhunters to move to Australia, or to try and get a job in a different industry beyond the regulated banking sector where the FCA’s influence will not directly or indirectly impact my prospects.

Beyond his career, Donaldson contends that the ruling has negatively affected his personal finances. He reports difficulties in securing basic financial services, saying:

There is also a wider impact that cannot have been intended by the FCA.Applying for simple things like home insurance, bank accounts and credit cards has been negatively impacted.

He elaborated on these difficulties:

I have had difficulty opening bank accounts and buying financial products.

He added that some firms, upon learning about the FCA ruling, have “declined to offer cover.”

Obviously this has a wider financial and reputational impact beyond what the FCA seeks to characterise as nothing more than a fine in respect of conduct at the lower end of the scale of seriousness.

Donaldson’s Defense and Claims Against the FCA

Donaldson is actively challenging the FCA’s ruling. He argues that metro Bank acted on legal advice and maintained proactive dialog with its board. Furthermore,he claims that the Bank of England’s Prudential Regulation Authority (PRA),responsible for supervising financial stability,was aware of Metro bank’s challenges in calculating risk on its loan portfolios.

A key point of contention is Donaldson’s assertion that the FCA was “too busy” to assign a dedicated team to oversee the growing bank. He stated:

the Bank requested this on numerous occasions.

instead,Metro Bank was allegedly directed to a call center for its supervisory needs.

Donaldson elaborated on this point:

The FCA said they were too busy and that they would continue to get our information from the PRA where necessary. We were the seventh-largest bank at the time.

He further explained:

In lieu of a supervision team, the Bank’s contact with the FCA was conducted via the FCA’s call centre.

The Ongoing Tribunal

Donaldson and Metro Bank’s former CFO, David Arden, are challenging the FCA ruling, wich includes fines of £223,100 and £134,600, respectively.The eight-day hearing at the upper tribunal in London is ongoing. The FCA and Donaldson’s legal team declined to comment. The hearing is scheduled to continue next week.