Metro Bank Raises £325 Million in New Capital to Address Regulatory Concerns
Metro Bank Addresses Financial Stability Concerns
Metro Bank has taken a significant step to address regulatory concerns regarding its financial stability by securing £325 million ($395 million) in new capital. This move comes after the bank faced regulatory penalties and experienced high-profile exits due to an accounting error. The bank, founded by Vernon Hill in 2010, successfully negotiated the capital raise to restore confidence in its operations.
Accounting Error Triggers Share Price Plunge
The accounting error underestimated the necessary mortgage capital, resulting in regulators rejecting Metro Bank’s internal method for calculating mortgage capital reserves. This rejection led to a 60% plummet in the bank’s share price last month. Recognizing the severity of the situation, Metro Bank swiftly took action to rectify the issue and regain stability.
Raising Capital from Shareholders and Bondholders
To secure the much-needed capital, Metro Bank raised £150 million from existing shareholders and an additional £175 million from bondholders. The bank’s largest shareholder, Jaime Gilinski Bacal, contributed a significant portion of the equity capital. This injection of funds aims to strengthen Metro Bank’s financial position and restore investor confidence.
Mortgage Sale to Bolster Financial Stability
As part of its strategy to enhance financial stability, Metro Bank is also considering the sale of £3 billion worth of mortgages. This strategic move will help the bank further strengthen its capital base and ensure long-term sustainability. With 2.8 million customers and assets worth £22 billion, Metro Bank is actively exploring all viable options to secure its future.
This article provides insights into Metro Bank’s efforts to overcome regulatory challenges and stabilize its financial standing. By raising £325 million in new capital and contemplating a significant mortgage sale, the bank aims to regain trust, strengthen its operations, and ensure a secure future.