Metro Bank creates plan to avoid risk for taxpayers

Metro Bank has drawn up plans for an orderly resolution should it fail and aligned them with the UK’s biggest lenders.

The struggling bank, whose share price has fallen 97 percent in the past five years, has been ordered by regulators to take measures that would prevent taxpayers from footing the bill if it collapses.

Losses totaling £627m over the past three years have sapped Metro Bank’s strength. Its shares have fallen 30 percent in the past month alone following the collapse of Silicon Valley Bank and UBS’s rescue of Credit Suisse.

Metro Bank is one of the least capitalized smaller challenger and specialty banks, according to a recent survey by consulting firm EY.

A proposal to create a “clean” holding company for a so-called “bail-in” if the lender fails will be put to shareholders next month. In addition, court approval is required.

Sign of the times: Metro Bank is among the most thinly capitalized smaller challenger and specialty banks

The move is part of the Bank of England’s effort to ensure taxpayers aren’t left behind for the biggest banks and building societies when they fail – to avoid a repeat of subsequent bailouts for Lloyds and Royal Bank of Scotland, now NatWest avoid the 2008 financial crisis.

It comes at a time of renewed turmoil in the industry. Silicon Valley Bank’s UK subsidiary has been sold to HSBC for £1 after uninsured depositors suddenly flocked to withdraw cash.

Bank of England Governor Andrew Bailey told MPs last week the run was the fastest since Barings went bust in 1995. But he insisted the UK banking system is “very strong” and dismissed comparisons to the Crisis 15 years ago back.

Metro Bank was founded by US entrepreneur Vernon Hill in 2010, making it the first new major bank in over a century.

But in December the Financial Conduct Authority fined £10m for misleading investors about its capital position in 2018. The company grew quickly by investing heavily in its stores, which became famous for providing dog biscuits. Most of its 76 stores are in London and the South East, but it intends to open 11 stores in Northern England.

A spokeswoman said the bank has remained above minimum capital requirements throughout the turnaround and its capital strength is twice the regulatory minimum.