Metro Bank has severed links with the architecture firm owned by the wife of its chairman amid criticism over £25m worth of payments made by the lender to the business.
The move came as the challenger bank, which clinched a £375m fundraising this week, seeks to improve its corporate reputation after a major accounting error.
Metro revealed in a prospectus for the share placing that it had cut ties with InterArch, owned by Shirley Hill, the wife of Metro founder and chairman Vernon Hill. Last year the bank’s contracts with InterArch were thrust into the spotlight by Metro investor Royal London Asset Management, which said they posed a conflict of interest and raised serious governance concerns.
Metro Bank quietly announced in its annual report this spring that it was putting the contract out to tender, though InterArch was still expected to be in the running. The prospectus went one step further on Friday by announcing that Metro would move its architectural design, creative and branding services to “alternative suppliers”.
“InterArch will work with Metro Bank to ensure a smooth operational transition by the end of 2020,” Metro said.
InterArch was paid £4.5m last year for architectural, brand and marketing services – including designing high street branches – bringing its total earnings from the bank contracts to more than £25m since Metro was founded in 2010.
This week’s £375m fund raising, via the placement of new shares, will help shore up the company’s balance sheet in the wake of an accounting error that misclassified £900m worth of loans as less risky than they actually were. It surpassed the £350m that Metro originally planned to raise as part of a fresh share placing that was completed within just three hours on Thursday. The news is expected to quash rumours over its financial health, which sparked customer queues at branches in London last weekend.
WhatsApp messages featuring a BBC article about the bank’s plunging share price urged customers to pull their cash and empty their safe deposit boxes, where they stored jewellery, gold and important documents.
However, Metro is still facing investigations by UK’s two City regulators – the Financial Conduct Authority and Prudential Regulation Authority – over the accounting error. Metro warned in the shareholder prospectus that it is at risk of fines or compensation payments, and “possible criminal liability” as a result of the blunder.
The challenger bank could face further embarrassment at its annual shareholder meeting in London on Tuesday after the UK’s largest asset manager, Legal and General Investment Management, confirmed it would vote against a string of directors including Vernon Hill for the second year running.
Shareholder Royal London Asset Management also revealed it would reject Hill’s re-election, and will also vote against chief executive Craig Donaldson.
Metro Bank declined to comment.