Northern Rock executives fined A$1.1m
(15 April 2010 – UK) Britain's Financial Services Authority (FSA) has fined Northern Rocks former deputy chief executive and former managing credit director £644,000 (A$1.1 million) pounds for not disclosing the severity of the bad loans the bank had accrued before it almost collapsed in September 2007.
David Baker, former deputy chief executive, was fined £504,000 was also prohibited from performing any function in relation to any regulated activity, while Richard Barclay, former managing credit director, was fined £104,000 and has been prohibited from performing any significant influence function at an FSA-regulated firm.
Mr Baker’s responsibilities at the bank included providing accurate internal and external reporting for Northern Rock. He had overall responsibility for much of this time for the firm’s debt management unit (DMU) which managed its secured loan book.
As managing credit director of the DMU, Mr Barclay was directly responsible for the provision of accurate management information concerning loan arrears and property possessions.
Despite becoming aware in January 2007 that there were 1,917 loans omitted from the mortgage arrears figures, Mr Baker failed to escalate the information internally and agreed a course of action which resulted in the loans not being reported.
The FSU also said that Mr Baker made misleading statements regarding these impaired loans to external stakeholders, including market analysts, quoting inaccurate figures.
Mr Barclay knew that the firm’s arrears position enabled senior management within the bank, analysts and the FSA to form a view of Northern Rock’s asset quality, but failed to ensure that the management information reported by the DMU was accurate despite warning signs at an early stage.
Both of the bankers admitted their misconduct at an early stage and co-operated fully with the FSA therefore received a 30 percent discount for early settlement.
The FSU said that although it is not possible to calculate the exact extent of this mis-reporting, if the correct figure had been reported, the arrears figures would have been significantly worse and closer to the Council of Mortgage Lenders average over an extended period of time.
Margaret Cole, FSA director of enforcement and financial crime, said both the bank’s executives failed to meet the standards the FSA requires of senior individuals within FSA-regulated firms. They both held senior positions of trust within the firm but they provided inaccurate information to the Northern Rock board and to the market.
Mr Baker’s responsibilities at the bank included providing accurate internal and external reporting for Northern Rock. He had overall responsibility for much of this time for the firm’s debt management unit (DMU) which managed its secured loan book.
As managing credit director of the DMU, Mr Barclay was directly responsible for the provision of accurate management information concerning loan arrears and property possessions.
Despite becoming aware in January 2007 that there were 1,917 loans omitted from the mortgage arrears figures, Mr Baker failed to escalate the information internally and agreed a course of action which resulted in the loans not being reported.
The FSU also said that Mr Baker made misleading statements regarding these impaired loans to external stakeholders, including market analysts, quoting inaccurate figures.
Mr Barclay knew that the firm’s arrears position enabled senior management within the bank, analysts and the FSA to form a view of Northern Rock’s asset quality, but failed to ensure that the management information reported by the DMU was accurate despite warning signs at an early stage.
Both of the bankers admitted their misconduct at an early stage and co-operated fully with the FSA therefore received a 30 percent discount for early settlement.
The FSU said that although it is not possible to calculate the exact extent of this mis-reporting, if the correct figure had been reported, the arrears figures would have been significantly worse and closer to the Council of Mortgage Lenders average over an extended period of time.
Margaret Cole, FSA director of enforcement and financial crime, said both the bank’s executives failed to meet the standards the FSA requires of senior individuals within FSA-regulated firms. They both held senior positions of trust within the firm but they provided inaccurate information to the Northern Rock board and to the market.
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