M
e
t
r
o
B
a
n
k
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
2
1
Annual Report
& Accounts 2021
At Metro Bank we aspire to disrupt
retail banking by building a bank
that puts customers at the heart
of what we do.
This is helping us achieve our
ambition to become the UK’s best
community bank – a bank that
is deeply rooted within local
communities, allowing us to serve
customers brilliantly in person,
digitally and over the phone.
WHAT’S INSIDE
STRATEGIC REPORT
1
2
4
Summary of the year
Metro Bank at a glance
Our purpose and strategy
framework
Chair’s statement
Chief Executive Officer’s statement
6
8
10 Business model
14 Key performance indicators
16 External market review
20 Strategic priorities
22 Financial review
26
Environmental, social and
governance review
41 Section 172 statement
42
Task Force on Climate-related
Financial Disclosures
52 Risk report
GOVERNANCE
92
Corporate governance
introduction
94 Board of Directors
96 Executive Committee
97
98
2021 governance at a glance
Board activity and stakeholder
engagement
100 Stakeholder engagement
103
Letter from Non-Executive
Director for colleague engagement
Board leadership and Company
purpose
104
106 Board roles and responsibilities
107 Board and Committee evaluation
110 Audit Committee report
118 Risk Oversight Committee report
122 Nomination Committee report
126 Remuneration Committee report
130 Remuneration at a glance
Remuneration Committee
131
governance
137 Annual report on remuneration
148 Directors’ report
FINANCIAL STATEMENTS
152
Independent auditors’ report
to the members of Metro
Bank PLC
Consolidated statement of
comprehensive income
Consolidated and Company
balance sheets
Consolidated and Company
statements of changes in equity
Consolidated and Company cash
flow statement
Notes to the financial statements
162
163
164
165
166
ADDITIONAL INFORMATION
219 Country-by-country report
220
Independent auditors’ report
to the Directors of Metro Bank
PLC (on country-by-country
information)
Other disclosures
Alternative performance
measures
223
224
227 Shareholder information
Summary
of the year
Our results for the second year of our turnaround journey
continue to reflect the challenging environment for UK retail
banks of low interest rates, high regulatory capital requirements
and an economy that continues to recover from the pandemic.
Despite these challenges our results show demonstrable progress
against all elements of our strategy, with the business gathering the
momentum that will allow it to return to sustainable profitability.
FINANCIAL SUMMARY
Assets
(£bn)
2017
2018
2019
2020
2021
Deposits
(£bn)
2017
2018
2019
2020
2021
16.4
21.6
21.4
22.6
22.6
Loans and advances
(£bn)
11.7
15.7
14.5
16.1
16.4
2017
2018
2019
2020
2021
Underlying (loss)/profit before tax
(£m)
Statutory (loss)/profit before tax
(£m)
Loan to deposit ratio
(%)
2017
2018
2019
20.8
50.0
-11.7
2017
2018
2019
18.7
40.6
-130.8
2020
-271.8
2020
-311.4
2021
-171.3
2021
-245.1
2017
2018
2019
2020
2021
9.6
14.2
14.7
12.1
12.3
82
91
101
75
75
STRATEGIC SUMMARY
– Continued focus on balance sheet optimisation, including
– Opening of Bradford store and completion of
progress in movement towards becoming a specialist
mortgage lender.
– Disciplined approach to store estate which included move
to close three stores in 2022.
– Delivered over £750 million of unsecured personal loans
(including purchase of RateSetter back book), more than
70x any other year in our history, as we build RateSetter’s
reputation as a leading provider of consumer credit.
Leicester store which opened in February 2022.
– Rated top for store service for 8th time running in
Competition and Markets Authority (CMA) survey.
– Progression with Advanced Internal Rating-Based
application (AIRB).
– Progress in regulatory investigations, including
settlement with Prudential Regulation Authority (PRA).
Metro Bank PLC Annual Report & Accounts 2021
1
Strategic reportFinancial statementsGovernanceAdditional information Metro Bank
at a glance
Our service is what makes us special. Putting FANS first is,
and always will be, the key to our success. Through our energised
and dedicated colleagues, we build long-lasting and personal
relationships with our customers and our communities, giving
them the responsive banking they need.
Who we are
We opened our doors in the summer of 2010 and were
the first high street bank to open in the UK in over 100
years. Since then, we’ve built a business that is providing
meaningful competition against larger incumbents and
offering a compelling alternative for customers across
retail, private, small business and commercial banking.
Our approach
Our approach is centred on our colleagues, customers
and communities. This is allowing us to deliver our
ambition to become the UK’s best community bank
and our purpose of creating FANS. Embracing our
community-centric model and focusing on our localness
informs everything we do and the decisions we make.
Key statistics
As at 31 December 2021
£16.4bn
Customer deposits
£12.3bn
Loans and advances
2.5mCustomer accounts
See pages 4 to 5 for more information
78Stores
24/7
Customer service centre
No. 1
Rated for store service¹
1. Independent CMA survey carried out in Great Britain by Ipsos MORI between January 2021 and December 2021 –
Services in branches. Results at www.ipsos-mori.com.
2
Metro Bank PLC Annual Report & Accounts 2021
Where we operate
Our network of 791 stores places us at the heart of the
communities we serve, giving customers a face-to-face
connection with our colleagues, while our telephone,
mobile and online capabilities offer the convenience
of banking when and where our customers choose.
Our stores are open early ‘til late, seven days a week
and as well as serving customers, host networking and
community events.
79
Stores¹
1. Our 79th store in Leicester
opened on 25 February 2022.
Metro Bank PLC Annual Report & Accounts 2021
3
Strategic reportFinancial statementsGovernanceAdditional information Our purpose and
strategy framework
OUR AMBITION
To become
the UK’s best
community bank.
Our ambition is to become the UK’s
best community bank. Community
banking means being embedded
in the local communities that we
serve, ensuring local decision-
making, providing access to simple
and straightforward retail, business
banking and commercial services
that best meet the needs of residents
and businesses in the area.
...achieved through...
...strengthened by...
OUR PURPOSE
OUR VALUES
To create FANS
FANS are customers created through delivering
exceptional customer service and who then champion
Metro Bank through actively recommending us to
friends and family.
Our values underpin everything we do and are
ingrained throughout our organisation helping
us drive our customer centric approach.
Attend to every detail
Make every wrong right
Ask if you’re not sure – bump it up!
Zest is contagious, share it!
Exceed expectations
Inspire colleagues to create FANS!
Nurture colleagues so they grow
Game-change because this is a revolution
4
Metro Bank PLC Annual Report & Accounts 2021
...delivered via...
–
OUR BUSINESS MODEL
We attract customers and create FANS by focusing
on our business model. Our business model involves
combining stores, telephony and digital with exceptional
customer service to generate sustainable long term value
and tangible book growth.
Unique culture
Our colleagues deliver superior service and are the heart
of our people-people banking approach.
Integrated model
Our model combines delivery through physical and
digital channels.
Low-cost deposits
We attract low-cost deposits through our service-led
community banking model with specific emphasis on our
core retail and SME franchise.
Risk-adjusted returns
We balance our lending mix through a broad yet simple
product offering that is priced proportionate to risk.
See pages 10 to 13 for more information
...supported by...
–
OUR STRATEGIC PRIORITIES
Delivering on these strategic priorities will ensure the
sustainability of our business model and move us closer
to achieving our ambition.
Infrastructure
Investment in integrated channels and core
infrastructure.
Costs
Tight cost control through back-office efficiencies,
organisational simplification and disciplined
property footprint.
Revenue
Meeting more customer needs through development
of new capabilities.
Balance sheet optimisation
Enhanced focus on risk-adjusted returns and growing
tangible book value.
Internal and external communications
Improve our approach to engagement.
See pages 20 to 21 for more information
...measured through...
–
OUR KEY PERFORMANCE INDICATORS
Our key performance indicators are the things we
monitor to check we are on track with the delivery of
our strategy as well as assess how our business model
is performing.
...aligned with...
–
PERFORMANCE BASED REMUNERATION
See pages 14 to 15 for more information
Our approach to remuneration for management is based
on a simple and clear scorecard in addition to a Long
Term Incentive Plan (LTIP). Scorecard measures are
aligned to the four components of our business model
with the LTIP based upon the successful generation of
sustainable long term value and tangible book growth.
See pages 126 to 147 for more information
Metro Bank PLC Annual Report & Accounts 2021
5
Strategic reportFinancial statementsGovernanceAdditional information Chair’s statement
I am pleased to introduce Metro Bank’s 2021 Annual Report,
as I complete the end of my first full year in role. The Bank’s
performance, the commitment of our colleagues, and the role we
play in the communities we serve have exceeded my expectations.
ROBERT SHARPE
CHAIR
Throughout the year, when COVID-
restrictions allowed, it was great to
visit more than 20 Metro Bank
locations and it was impressive to see
how our colleagues live the Bank’s
values every day – with a relentless
focus on customer service. I also
enjoyed spending quality time
during the year with our Executive
Committee. The ability of our people
and their dedication to deliver in
difficult circumstances is inspiring.
It is clear that everyone I have met
is focused on protecting the Bank’s
special culture while delivering on the
turnaround plan.
This year has shown the resilience of
the Bank’s turnaround plan and the
strength of the management team.
This combination has ensured
continuing momentum in returning
the Bank towards sustainable
profitability, while holding the ethos
of superior service at its core.
Results
Our results for the year are in line with
expectations and show solid progress
in reducing the loss year-on-year.
Despite it being a difficult 12 months
for the economy, businesses, and
consumers, we have significantly
reduced our expected credit loss
expense to £22.4 million (2020:
£126.7 million). The statutory
loss before tax for the year was
£245.1 million (2020: £311.4 million).
I am particularly pleased to see
the Bank’s strong performance in
unsecured lending. Consumer lending
increased to 7% of the total loan book
from 2% a year earlier, resulting from
the RateSetter back book acquisition
and a strong increase in organic
lending. Also in the lending space, we
supported small businesses by offering
the UK government-backed Bounce
Back Loan Scheme (BBLS) top-ups
and later in the year the Recovery
Loan Scheme.
Capital continues to be the largest
constraint on our ability to increase
lending. We ended the year with a
Total Capital plus MREL ratio of 20.5%
(31 December 2020: 22.4%) compared
to a regulatory minimum of 18%, or
20.5% including buffers (excluding any
confidential buffer, if applicable). We
continue to focus on generating higher
risk-adjusted returns on regulatory
capital, including progressing our AIRB
application. This is in addition to my
main priority, which is shared by the
Metro Bank Board, of ensuring that
the Bank builds on its progress
towards sustainable profitability.
Changes to Board Composition
In October 2021, we bade farewell
to Sir Michael Snyder who was a
Non-Executive Director at Metro Bank
since 2015 and served as interim
Chairman between October 2019 and
November 2020. The Board thanks
Sir Michael for his commitment and
significant contribution during his
tenure. As a result of his departure,
Monique Melis became the Bank’s
Senior Independent Director (subject
to regulatory approval) and I have
replaced her as Chair of the
Nomination Committee.
In February 2022, we announced that
David Arden, Chief Financial Officer,
had agreed with the Board that he
would step down from the Board and
leave the business on 1 April 2022. The
Board would like to thank David for the
important work that he has done to
strengthen Metro Bank’s financial
controls. He has played an instrumental
role in helping to deliver the Bank’s
strategic priorities and turnaround plan.
Remuneration
One of the most important parts of my
role is listening to the feedback from
shareholders and stakeholders, and in
2020 we understood that there was
more we could do to strengthen our
approach to executive remuneration.
As such we announced a new
approach, more closely linked to
shareholder outcomes. I’m pleased
to say the new approach to Directors
Remuneration was overwhelmingly
voted for by shareholders at our
Annual General Meeting (AGM).
ESG
Metro Bank’s approach to business
and environmental, social, and
governance (ESG) is to simply do
the right thing for our colleagues,
customers, shareholders and other
stakeholders. The Bank already has
a focus on supporting its local
communities, has made great progress
in ensuring there is diversity at all
levels of the Bank and is working hard
to close the gender pay gap. During a
year which has seen such a significant
international focus on climate change
through COP 26, I am pleased to say
that the Board and I also agreed to
set a Net Zero target for the Bank’s
operations carbon emissions by 2030
and Net Zero in our supply chain by
2050. We are working through our
plans to achieve these targets and will
be updating stakeholders with our
progress in next year’s Annual Report.
6
Metro Bank PLC Annual Report & Accounts 2021
Legacy issues
At the end of the year the PRA
investigation concluded and imposed
a financial penalty. The Bank
co-operated fully with the PRA and
I am pleased that the investigation has
been finalised and we can draw a line
under this legacy issue. In the time since
the errors were identified, Metro Bank
has made significant improvements
to, and substantial investment in, its
regulatory reporting processes and
controls. It has also strengthened its
broader risk management and
governance, demonstrating its
commitment to accurate regulatory
reporting and compliant growth. At the
time of writing, we are in the process of
making representations to the Financial
Conduct Authority (FCA) on the
Warning Notice and in particular
on the appropriate level of penalty.
As the process is confidential and
ongoing, we are unable to comment
further at this stage. The investigation
is sufficiently advanced that the Bank
thought it appropriate to provide
£5.3 million for a potential penalty.
The future
I said last year that Metro Bank had
turned a corner. This year we have
made considerable progress along the
path of returning to being a profitable,
challenger bank. Although we have
taken the difficult decision to close
three stores during 2022, we remain
committed to our store network and
this year we opened our new store in
Bradford as well as a further store in
Leicester in February 2022. Alongside
our stores we will build on the digital
advances we have made for customers
during the year and invest in our digital
products and services over future years.
We are continuing to monitor the
effects of conflict in Ukraine and its
impacts on the Bank. Given the rapidly
evolving nature of events it is difficult
to either predict or quantify with any
certainty the impact at this stage.
I continue to be immensely grateful
for the hard work and dedication of
colleagues across the Bank. My Board
colleagues and I would also like to
acknowledge and thank shareholders
for their ongoing support.
Robert Sharpe
23 March 2022
Empowering small
businesses
In June 2021 we launched a new
brand and marketing campaign,
demonstrating our commitment
to empowering the UK’s small
businesses and demonstrating
our business banking offering.
It featured three of our business
customers, giving them an
opportunity to showcase their
businesses and delve into the close,
mutually beneficial relationships
they’ve built with us.
The three businesses featured were:
Lexi’s Treats, which makes low
calorie snack bars and has grown
quickly with the support of
Metro Bank. Lexi is a former banker
turned businessman, who saw
a gap in the market for low calorie
snacks that genuinely taste
great too.
Daisy’s Dog Empawrium, a
business making dog accessories
and homemade dog treats, with
a shop in Bluewater Shopping
Centre in Kent. Daisy’s secured a
government-backed Bounce Back
Loan with Metro Bank, enabling the
business to develop e-commerce
capabilities during lockdown.
Koalaa Ltd, which designs and
produces bespoke prosthetic limbs
for children and adults. Its core
mission is to ensure that prostheses
are comfortable and much more
affordable.
As well as featuring the businesses
the campaign also included each
customer’s business manager,
which is a key component of our
business proposition, with business
customers getting their own
dedicated business manager.
The campaign was our first ever
to focus on our business offering
and centred on radio advertising
with support from an array of
digital channels across social
media, YouTube, display and paid
search. The campaign was built
upon our updated brand strategy
focusing on “people-people
banking” – the philosophy that
whatever happens in the future of
banking, people need people and
value human relationships.
Metro Bank PLC Annual Report & Accounts 2021
7
Strategic reportFinancial statementsGovernanceAdditional information Chief Executive
Officer’s statement
2021 saw the Bank complete the second year of its turnaround plan
and I’m pleased to report it ends the year in a stronger position than
when I took over the reins as CEO in 2020.
DANIEL FRUMKIN
CEO
Our commitment to being the UK’s
best community bank continues to set
us apart from our banking peers and
our model continues to resonate with
our FANS. Our personal and business
customers have depended on
Metro Bank to help them navigate
what for many has been another
difficult 12 months. They have also
relied on the Bank to be their partner
in the local communities where
they live. Whether that is through
supporting local community activities,
donating colleagues’ time and
expertise, fundraising for good causes,
providing space in our stores, or
helping young people learn about
money, Metro Bank has been there
every step of the way, hand in hand.
We are proud to remain the UK’s
highest rated high street bank for
customer service for the eighth time
running. When you combine this
relentless focus on exceptional
customer service with our desire to
continually surprise and delight and
to create FANS, it’s easy to see why
we are the bank of choice for
2.5 million customer accounts.
Our strategy
In early 2020, we identified the five
strategic pillars that formed our
turnaround strategy, designed to
deliver improved shareholder returns
and sustainable profitable growth.
These comprise:
– Revenue
– Cost
– Infrastructure
– Balance sheet optimisation
– Communication
Our strategy is driven by an
unwavering focus on customer service
which we believe enables us to build
deeper, more meaningful relationships
with our customers. We achieve this
with well-informed colleagues in our
stores, our market-leading digital
services, an easily accessible store
footprint in the major cities and towns
of England and Wales and a wide
range of products to meet customers’
banking needs.
Progress
Revenue
We’ve made great progress in filling
our shelves by adding new products
that meet more of our customers’
needs. Most notably, we strengthened
our consumer lending operation with
customers now able to take a loan
through the RateSetter platform
in-store, online and via our mobile
app, as well as under the RateSetter
brand on the main aggregator sites
and its own website. We have also
reinvigorated our credit card offer
in our stores.
Also, in the lending space, we
supported small businesses by offering
the UK government-backed BBLS
top-ups and later in the year the
Recovery Loan Scheme. In Specialist
Mortgages we have introduced new
products. We also entered the
insurance market, providing SME
business insurance and pet insurance.
Cost initiatives
While the Bank continues to operate
with a high fixed cost base in the form
of its store footprint, we have worked
hard to contain business as usual (‘Run
the Bank’) costs which grew 3% on a
like for like basis in the year. Costs to
transform the Bank (‘Change the
Bank’) have fallen by 15% in the second
half of the year as this transformation
programme has now passed its peak.
The Bank continues to optimise its
property footprint and has adopted a
hybrid way of working for office-based
colleagues, utilising space above and
alongside our existing store network.
We have purchased the freehold of
seven stores since 2020, lowering our
occupancy costs and consolidated our
call centre operations into three main
sites in Bristol, Slough and Ilford.
We have also made the difficult
decision to close three of our
stores – Earl’s Court, Milton Keynes
Midsummer and Windsor. Our stores
are fundamental to our customer and
community proposition, culture and
brand, but like any good retailer we
regularly review how our stores are
doing. While we are happy with our
store estate overall, these three stores
have certain unique challenges: Earl’s
Court was a fantastic billboard when
8
Metro Bank PLC Annual Report & Accounts 2021
Metro Bank first opened, but it’s in a
low footfall area; Windsor has high
footfall, but much of this is driven by
tourists rather than residents; and we
have two stores in Milton Keynes – one
with a lease break coming up, and
we’re confident we can meet our
customers’ needs with one store. While
our colleagues have done a great job
of trying to make these three stores
successful, this is the right decision for
the Bank and we’re pleased to be able
to make these closures without any
colleague redundancies.
Furthermore, we have worked hard
to simplify complex processes and
systems and to work more efficiently.
We have also transformed the way
we deliver our change agenda by
introducing Agile methodology, which
centres around value streams, to help
IT, Change, and Product teams design
and deliver new products and
solutions more quickly.
Infrastructure
Throughout the year we invested in
the Bank’s IT resilience and delivered
upgrades and improvements that have
reduced vulnerability. The Bank has
focused on its regulatory requirements
and introduced Strong Customer
Authentication and card migration to
meet PSD2 requirements. There has
also been progress on our financial
crime improvement, GDPR and cyber
programmes, which have all delivered
a range of improvements further
protecting the Bank.
During the year we recruited
colleagues to ensure that customers
in financial difficulties received the
support they needed; we launched
a service to support the new Debt
Respite Scheme (Breathing Space)
guidance to alleviate pressure from
customers with financial or mental
health difficulties; and we delivered
Pay-As-You-Grow functionality in line
with BBLS requirements to support
businesses beyond the pandemic.
All of these initiatives have helped
make the Bank safer, more resilient
and fit for the future.
Balance Sheet Optimisation
During the year we have made
meaningful strides in reshaping the
Bank’s balance sheet. We acquired
the RateSetter back book, significantly
increased the volume of consumer
lending and ramped up specialist
mortgages. In tandem we actively
managed down high-cost fixed term
deposits and increased the proportion
of current accounts and low-cost
instant access savings accounts. These
activities have resulted in increased
yield and a lower cost of deposits. At
the end of the period, RateSetter has
established itself as a leading provider
of consumer credit in the open market.
Culture and Communication
We’ve done lots of work to showcase
what makes Metro Bank stand out
from the crowd, from our small
business banking campaign to our
refreshed RateSetter website. Our
colleagues in-store have embraced
being Champions of our Community
through educating children with our
Money Zone Programme, our in-store
events, and the work we have done
with local charities. This year saw us
increase our spend on digital and
performance marketing. We have also
invested in hyper-local marketing to
drive footfall into stores across
England and Wales and highlight our
community credentials.
Results
The Bank has shown year on year,
half on half and quarter on quarter
improvements in its financial results.
The financial performance is in line with
our expectations and demonstrates
promising momentum in the business.
The bank reported a loss before tax of
£245.1 million, an improvement on last
year’s loss (2020: loss of £311.4 million).
Underlying loss before tax reduced by
37% to £171.3 million, and second half
underlying loss of £61.3 million is down
44% on the first half, highlighting the
momentum towards profitability.
While good progress is being made
to return to sustainable profitability,
I fully understand that these losses
need to be minimised swiftly and I am
confident our strategy will achieve that.
The future
The Bank’s strategic pillars,
transformation plan and relentless
focus on the provision of superior
customer service will continue into
2022. We were once again rated the
top high street bank for overall service
for personal and business customers
in the latest Competition and Markets
Authority Service Quality rankings
and number one for store service
for the eighth time running. This is
welcome external validation of the
continued efforts of our colleagues
across the business.
2021 saw the Bank complete much
of the heavy lifting required to
transform from being loss-making
towards sustainable profitability.
Metro Bank is a business to be proud
of, with colleagues who are dedicated
to meeting the needs of their
customers and communities.
As I come to the end of my second
year in role, after another challenging
year, I am proud of the achievements
of 2021, the progress we have made in
the Bank’s turnaround and most of all
the support we have provided to our
local communities. There is still much
to do in the coming months, but we
start 2022 with real momentum.
Finally
Metro Bank’s success is directly
attributable to my fantastic colleagues
who I am blessed to lead. Their
brilliance, dedication, customer focus,
caring natures and focus on others
inspires me every day. While it doesn’t
seem like enough, all I can do is say
a huge thank you.
Daniel Frumkin
23 March 2022
Metro Bank PLC Annual Report & Accounts 2021
9
Strategic reportFinancial statementsGovernanceAdditional information Business model
Our business model involves combining an integrated
model of stores, telephony and digital with exceptional
customer service to generate sustainable long term
value for all our stakeholders.
We take inputs in the form of...
AWARD WINNING
CUSTOMER SERVICE
INTEGRATED
DELIVERY
We focus on combining the
best of physical and digital.
Through a network of 79
stores, digitally and on the
phone we serve our 2.5 million
customer accounts.
We seek to provide an
exceptional level of service
through our people-people
approach to banking. We
work to make our customers
FANS who share their positive
experiences with their friends
and families – generating
strong brand awareness
and affinity in the markets
we operate.
OUR VALUES
Our AMAZEING values are
at the heart of everything
we do. By having our
values embedded within the
organisation it makes sure
that our customers and
communities inform the
decisions we make.
OUR STRATEGIC PRIORITIES
In 2020 we launched our
strategic priorities to help
turnaround our business.
These priorities are designed
to strengthen our model and
ensure its sustainability for the
long term.
Details on pages 20 to 21
...underpinned by a framework of...
RISK MANAGEMENT
GOVERNANCE
We continue to focus on enhancing our control
environment and risk capabilities ensuring we balance
the risks that need to be taken to deliver our strategy
whilst at the same time ensuring this is done in a
managed and appropriate manner.
The other key foundation on which our business
model is built is ensuring we continually improve
our approach to governance. Ensuring we maintain
a robust governance framework is important in
allowing all stakeholders to have confidence that
we are making decisions in the right way.
Details on page 52 to 91
Details on page 92 to 151
10
Metro Bank PLC Annual Report & Accounts 2021
...and apply our business model...
CREATING
LONG-TERM
VALUE AND
BOOK GROWTH
1
Integrated model
Our integrated model
aims to combine delivery
through physical and
digital channels.
INVEST IN
OUR MODEL
AND OUR
CULTURE
4
Risk-adjusted returns
We seek to balance our
lending mix through a
broad yet simple product
offering that is priced
proportionate to risk.
Through focusing on our
purpose of creating FANS
we achieve our ambition
to become the UK’s best
community bank
2
Unique culture
Our colleagues deliver
superior service and
are at the heart of our
people-people banking
approach.
AND
FANS WHO
BRING...
3
Low-cost deposits
We seek to attract
low-cost deposits
through our service-led
community banking
model
CREATING
FANS WHO
BRING...
Details on page 12 to 13
...to deliver outcomes in the form of...
STAKEHOLDER OUTCOMES
FANS
Whether it is helping achieve major
lifetime milestones such as buying a first
new home or just looking after day-to-
day spending and saving we help
customers manage their money.
2.5 million
Customer accounts
COMMUNITIES
As a community bank we want to be an
active member of society. Whether it is
through hosting network events and
helping small businesses thrive or
volunteering to support local causes we
place ourselves at the heart of the
communities we serve.
over 230k
Children put through Money Zone
COLLEAGUES
We create fulfilling careers where
colleagues can progress and excel.
INVESTORS
We aim to reward investors with tangible
book growth and a sustainable return.
73%
Positive colleague sentiment for culture
in latest colleague survey
over 100
Investor meetings in 2021
REGULATORS
Our regulators work to create and
maintain a stable, competitive and fair
banking system in which customers can
trust. We work closely with our
regulators to help in this shared aim.
£5.4 million
Settlement with PRA in relation to
regulatory investigation
SUPPLIERS
As we grow we generate value for
companies throughout our supply chain.
We work to support and deepen our
relationships with our suppliers helping
them to grow.
560
Active suppliers (excluding brokers)
Metro Bank PLC Annual Report & Accounts 2021
11
Strategic reportFinancial statementsGovernanceAdditional information
Business model continued
PROGRESS IN 2021
PRIORITIES
MARKET RISKS & OPPORTUNITIES
REMUNERATION & RISK
KPIs
Integrated
model
Our integrated model aims
to combine delivery through
physical and digital channels.
– Optimisation of store estate resulting in
– Plan for new store
announcement of three store closures, opening
of Bradford store and near completion of
Leicester store.
openings.
– Build out new digital
offerings.
– Purchase of four freeholds taking the proportion
of our estate that is owned outright to over
a third.
– Integrated unsecured lending offering into all
our stores.
Unique
culture
Our colleagues deliver superior
service and are at the heart of our
people-people banking approach.
– Gave over 30,000 volunteer hours of time to
support local causes.
– Created 100 new roles at our new AMAZE
Direct contact centre in Bristol.
– Awarded a Gold Employer Recognition Scheme
award in recognition of our work supporting
the Armed Forces.
– Promoted 565 colleagues.
– Invest in our colleagues
and continue to develop
talent from within.
– Continue to champion and
increase diversity across
all levels to ensure we
represent the communities
we serve.
Low-cost
deposits
We seek to attract low-cost
deposits through our service-led
community banking model with
specific emphasis on our core
retail and SME franchise.
Risk-adjusted
returns
We seek to balance our lending
mix through a broad yet simple
product offering that is priced
proportionate to risk.
– Reduction in cost of deposits from 0.65% to
0.24% reflecting continued discipline on pricing.
– Increase in net fee and commission income 16%
to £69.6 million as the economy continued to
rebound from the COVID-19 pandemic.
– Continued shift in the deposit mix away from
fixed-term deposits.
– Retain low cost of deposits
in the face of increasing
base rate.
– Build out fee earning
potential on our services.
– Delivered over £750 million of unsecured
personal loans (including the purchase of
RateSetter back book), more than 70x any other
year in our history.
– Launch of capital-efficient Recovery Loans
Scheme (RLS) lending and delivery of
£157 million of lending, with a strong pipeline
as at 31 December 2021.
– Fulfil strong pipeline of
RLS lending.
– Continue to increase front
book lending yields as
base rates rise.
– Improve returns and risk
density of treasury
portfolio.
– Increased range of specialist mortgages
– Continued focus on
including enhancements of buy-to-let products.
– Launch of new insurance products, including
pet insurance.
unsecured lending with
the development of new
products including motor
finance.
12
Metro Bank PLC Annual Report & Accounts 2021
Remuneration
Colleague engagement
– Continued strong competition, both from digital-only
Risks
banks and incumbents.
Opportunities
Remuneration
Customers
Risk
Operational risk
– Return of high street activity allows us to increase our
Strategic risk
presence and also grow fee income.
– Opening of new stores allows us to penetrate new
markets.
Risks
Opportunities
– Competitive market for talent remains at all levels.
– High wage inflation, especially in specialist roles.
– Better use of our property footprint allows us to
Conduct risk
expand our talent pool outside of London.
Risks
– Continued competition for current accounts.
– As Term Funding Schemes wind down competition
for wider deposits likely to increase.
– Increased legal and regulatory requirements relating
to financial crime, requiring further investment, over
– Forecast base rate rises allow net interest margin
to widen as we retain low cost deposit base.
– New product launches allow us to penetrate new
that anticipated.
Opportunities
markets.
Risks
– Slowdown in housing market as interest rates increase.
– Global uncertainty and high inflationary environment
increasing pressure on expected credit losses.
Opportunities
– Rising base rate environment provides opportunities
to increase lending yields.
– Greater ability to grow unsecured lending as consumer
confidence returns post-pandemic.
– Progression of AIRB application gives the potential
to gain greater capital efficiencies.
Remuneration
Financial
Risk
Risk
Credit risk
Market risk
Financial crime
Regulatory risk
Model risk
Capital risk
People
Risk
Operational risk
Legal risk
Strategic risk
Remuneration
Financial
Risk
Liquidity and funding risk
Market risk
Financial crime
Regulatory risk
Legal risk
Number of accounts
2021:
2.5 million
2020:
2.2 million
Customer satisfaction
2021:
90 (new to bank)
42 (existing)
2020:
86 (new to bank)
45 (existing)
2021:
69%
2020:
73%
Senior leadership
diversity
2021:
20% (BAME)
43% (female)
2020:
11% (BAME)
38% (female)
Cost of deposits
2021:
0.24%
2020: 0.65%
Loan to deposit ratio
Cost of risk
2021:
0.18%
2020: 0.86%
2021:
75%
2020:
75%
CET1 ratio
2021:
12.6%
2020:
15.0%
PROGRESS IN 2021
PRIORITIES
MARKET RISKS & OPPORTUNITIES
REMUNERATION & RISK
KPIs
Integrated
model
Our integrated model aims
to combine delivery through
physical and digital channels.
– Optimisation of store estate resulting in
– Plan for new store
announcement of three store closures, opening
openings.
of Bradford store and near completion of
– Build out new digital
Leicester store.
offerings.
– Purchase of four freeholds taking the proportion
of our estate that is owned outright to over
– Integrated unsecured lending offering into all
a third.
our stores.
Unique
culture
Our colleagues deliver superior
service and are at the heart of our
people-people banking approach.
– Gave over 30,000 volunteer hours of time to
– Invest in our colleagues
support local causes.
and continue to develop
– Created 100 new roles at our new AMAZE
talent from within.
Direct contact centre in Bristol.
– Continue to champion and
– Awarded a Gold Employer Recognition Scheme
increase diversity across
award in recognition of our work supporting
all levels to ensure we
the Armed Forces.
– Promoted 565 colleagues.
represent the communities
we serve.
Low-cost
deposits
We seek to attract low-cost
deposits through our service-led
community banking model with
specific emphasis on our core
retail and SME franchise.
Risk-adjusted
returns
We seek to balance our lending
mix through a broad yet simple
product offering that is priced
proportionate to risk.
– Reduction in cost of deposits from 0.65% to
– Retain low cost of deposits
0.24% reflecting continued discipline on pricing.
in the face of increasing
– Increase in net fee and commission income 16%
base rate.
to £69.6 million as the economy continued to
– Build out fee earning
rebound from the COVID-19 pandemic.
potential on our services.
– Continued shift in the deposit mix away from
fixed-term deposits.
– Delivered over £750 million of unsecured
– Fulfil strong pipeline of
personal loans (including the purchase of
RLS lending.
RateSetter back book), more than 70x any other
– Continue to increase front
year in our history.
book lending yields as
– Launch of capital-efficient Recovery Loans
base rates rise.
Scheme (RLS) lending and delivery of
– Improve returns and risk
£157 million of lending, with a strong pipeline
density of treasury
as at 31 December 2021.
portfolio.
– Increased range of specialist mortgages
– Continued focus on
including enhancements of buy-to-let products.
unsecured lending with
– Launch of new insurance products, including
the development of new
pet insurance.
products including motor
finance.
Risks
– Continued strong competition, both from digital-only
Remuneration
Customers
banks and incumbents.
Opportunities
– Return of high street activity allows us to increase our
presence and also grow fee income.
– Opening of new stores allows us to penetrate new
markets.
Risks
– Competitive market for talent remains at all levels.
– High wage inflation, especially in specialist roles.
Opportunities
– Better use of our property footprint allows us to
expand our talent pool outside of London.
Risk
Operational risk
Strategic risk
Remuneration
People
Risk
Operational risk
Conduct risk
Legal risk
Strategic risk
Risks
– Continued competition for current accounts.
– As Term Funding Schemes wind down competition
for wider deposits likely to increase.
– Increased legal and regulatory requirements relating
to financial crime, requiring further investment, over
that anticipated.
Opportunities
– Forecast base rate rises allow net interest margin
to widen as we retain low cost deposit base.
– New product launches allow us to penetrate new
markets.
Remuneration
Financial
Risk
Liquidity and funding risk
Market risk
Financial crime
Regulatory risk
Legal risk
Risks
– Slowdown in housing market as interest rates increase.
– Global uncertainty and high inflationary environment
increasing pressure on expected credit losses.
Opportunities
– Rising base rate environment provides opportunities
to increase lending yields.
– Greater ability to grow unsecured lending as consumer
confidence returns post-pandemic.
– Progression of AIRB application gives the potential
to gain greater capital efficiencies.
Remuneration
Financial
Risk
Risk
Credit risk
Market risk
Financial crime
Regulatory risk
Model risk
Capital risk
Number of accounts
2021:
2.5 million
2020:
2.2 million
Customer satisfaction
2021:
90 (new to bank)
42 (existing)
2020:
86 (new to bank)
45 (existing)
Colleague engagement
69%
2021:
2020:
73%
Senior leadership
diversity
2021:
20% (BAME)
43% (female)
2020:
11% (BAME)
38% (female)
Cost of deposits
2021:
0.24%
2020: 0.65%
Cost of risk
2021:
0.18%
2020: 0.86%
Loan to deposit ratio
75%
2021:
2020:
75%
CET1 ratio
2021:
12.6%
2020:
15.0%
Market risks & opportunities: pages 16 to 19
Risks: pages 52 to 91
KPIs: pages 14 to 15
Remuneration: pages 126 to 147
Metro Bank PLC Annual Report & Accounts 2021
13
Strategic reportFinancial statementsGovernanceAdditional information Key performance
indicators
Our KPIs are the things we monitor to
check we are on track with the delivery
of our strategy as well as assess how
our business model is performing.
Link to business model
Components of our business model
Our business model consists of:
– Integrated model
– Unique culture
– Low cost deposits
– Risk-adjusted returns
Our business model is set out on pages
10 to 13. This includes showing how our
KPIs link to the above components.
Output of our business model
Our business model is to generate
long-term value and create tangible
book growth. This is measured through:
– Total shareholder return
– Return on tangible equity
Link to remuneration approach
Our approach to remuneration for
management is based on a simple
and clear scorecard in addition to an
LTIP. Scorecard measures are aligned
to the four components of our
business model with the LTIP based
upon the successful generation of
sustainable long-term value and
tangible book growth.
NON-FINANCIAL
Customer accounts (m)
S
Colleague engagement (%)
S
2021
2020
2019
2.5
2.2
2.0
2021
2020
2019
69
73
74
How we define it
Number of active customer accounts.
Why it is important
Growing our customer accounts is key
to our franchise and validates that our
approach is working and that our
proposition resonates with customers.
How we define it
The result is taken from our annual voice
of the colleague survey.
Why it is important
Attracting and retaining talent is vital to
delivering superior service and preserving
our culture and therefore we want to ensure
colleagues enjoy working for Metro Bank.
Customer satisfaction (%)
S Diversity (%)
S
New account openings
2021
2020
2019
Female
2021
2020
2019
90
86
89
43
38
36
Continuing relationships
Black, Asian and minority ethnic (BAME)
2021
2020
2019
42
45
47
2021
2020
2019
11
8
20
Further details on our
remuneration approach can
be found on page 130
How we define it
Net promoter score for new account
openings and continuing customer
relationships.
How we define it
Proportion of female/BAME colleagues
amongst our senior leadership
(the ExCo and their direct reports).
Alternative performance measures
Where a financial KPI is an alternative
performance measure a reconciliation
to the nearest statutory measure can
be found on pages 224 to 226.
Why it is important
Our purpose is to create FANS and as such
ensuring strong ongoing levels of customer
satisfaction is important in measuring this.
Why it is important
Ensuring diversity amongst our senior
management ensures we are representative
of the communities we serve and our
colleagues as a whole. This means we are
more likely to make decisions that are
beneficial to all our stakeholders and help
us deliver on our strategy.
Link to remuneration
S Scorecard Measure
L LTIP Measure
Alternative performance measures
14
Metro Bank PLC Annual Report & Accounts 2021
FINANCIAL
Statutory loss before tax (£m)
Underlying loss before tax (£m) S
CET1 ratio (%)
2021
-245.1
2021
-171.3
2020
-311.4
2019
-130.8
2020
-271.8
2019
2021
2020
2019
-11.7
12.6
15.0
15.6
How we define it
Our earnings before tax as defined by IFRS.
Why it is important
Achieving sustainable profitability is the key
financial measure to demonstrate we are
creating long-term value which is the
output of our business model.
How we define it
Our statutory earnings adjusted for
certain items that distort year-on-year
comparisons.
Why it is important
It provides further understanding of the
underlying trends in the business.
How we define it
Our common equity tier 1 capital expressed
as a percentage of RWAs.
Why it is important
This is the regulatory core capital we hold.
Cost of deposits (%)
Cost of risk (%)
S
Statutory cost: income ratio (%) S
0.24
2021
2020
2019
0.65
0.78
2021
2020
2019
0.18
0.08
0.86
2021
2020
2019
153
143
129
How we define it
Interest expense on customer deposits
divided by the average deposits from
customers for the year.
Why it is important
Cost of deposits is a key component of
profitability. As customers are more willing
to trade interest for a better service offering
on deposits as compared to lending it is
much more within management’s ability
to influence the costs of deposits.
How we define it
Expected credit loss expense divided
by average gross loans for the year.
Why it is important
We seek to minimise our cost of risk and
optimise this in relation to the lending
yield received.
How we define it
Total costs (excluding expected credit
loss expense) expressed as proportion
of total income.
Why it is important
Achieving tangible book growth involves
achieving profitability and therefore
creating positive operating jaws is vital to
this. Statutory cost: income ratio is a useful
metric in measuring progress in this regard.
Return on tangible equity (%)
L
Loan to deposit ratio (%)
S
Total shareholder return (%)
L
2021
-28
2020
2019
-22
-13
2021
2020
2019
75
75
2021
-94
2020
-96
101
2019
-93
How we define it
Earnings for the year divided by average
tangible shareholders’ equity (total equity
less intangible assets).
Why it is important
This is the strategic output of our business
model and how we judge success.
How we define it
Loans and advances to customers
expressed as a percentage of total deposits.
Why it is important
As we seek to be a deposit funded bank,
ensuring we maintain an appropriate
loan to deposit ratio is a key measure in
managing this.
How we define it
Total capital gains and dividends
returned to investors over a three-year
rolling period.
Why it is important
We want to ensure shareholders
are rewarded for their continued
investment in us.
Metro Bank PLC Annual Report & Accounts 2021
15
Strategic reportFinancial statementsGovernanceAdditional information
External
market review
We monitor the external market in order to effectively
anticipate and respond to the challenges and opportunities
we face now and in the future.
Economic outlook
The UK economy has seen a strong
recovery in 2021. The easing of the
COVID-19 pandemic restrictions as
well as increased vaccination rates
across 2021 resulted in improved
consumer confidence and spending,
stimulating GDP growth of 7.5% in the
year. The UK economy is expected to
continue to recover over the course of
2022 as the impact of the COVID-19
pandemic begins to subside, subject
to the impact of new COVID-19
variants and the continuation of
government support initiatives.
However, economic conditions are
expected to continue to be uncertain
as the longer-term impacts of the
pandemic, as well as the emerging
impacts resulting from the Russian
invasion of Ukraine, remain to be fully
understood. CPI inflation rose to 5.4%
in 2021 and is expected to continue to
rise in 2022 driven largely by energy
and goods prices. Further to this,
whilst the unemployment rate in the
UK fell to 4.1% in Q4 2021, exceeding
initial expectations and notably above
pre-pandemic levels, the full impacts
of the withdrawal of the Government’s
Furlough Scheme in September 2021
are yet to fully materialise.
Given the pace of the UK economic
recovery and increased inflationary
pressures, the Bank of England has
started to increase the base rate.
The government replaced the
Business Bounce Back Loans Scheme
(BBLS) with the Recovery Loans
Scheme (RLS) in April 2021 to ensure
extended support to UK businesses
that continue to recover from the
impacts of the pandemic. Banks,
including ourselves, played an
important role in ensuring the RLS
scheme was set up promptly to
support our customers.
Competition in the housing market
remains strong and house prices have
continued to rise, with the Housing
Price Index increasing to 10.8%
in 2021.
Our response
Throughout the pandemic Metro Bank
stores remained open to ensure we
were there to support customers
when and where they need us.
Investment has also continued in our
customer support function to ensure
we can provide help to personal and
business customers through the
economic recovery.
The improved economic conditions
have driven additional personal
lending growth and a rise in fee
income, a trend that is expected to
continue as the economy recovers.
We delivered all government-backed
loan initiatives at pace when they were
launched in 2020 and continued to
update these through 2021 to ensure
they were available to customers.
So far, we have lent over £1.6 billion
of government-backed loans to
16
Metro Bank PLC Annual Report & Accounts 2021
customers, making sure we have been
there to support our customers as
they begin to recover from the
impacts of the pandemic.
To recognise the importance of
consumer finance, a new dedicated
consumer finance division was created
in June 2021, focusing on expanding
our personal and business lending
capabilities.
Returning to sustainable profitability
remains a key focus for management
and the Board.
Our response
In response to the competitive
pressures in the prime mortgage
market, we have maintained our
strategy of pulling back from
mainstream mortgage lending
and instead focusing on higher-
yielding segments through a range
of specialist mortgage products.
Further investment into this strategy
is expected in 2022, including the
launch of a new limited company
buy-to-let product and high net
worth proposition.
Building off the successful RateSetter
acquisition in 2020, we launched a
personal loans proposition across all
our stores and digital channels, whilst
continuing to offer personal loans
through aggregator channels.
In April 2021 we purchased the
RateSetter back book and have
successfully completed the integration
of the RateSetter business acquired
the year before. We are continuing to
invest in our consumer finance division
with the expected launch of new
products including automotive finance
and digital lending products for SMEs.
We continue to invest in our digital
channels to attract new customers
and support existing customers to
give them choice in the way they
bank with us; further investment is
expected during 2022 as we build
more servicing and sales capability.
We believe in a multi-channel
approach and our #1 service ranking
for branch banking supports growth
in accounts across personal and
business banking sectors across
all channels.
Competition
The large banks continue to dominate
the current account market (the
largest four banks hold around 64%
of personal current accounts and
around 67% of micro-business current
accounts¹) which as a result remains
highly concentrated. Those banks use
their scale and capital advantages
to offer large switching incentives to
attract customers whilst challenger
banks are largely focused on targeting
specific customer segments with
an increasingly sophisticated
digital offering.
Healthy competition is also being
seen in the consumer finance market,
especially in the case of new and
emerging propositions such as “Buy
Now, Pay Later”. Further to this, the
rising popularity of aggregators and
price comparison sites amongst
customers has increased price
competition as well.
The stamp duty holiday ending in
September 2021 has resulted in a
reduction in property transactions,
and an increase in excess liquidity in
the market. This has led to elevated
price competition that we expect to
continue in the medium term, even
in the face of base rate increases.
Savings and deposit balances have
remained higher than pre-pandemic
levels but have been reducing as
consumer confidence returns, and
competition in the deposits market
has been relatively low with limited
new entrants.
1. Source: FCA Strategic Review of Retail
Banking Business Models, January 2022.
Metro Bank PLC Annual Report & Accounts 2021
17
Strategic reportFinancial statementsGovernanceAdditional information External market review continued
Capital regime
and funding
At the start of the pandemic
regulators moved quickly to ensure
that the banking system could
support the economy during a period
of stress. Several measures were
employed to enhance banks’
capital positions such as the Capital
Requirements Regulation (CRR)
‘Quick Fix’ package that included
an additional IFRS 9 transitional
agreement and changes to the
SME supporting factor. The IFRS 9
transitional relief was initially applied
at 100%, falling to 75% on 1 January
2022 and subsequently 50% and
25% in the two years following. The
measures also included a reduction in
the countercyclical buffer to 0% from
1%, although the Bank of England has
since announced that this will return
to 1% from 13 December 2022, rising
to 2% in Q2 2023 if the economic
recovery proceeds in line with
its expectations.
In 2021 the European Banking
Authority (EBA) also provided relief
through a change to the capital
treatment of software assets, however
as expected in July 2021 the PRA
announced that software assets
would revert to being deducted for
UK entities from 1 January 2022.
UK financial institutions, including
ourselves, with total assets greater
than £15-25 billion are subject to the
most stringent MREL requirements
defined under the ‘bail-in’ stabilisation
power within the European Union’s
Banking Recovery and Resolution
Directive. The Bank of England
adopted a transitional period, with an
interim requirement from 1 January
2020 equal to 18% of risk-weighted
assets (RWAs) plus regulatory buffers.
End-state requirements for ‘bail-in’
banks are equal to twice its Pillar 1 and
Pillar 2A requirement, plus regulatory
buffers. Furthermore, UK resolution
entities subject to a bail-in strategy
are required to have MREL resources
subordinated to operating liabilities
using structural subordination,
requiring the formation of a
holding company.
In December 2021 the Bank of
England issued a policy statement
following a review of its approach
to setting MREL requirements.
Our response
We continue to deliver on our
strategic priorities to ensure we
return to sustainable profitability.
A core component of this is our focus
on risk-adjusted return on regulatory
capital to drive transformation in our
lending mix, with significant growth
in unsecured personal lending,
government-backed loans and
specialist mortgages.
In February we completed the
remaining 10% of the £3.1 billion
residential mortgage portfolio sale.
The disposal increased our capital
headroom and removed the need to
issue additional MREL qualifying debt
in 2021.
The portfolio sale also increased
our liquidity significantly and we
optimised our treasury asset mix to
enable us to benefit as the yield curve
began to steepen in the latter half of
the year.
Our loan to deposit ratio is below
historic levels, constrained by our
capital position, presenting an
opportunity to accelerate growth
as we begin to free up capital.
We continue to progress our AIRB
application to reduce risk density
and increase our competitiveness.
Pillar 3
Pillar 3 reporting requirements require
us to publish a set of disclosures which
allow market participants to assess
our capital, risk exposures and risk
assessment process.
Our Pillar 3 disclosures,
which are unaudited, can
be found on our website
www.metrobankonline.co.uk/
investor-relations/.
18
Metro Bank PLC Annual Report & Accounts 2021
Regulatory environment
The regulatory environment continues
to evolve and banks and other
financial services firms continue to be
subject to monitoring and oversight
from the regulators from both a
Prudential and Conduct perspective.
The fair treatment of customers
continues to remain a key focus area
for the FCA, borrowers in financial
difficulty are of particular interest
due to the COVID-19 pandemic. More
broadly the FCA is consulting on the
introduction of the consumer duty,
a new consumer principle which
would mandate firms to deliver good
outcomes for retail clients. The FCA
published their second consultation
on this matter in December 2021, with
a Policy expected in July 2022.
The UK government has committed to
achieve a net zero economy by 2050,
whilst the financial services industry
has commenced work to assess the
financial impact of climate change,
further policy change can be expected
throughout the coming years to ensure
the industry assists in meeting the
government’s ambition.
Emerging events in relation to the
Russian invasion of Ukraine are
increasing regulatory requirements and
focus on financial crime, noticeably
in respect of sanctions.
Other key areas of focus include
Operational Resilience, where the
regulators are expecting firms to be
operationally resilient against disruption,
and diversity and inclusion, where the
regulators are developing their approach
on how to measure a firm’s progress
against diversity outcomes. Their aim is
to ensure a consistent approach across
the financial services industry.
Our response
We continue to monitor closely and
prepare for further regulatory initiatives
including the proposed consumer duty
and the impacts of climate change, to
Consumer behaviour
The COVID-19 pandemic has led to
significant shifts in consumer
behaviour, some of which appear
permanent, whilst others may begin
to revert as the UK economy recovers.
As the lockdown restrictions eased
and vaccination rates grew, consumer
confidence began to increase over the
first half of 2021. However, uncertainty
over new emerging COVID-19 variants
negatively impacted consumer
confidence in the fourth quarter. This
suppressed transaction activity across
all banking channels, especially in
stores, but also increased demand for
both consumer and business lending.
Since the easing of the government
restrictions, consumer confidence and
expenditure on non-essential items
has increased, albeit at a slower rate
than expected.
Increased demand for business
lending was evident from the take
up of the government-backed lending
schemes launched in 2020 and is
expected to continue through the RLS
scheme that launched in April 2021.
The trend towards personal and business
customers preferring digital to physical
channels has been accelerated by the
COVID-19 pandemic. Whilst this is not
a new trend, the COVID-19 pandemic
increased customer preference for digital
channels and required banking providers
to enhance their digital capabilities to
service customers’ needs throughout the
national lockdowns.
Our response
We have continued to support our
communities throughout the pandemic
and economic recovery by ensuring they
have continued access to our banking
services either in-store, via telephone
or online.
Transactional activity in our stores
has increased as expected. We remain
committed to serving our personal
and business customers across our
store network.
Investment in our digital capabilities
has continued and we have delivered
several updates to both our business and
personal online banking platforms, and
we are also piloting the use of web chat
technology to improve the way we
communicate with our customers.
ensure that we remain well placed
to identify impacts to our business
model and our ability to continue to
support our customers effectively.
Alongside this, we continue to invest
in and evolve our financial processes
and systems including those related
to regulatory compliance and
financial crime.
Our ‘Magic Makers’ start-up
accelerator programme launched
in September 2021, and we have
partnered with three innovative
software start-ups. This demonstrates
our commitment to supporting UK
start-ups and small businesses and
allows us to leverage their technology
to enhance and improve processes
across our stores, telephone banking
sites and digital channels.
Metro Bank PLC Annual Report & Accounts 2021
19
Strategic reportFinancial statementsGovernanceAdditional information Strategic
priorities
DETAILS
PROGRESS IN 2021
PRIORITIES IN 2022
Costs
Tight cost control through back-
office efficiencies, organisational
simplification and disciplined
property footprint.
Fixed costs are a significant portion of our cost base, notably our store estate.
We are therefore focused on achieving greater operational leverage.
We continue to focus on initiatives to contain cost growth and have undertaken
a transformation programme to ensure these are both contained and
proportionate in allowing us to drive revenue growth.
Revenue
Meeting more customer needs and
development of new capabilities.
There is significant opportunity for us to grow our revenue by increasing net
interest income and fee and commission income by building stronger
relationships with our existing customers, continuing to attract more people
to our stores and embedding ourselves in more communities in the UK.
We are also focused on improving our range of products, as well as their
availability through new and existing channels. This will allow us to deepen our
customer relationships through meeting more of their needs, allowing us to
maximise our revenue opportunities.
Infrastructure
Investment in integrated channels
and core infrastructure.
We are continuing to build our #1 service proposition in-store and digitally to
ensure we continue to offer the best channel experience in an efficient way.
We therefore continue to invest in our digital and physical infrastructure to
deliver process improvements and enhance our core capabilities as well as
ensuring that we keep pace with the ever-changing regulatory agenda.
We continue to be committed to stores, but will ensure that new openings are
done in a more cost-efficient way. We’ll also grow our digital service offering
and provide customers with more self-service opportunities. By pivoting towards
greater automation we will improve our speed to market and streamline back-
office functions.
Capital continues to be the greatest constraint on our ability to grow. We are
therefore focused on optimising our balance sheet to maximise returns on
risk-adjusted regulatory capital. We are achieving this through rebalancing our
lending mix towards higher-yielding areas such as specialist mortgages, SMEs
and retail unsecured loans.
We continue to explore corporate transactions, such as the mortgage portfolio
sale which completed in 2021, where these are attractive, although our
predominant focus remains on growing organically and managing our lending
mix through natural attrition.
We are focused on improving our engagement with customers and colleagues
ensuring we are both clear and transparent in our communications. This will
allow us to showcase our proposition and help stakeholders understand what
Metro Bank stands for and what differentiates us from our competitors.
Balance sheet
optimisation
Enhanced focus on risk-adjusted
returns and growing tangible book
value.
Internal and external
communications
Improve our approach to
engagement.
20
Metro Bank PLC Annual Report & Accounts 2021
– Agreed the purchase of a further four store freeholds.
– Adoption of robotics, automation and digitalisation.
– Prepared for the closure of three stores in 2022.
– Finalise integration of RateSetter into the business.
– Reduced head count from start to end of year.
– Reduce overall costs despite high inflationary
– Rationalised call centre sites from seven to three.
environment, with a focus on reducing non-underlying
expenditure.
– Extended product offering through launch of pet and
– Launch of new motor finance products to expand our
SME insurance offering.
consumer lending propositions and build upon the
– Enhanced existing products though use of government
RateSetter brand.
Recovery Loan Scheme, new specialist mortgage
– Continue to launch further specialist mortgage products
propositions and enhanced SME lending.
– Digital lending to SMEs.
– Enhance fee earning potential.
– Focus on reaching profitability in the near-term.
– Opened store in Bradford and progressed build of store
– Continue investment in infrastructure albeit at a reduced
pace as we finalise our transformation.
in Leicester, which opened early 2022.
– New regulatory reporting system initiated.
– AML infrastructure improved.
– Progressed AIRB application.
– Continue to progress with AIRB application with
– Purchase of the RateSetter back book and delivery of
ambition of achieving accreditation in 2022.
unsecured originations leading to over £750 million of
– Continue to shift the balance sheet composition as older
new lending.
commercial loans attrite and redeploy the capital to
more capital-efficient lending.
– Drive greater returns from excess liquidity as yields
steepen.
– Launched first brand and marketing campaign for small
– Transform our customer insight capabilities through
and medium-sized businesses.
– Hyper-local brand campaigns.
enhanced tracking and reporting.
– Continue to bolster our community presence as
– Restarted Money Zones (after COVID-19). More than
COVID-19 restrictions are lifted.
230,000 children have now been through the
– Execute national and localised campaigns that exemplify
programme.
our community focus.
– Launched our KPIs and obtained shareholder approval
for our revised approach to executive remuneration.
DETAILS
PROGRESS IN 2021
PRIORITIES IN 2022
Costs
Tight cost control through back-
office efficiencies, organisational
simplification and disciplined
property footprint.
Fixed costs are a significant portion of our cost base, notably our store estate.
We are therefore focused on achieving greater operational leverage.
We continue to focus on initiatives to contain cost growth and have undertaken
a transformation programme to ensure these are both contained and
proportionate in allowing us to drive revenue growth.
Revenue
There is significant opportunity for us to grow our revenue by increasing net
interest income and fee and commission income by building stronger
Meeting more customer needs and
relationships with our existing customers, continuing to attract more people
development of new capabilities.
to our stores and embedding ourselves in more communities in the UK.
We are also focused on improving our range of products, as well as their
availability through new and existing channels. This will allow us to deepen our
customer relationships through meeting more of their needs, allowing us to
maximise our revenue opportunities.
Infrastructure
We are continuing to build our #1 service proposition in-store and digitally to
ensure we continue to offer the best channel experience in an efficient way.
Investment in integrated channels
We therefore continue to invest in our digital and physical infrastructure to
and core infrastructure.
deliver process improvements and enhance our core capabilities as well as
ensuring that we keep pace with the ever-changing regulatory agenda.
We continue to be committed to stores, but will ensure that new openings are
done in a more cost-efficient way. We’ll also grow our digital service offering
and provide customers with more self-service opportunities. By pivoting towards
greater automation we will improve our speed to market and streamline back-
office functions.
Capital continues to be the greatest constraint on our ability to grow. We are
therefore focused on optimising our balance sheet to maximise returns on
risk-adjusted regulatory capital. We are achieving this through rebalancing our
lending mix towards higher-yielding areas such as specialist mortgages, SMEs
and retail unsecured loans.
We continue to explore corporate transactions, such as the mortgage portfolio
sale which completed in 2021, where these are attractive, although our
predominant focus remains on growing organically and managing our lending
mix through natural attrition.
We are focused on improving our engagement with customers and colleagues
ensuring we are both clear and transparent in our communications. This will
allow us to showcase our proposition and help stakeholders understand what
Metro Bank stands for and what differentiates us from our competitors.
Balance sheet
optimisation
Enhanced focus on risk-adjusted
returns and growing tangible book
value.
Internal and external
communications
Improve our approach to
engagement.
– Agreed the purchase of a further four store freeholds.
– Prepared for the closure of three stores in 2022.
– Reduced head count from start to end of year.
– Rationalised call centre sites from seven to three.
– Adoption of robotics, automation and digitalisation.
– Finalise integration of RateSetter into the business.
– Reduce overall costs despite high inflationary
environment, with a focus on reducing non-underlying
expenditure.
– Extended product offering through launch of pet and
SME insurance offering.
– Enhanced existing products though use of government
Recovery Loan Scheme, new specialist mortgage
propositions and enhanced SME lending.
– Launch of new motor finance products to expand our
consumer lending propositions and build upon the
RateSetter brand.
– Continue to launch further specialist mortgage products
– Digital lending to SMEs.
– Enhance fee earning potential.
– Focus on reaching profitability in the near-term.
– Opened store in Bradford and progressed build of store
– Continue investment in infrastructure albeit at a reduced
in Leicester, which opened early 2022.
– New regulatory reporting system initiated.
– AML infrastructure improved.
pace as we finalise our transformation.
– Progressed AIRB application.
– Purchase of the RateSetter back book and delivery of
unsecured originations leading to over £750 million of
new lending.
– Continue to progress with AIRB application with
ambition of achieving accreditation in 2022.
– Continue to shift the balance sheet composition as older
commercial loans attrite and redeploy the capital to
more capital-efficient lending.
– Drive greater returns from excess liquidity as yields
steepen.
– Launched first brand and marketing campaign for small
– Transform our customer insight capabilities through
and medium-sized businesses.
– Hyper-local brand campaigns.
– Restarted Money Zones (after COVID-19). More than
enhanced tracking and reporting.
– Continue to bolster our community presence as
COVID-19 restrictions are lifted.
230,000 children have now been through the
programme.
– Launched our KPIs and obtained shareholder approval
for our revised approach to executive remuneration.
– Execute national and localised campaigns that exemplify
our community focus.
Metro Bank PLC Annual Report & Accounts 2021
21
Strategic reportFinancial statementsGovernanceAdditional information Financial review
Our financial performance in 2021 reflects where we are in
our strategic turnaround, it shows strong momentum within
the business and positive signs that our approach is working.
Underlying net
interest income
Underlying fee
and other
income
Underlying net
gains on sale of
assets
Total underlying
revenue
Underlying
operating costs
Expected credit
loss expense
Underlying loss
before tax
Non-underlying
items
Statutory loss
before tax
2021
£m
2020
£m
Change
%
295.7
250.3
18%
101.5
86.3
18%
0.7
4.3
(84%)
397.9
340.9
17%
(546.8) (486.0)
13%
(22.4)
(126.7) (82%)
(171.3)
(271.8)
(37%)
(73.8)
(39.6)
86%
(245.1)
(311.4)
(21%)
We recognised a statutory loss
before tax for the period of
£245.1 million, down from the
£311.4 million loss recognised in 2020,
with the decrease primarily due to the
£104.3 million lower charge for
expected credit losses.
We entered 2021 well positioned
for the prevailing economic climate,
with the recently signed £3.1 billion
mortgage portfolio divestment
providing both regulatory capital
headroom and liquidity at a time
of uncertainty with the country in
lockdown. The disposal supported
our strategic goal of maximising
risk-adjusted returns on capital, as
we reinvested £337 million of the
proceeds to acquire the RateSetter
back book of consumer loans with an
average total gross yield of c.8%; that
compared to the divested mortgage
portfolio which had a weighted
average rate of 2.1%.
The Bank has continued to make
strong progress against the turnaround
plan, delivering considerable
improvement in balance sheet mix
at an accelerated pace that can now
clearly be seen in improved net
interest income.
On an underlying basis, the loss for
the period of £171.3 million was down
37% compared to the prior year
(2020: £271.8 million), driven by lower
expected credit losses and positive
operating jaws. Operating expenses
increased 13% year-on-year and
income increased 17%, despite
£63 million of lost income as a result
of the mortgage portfolio sale.
2021 has seen us continue to focus
on shifting our deposit mix, which
has led to the cost of deposits falling
from 0.65% in 2020 to 0.24% in the
current period. Alongside this we have
delivered an increasing lending yield
and our approach of optimising the
balance sheet is now seeing us
generate a greater level of interest
income as a proportion of risk-
weighted assets.
We ended the year with a CET1
capital ratio of 12.6% and a Total
Capital plus MREL ratio of 20.5%.
These compare to the regulatory
minima of 5.1% and 18.0% respectively,
or 9.3% and 20.5% respectively
including buffers (excluding any
confidential buffer, if applicable). We
continue to take a proactive, measured
approach to capital management as
we focus on building greater risk-
adjusted returns on regulatory capital.
Our primary aim remains the
transformation of the Bank and in
doing so we are taking a prudent
approach in our assessment of the
pace of economic recovery. We
recognised an expected credit loss
expense of £22.4 million for the period
which is a significant improvement on
the prior year (2020: £126.7 million).
Underlying loss before tax
Impairment and write-off of
PPE and intangible assets
Remediation costs
Transformation costs
Business acquisition costs
Portfolio sale
Statutory loss before tax
2021
£m
(171.3)
(24.9)
(45.9)
(8.9)
(2.4)
8.3
(245.1)
For more on our alternative
performance measures see
pages 224 to 226
Income
Underlying net interest income
increased 18% year-on-year to
£295.7 million (2020: £250.3 million),
reflecting increased front book yields,
including our meaningful entry into the
personal lending market, combined
with actions we have taken to reduce
the cost of deposits.
Net interest margin at 1.40% is 18 bps
above 2020 (1.22%) reflecting the
higher-yielding asset mix and lower
cost of deposits. The average lending
yield increased to 3.07% from 2.68%
a year earlier benefitting from high
consumer lending yields and an
improvement in the blended mortgage
lending yield reflecting our focus
on specialist mortgage products.
Meanwhile our emphasis on current
accounts and instant access deposits
combined with the roll-off of higher-
rate fixed-term accounts reduced the
cost of deposits meaningfully to 0.24%
compared to 0.65% a year earlier.
22
Metro Bank PLC Annual Report & Accounts 2021
A strong Q4 2021 net interest margin
of 1.56% holds us in good stead for
2022 with continued focus on lending
mix and improved yields as a result
of the base rate rises, potentially
tempered by higher cost of deposits.
Fee, commission and other income
Fee, commission and other income
remain below pre-pandemic levels
as the lockdowns at the start of the
year continued to constrain activity.
However, as restrictions started to be
lifted in the second half we saw an
uptick in activity particularly in areas
such as foreign exchange, where
volumes had been significantly
depressed throughout the pandemic.
Fees and commission income is an
area where we believe that we can
deliver strong capital-efficient returns
by building on our expanding account
base and leading customer service,
however, the growth of these income
streams will be influenced by the pace
of recovery from the pandemic.
Operating expenses
Underlying operating expenses grew
to £546.8 million from £486.0 million
in 2020. The year-on-year increase is
impacted by several factors, including
the acquisition of RateSetter which
occurred in September 2020.
As expected, expenditure on the
‘Change the Bank’ investment
programme began to reduce in the
second half of the year. This trend is
anticipated to continue, contributing
to an expected low single-digit
percentage reduction in total
underlying operating costs in 2022.
On a statutory basis total operating
expenses increased by less than
4% to £641.2 million compared to
£617.3 million in 2020 as the underlying
cost increase, including the additional
RateSetter running costs, was partially
offset by lower write downs and
BCR costs together with reduced
transformation and integration
expenditure.
Depreciation and amortisation
remained largely unchanged at
£80.2 million (2020: £74.4 million).
Depreciation and
amortisation
Total operating
expenses
Total non-
underlying
operating
expenses
Total underlying
operating
expenses
‘Run the Bank’
costs
'Change the Bank’
costs
Statutory cost:
income ratio
Underlying cost:
income ratio
2021
£m
2020
£m
Change
%
80.2
74.4
8%
641.2
617.3
4%
94.4
131.3
(28%)
546.8 486.0
13%
435.5
390.4
12%
111.3
95.6
16%
153%
143%
137%
143%
Remediation programmes continue
to be a significant expense with
associated costs of £45.9 million
recognised in the period (2020:
£40.8 million). These costs include
the penalty resulting from the PRA
investigation, which was concluded
in December, as well as a provision
for the settlement of the related FCA
investigation. We are continuing to
work closely with the regulators on
the outstanding regulatory matters.
Non-underlying costs also reflect the
decision taken to close three stores in
2022. We regularly review how our
existing stores are performing as well
as assess new markets where there is
potential for growth in the longer term.
The three stores have consistently
underperformed compared to other
locations and upcoming lease events
provided us with an opportunity to
close. We still remain committed to
stores and continue to invest in them.
In 2021 we opened our 78th store in
Bradford, alongside preparing to
launch our new store in Leicester
which we opened in February 2022.
We also acquired four further
freeholds during the year; which
means a third of our store estate is
now freehold. By trading right of use
assets for freeholds at attractive prices
we can both reduce costs and gain
flexibility for minimal additional
risk-weighted assets. Whilst we will
continue to take advantage of
opportunities where these arise
and there is a strong commercial
rationale for doing so, the stabilisation
of commercial property prices will
likely limit these opportunities in the
near term.
Non-underlying items in 2022 are
expected to be less than 20% of the
total in 2021 as remediation costs
fall away.
Expected credit loss expense
Although the macroeconomic
environment has improved in 2021,
uncertainty remains, particularly in
respect of new COVID variants and
the sustainability of recently lifted
public health restrictions. The
expected credit loss charge for
the year of £22.4 million (2020:
£126.7 million) is primarily driven
by growth in unsecured lending
origination, the purchase of RateSetter
back book and a small number of large
single name commercial cases.
A fourth severe downside
macroeconomic scenario was
introduced in 2021 across all portfolios,
with associated changes in the
probability weightings. This aligns our
approach to market best practice and
further captures the potential risks
associated with a more extreme
downside scenario.
We continue to maintain a prudent
level of post model overlays to capture
factors that are not fully reflected in
the scenarios. These reflect our
cautious outlook driven by the impact
of higher energy prices, increase in
national insurance contributions, and
inflationary pressures on individual
customer affordability. During the
year we have reduced the overall
number of post model overlays
applied through the continued
development of our models.
Metro Bank PLC Annual Report & Accounts 2021
23
Strategic reportFinancial statementsGovernanceAdditional information Financial review continued
Unsecured lending has increased
significantly in the year, in line with
our strategy. We manage this exposure
within a defined risk appetite, with a
focus on prime lending, underpinned
by strong credit scoring criteria to limit
losses, which to date remain low.
same time we have proactively let
higher cost fixed term deposits roll
off as we continue to manage the cost
of deposits downwards.
In 2022 we anticipate higher growth in
deposits than in 2021 with continued
focus on mix improvement.
Further information on our
approach to credit risk can be
found in the Risk Report on pages
64 to 80
Deposits
Retail customer
(excluding retail
partnerships)
Retail
partnerships
Commercial
customers
(excluding SMEs)
SMEs
Total customer
deposits
2021
£m
2020
£m
Change
%
6,713
7,364
(9%)
1,814
1,596
14%
3,157
2,692
4,764 4,420
17%
8%
16,448 16,072
2%
Deposits grew by 2% from 31
December 2020 to £16,448 million at
31 December 2021 (31 December 2020:
£16,072 million). The increase was
primarily driven by commercial and
SME customers which were up 17% and
8% respectively from the start of the
year.
2021
£m
2020
£m
Change
%
Demand: current
accounts
Demand: savings
accounts
Fixed term:
savings accounts
Total customer
deposits
7,318
6,218
18%
7,684 6,430
20%
1,446
3,424
(58%)
16,448 16,072
2%
Current account balances grew by 18%
during the year and make up 44% of
total customer deposits as at 31
December 2021 (31 December 2020:
39%). We continue to see customer
preference moving towards having
instant access to funds, leading to the
growth of current accounts and instant
access savings accounts, whilst at the
Assets
Loans and
advances to
customers
Total assets
2021
£m
2020
£m
Change
%
12,290 12,090
22,587 22,579
2%
0%
Loan to deposit
75%
75%
Cost of risk
0.18% 0.86%
Net lending ended the period at
£12,290 million, up 2% from
£12,090 million at 31 December 2020.
The £200 million increase has been
driven by a £686 million growth
in consumer lending, offset by a
moderate reduction in the commercial
loans and retail mortgage books.
The growth in consumer lending is
a result of both organic origination
through the RateSetter platform, and
the purchase of the £337 million back
book from peer-to-peer investors.
Our investment in consumer lending,
including integrating the RateSetter
lending capabilities in-store, provides
a strong base on which we can
capitalise as the economy continues
to recover and we are ready to serve
a consumer-led recovery.
Retail mortgages remained the largest
component of the lending book at
54% of gross lending (31 December
2020: 56%), down £169 million to
£6,723 million at 31 December 2021
from £6,892 million at 31 December
2020. The decrease reflects the
attrition of older loans, offset by our
continued penetration through our
specialist mortgage products into
underserved areas of the mortgage
market, which has replaced some of
these balances.
Commercial loans, which now
comprise 39% of our lending, saw
a £302 million reduction from
£5,148 million at 31 December 2020.
The decrease is down to older term
loans repaying combined with
a slowdown and the start of
repayments of BBLS loans in the
second half, partially offset by
government-backed Recovery Loan
Scheme lending.
We anticipate a higher rate of
growth in overall lending in 2022
compared to 2021, with expansion in
existing categories with higher
risk-adjusted returns including
consumer unsecured and specialist
mortgages, complemented by the
expected launch of new products
including automotive finance and
digital lending products for SMEs.
Non-current assets have decreased
during the period, driven by
a reduction in our property, plant
and equipment balance, reflecting
the scaling back of our store opening
programme.
Intangibles remained flat during the
year as continued investment, albeit
at a slower rate, was offset by
amortisation and impairment charges.
Taxation
During 2021 we made a total tax
contribution of £152.5 million (2020:
£132.9 million), which comprised
£91.6 million (2020: £86.5 million)
of taxes we paid and a further
£60.9 million (2020: £46.4 million)
of taxes we collected.
Taxes paid
2021
2020
Business rates
Land transaction tax
Employer NICs
Irrecoverable VAT
and customs duty
Other
15.0%
1.6%
23.7%
59.4%
0.3%
13.5%
1.3%
20.4%
64.5%
0.3%
Total taxes paid
£91.6m
£86.5m
Taxes collected
2021
2020
Employees’ NICs
PAYE
Net VAT
Other
Total taxes
collected
22.3%
64.0%
13.7%
0.0%
25.1%
65.5%
9.1%
0.4%
£60.9m
£46.4m
24
Metro Bank PLC Annual Report & Accounts 2021
In 2021 our tax expense recognised in
the income statement was £3.1 million
(2020: credit of £9.7 million).
Change
(21%)
(6%)
Capital
2021
£m
2020
£m
CET1 capital
936
1,192
RWAS
CET1 ratio
Total regulatory
capital ratio
Total regulatory
capital plus
MREL ratio
Regulatory
leverage ratio
7,454 7,957
12.6% 15.0% (240bps)
15.9% 18.1% (220bps)
20.5% 22.4% (190bps)
4.4% 5.6%
Our CET1, Tier 1 and MREL ratios at
31 December 2021 were 12.6%, 12.6%
and 20.5% respectively, compared
to the minimum capital requirement
including buffers (excluding any
confidential buffer, if applicable) of
7.6%, 9.3% and 20.5%, respectively.
On 1 January 2022 software assets will
revert to being deducted from capital,
reducing our CET1 and MREL ratios
by 0.8% and 0.7% respectively.
At the same time, the original IFRS 9
transitional relief will move from 50%
to 25% along with the COVID-19
transitionary relief which moves from
100% to 75%, reducing CET1 and MREL
by 0.3%. From 13 December 2022, the
Bank of England has announced that
the countercyclical buffer will increase
from 0% back to its pre-pandemic
level of 1%.
Although we will operate in buffers we
will ensure we remain above regulatory
minima as we continue to focus on
executing our strategy and returning
to sustainable profitability.
Risk-weighted assets ended the
period down 6% to £7,454 million
(31 December 2020: £7,957 million)
reflecting our change in asset mix and
our focus on improving return on
regulatory capital. The reduction was
also supported by the settlement of
the final tranche of the mortgage
portfolio in February 2021. We
continue to progress our AIRB
application, the approval of which
would reduce the overall risk-
weighting of our lending.
Looking ahead
2021 has seen us gather clear
momentum, continuing to
demonstrate that our strategy
is delivering.
2022 will see us continue to build on
this work with a focus on containing
costs whilst maximising our risk-
adjusted returns on regulatory capital,
including continuing to progress our
AIRB application.
We continue to adopt a cautious
outlook as the economy recovers from
the effects of the COVID-19 pandemic
as well as the uncertainties resulting
from the war in Ukraine.
At present we have no direct
exposure to either Russia, Ukraine
or any individuals currently subject
to sanctions, although we continue
to monitor the situation closely.
We are also closely monitoring the
outlook the effects of the conflict
have on the macroeconomic
environment, especially as the
inflationary impacts start to impact our
customers. Given the rapidly evolving
nature of events, including the global
response, it is difficult to either predict
or quantify with any certainty the
impact at this stage.
Total capital plus MREL
ratio at 1 January 2021
Annual operational risk
adjustment
Intangibles investment
and other
RateSetter back book
acquisition
Profit and loss account
(excluding ECL and
mortgage sale)
Profit and loss account – ECL
Quick-fix ECL add back
Lending volume and mix
Mortgage book disposal
completion
Total capital plus MREL
ratio at 31 December 2021
Reconciliation
22.4%
(0.1%)
0.1%
(0.3%)
(3.1%)
(0.3%)
(0.1%)
(0.1%)
2.0%
20.5%
Following discussion with the Bank
of England, post the publication of
their December 2021 MREL Policy
Statement, the Bank of England has
provided us with a 6 month adjustment
to the point in time at which the Bank
of England’s revised policy on MREL
eligibility is implemented. As such, the
requirement to establish a holding
company has moved to 26 June 2023,
which is in line with the call date of the
existing Tier 2 debt instrument. For the
avoidance of doubt, there has been no
change to Metro Bank’s end-state
MREL deadline of 1 January 2023.
Further information can be found in
our Pillar 3 disclosures. These can
be found on our website
www.metrobankonline.co. uk/
investor-relations/.
Liquidity
Our liquidity position continues to be
strong, owing to the liquidity freed up
from the mortgage portfolio sale.
We ended the year with a Liquidity
Coverage Ratio of 281%. We will
continue to prudently manage our
investments and to invest in high-
quality securities while maintaining
a strong cash position.
Metro Bank PLC Annual Report & Accounts 2021
25
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social
and governance review
Our ambition is to become the UK’s best community bank and
an essential part of this is acting sustainably and responsibly.
Our approach to ESG is simply about doing the right thing.
Our approach
We aim to drive positive environmental
and social change and generate positive
stakeholder outcomes. As we grow,
we are taking the opportunity to
incorporate environmental, social and
governance (ESG) priorities into our
business and ensure we build it in the
right way. In doing this, we are committed
to being open and transparent about
what we are doing and why.
Oversight of ESG, our strategy and
priorities sit at Board and ExCo
level. A new internal ESG structure
involving colleagues across the Bank,
coordinated by a dedicated ESG
Steering Committee, will come into
effect in early 2022.
Our values
Our AMAZEING values underpin
everything we do, including our
approach to ESG. Our values align
to our belief that we should act
responsibly and with integrity in
everything that we do.
Non-financial information statement
This is our Group Non-Financial Information statement, prepared in order to comply with sections 414CA and 414CB
of the Companies Act 2006. We explain here where you can find further information about how we make sure we
do the right thing in relation to wider society and the environment and how we seek to do the right thing in terms of
our impacts.
A description of our business model and strategy, as well as the non-financial Key Performance Indicators (‘KPIs’)
relevant to our business can be found on pages 10-21.
Reporting requirement
Environmental
matters
Employees
Social matters
Respect for
human rights
Anti-bribery and
corruption
Where to find further information for an
understanding of our business and our impacts,
including outcomes of our activities
Relevant policies and standards that govern our
approach (please see pages 28 to 29 for a
description of each policy)
– Our Planet, page 40
– Our Colleagues, pages 34-38
– Colleague engagement, page 100
– Gender pay gap, page 34
– Annual report on remuneration, pages 137-147
– Climate pledges
– Supplier Management
– Diversity and Inclusion
– Recruitment and Selection
– Health and Safety
– Whistleblowing
– Conflicts of Interest
– Our FANS and Communities, pages 30-33
– Climate pledges
– Our Suppliers, page 39
– Modern slavery, page 39
– Diversity, equality and inclusion, page 34
– Modern Slavery
– Outsourcing
– Diversity and Inclusion
– Our Suppliers, page 39
– Anti-bribery and Corruption
26
Metro Bank PLC Annual Report & Accounts 2021
Materiality assessment
As part of reviewing our approach to
current and emerging ESG issues, as well
as our prioritisation of current initiatives
and programmes, we undertook a
materiality assessment in Q4 2021.
The process was carried out by external
sustainability consultants using the
Global Reporting Initiative (GRI)
approach on materiality.
Issue identification
Desk research was undertaken to
identify ESG topics to assess. The
research included reviewing internal
documentation, competitor analysis
and external horizon scanning including
reporting standards and guidelines,
thought leadership and white papers.
A detailed long list of potential topics
was initially identified based on the desk
research. The list of topics was then
refined and consolidated to a shortlist
of 19 ESG topics for assessment.
Engagement
Surveys were conducted with more than
150 internal and external stakeholders
who ranked the 19 topics based on the
perception of impact to the business
and level of importance. Participating
stakeholders included the Board,
colleagues, business banking customers,
personal banking customers and
mortgage brokers. Interviews were
conducted with members of the senior
leadership team, Executive Committee
and Board in order to explore the topics
in more detail.
Results and validation
The results of the survey were reviewed
and validated. The 19 topics assessed
have been mapped to our ESG priorities
as outlined in the table below.
All 19 ESG topics were considered to be
important, with those identified as the
highest priority being:
– Customer service and experience –
creating FANS
– Data privacy and cyber security
– Ethics and compliance
– Financial crime and fraud
– Risk management and business
resilience
– Good governance practices
– Diversity, equality and inclusion
The results of the materiality assessment
will feed into our considerations of ESG
issues and our new internal ESG structure
in 2022.
Mapping the materiality assessment onto our ESG priorities
OUR FANS AND
COMMUNITIES
OUR
COLLEAGUES
DATA PRIVACY AND
SECURITY
OUR
SUPPLIERS
OUR
PLANET
Turning customers and
the communities we
serve into FANS is
central to everything
we do.
Topics identified via
materiality assessment:
– Customer service and
experience – creating
FANS
We are committed to
an AMAZEING colleague
experience, based on an
inclusive culture.
We continue to assess
evolve and mature our
data privacy and cyber
security capabilities.
We work with suppliers
who uphold our values
and actively assess and
monitor the controls
they put in place.
We are taking the
actions required to make
positive changes and
reduce our impact on
the environment.
Topics identified via
materiality assessment:
– Colleague attraction
Topics identified via
materiality assessment:
– Data privacy and cyber
Topics identified via
materiality assessment:
– Supply chain
training and
development
security
– Financial crime and
engagement and
responsible
procurement
– Human rights and
modern slavery
– Anti-bribery and
corruption
Topics identified via
materiality assessment:
– Climate change
– Operational
environmental
efficiency
– Responsible
investment and
stewardship
– Sustainable product
innovation
– Financial inclusion,
– Colleague
fraud
literacy and education
– Supporting vulnerable
customers
– Community
engagement,
investment and
fundraising
engagement, health,
safety and wellbeing
– Diversity, equality and
inclusion
Read more
on page 30
Read more
on page 34
Read more
on page 38
Read more
on page 39
Read more
on page 40
GOVERNANCE AND
BUSINESS RESILIENCE
All the above topics are underpinned by good governance, compliance and risk management practices – making sure we remain a
sustainable, strong and resilient business.
Topics identified via materiality assessment:
– Good governance practices
– Ethics and compliance
– Risk management and business resilience
Metro Bank PLC Annual Report & Accounts 2021
27
Strategic reportFinancial statementsGovernanceAdditional information
Environmental, social and
governance review continued
Management of principal risks and
due diligence for ESG policies
We manage risk through a
comprehensive governance and
control framework, as described in our
Risk Report on pages 52-91. The Risk
Report also describes the principal and
emerging risks to our business. Our
risk management policies and controls
are reviewed regularly to reflect
changes in market conditions,
regulations and our activities.
Through regular training and additional
standards, guidance and procedures,
we aim to develop a robust and
effective control environment in which
all our colleagues understand their
roles and obligations. The policies
disclosed on this page and page 29
form part of our wider risk management
approach. All colleagues are
responsible for managing risk as part
of their day-to-day roles and our
AMAZEING culture is all about our
colleagues doing the right thing for
our FANS and the business. As such,
everyone at Metro Bank plays a role in
risk management.
Management exercises an appropriate
level of due diligence over the policies
and activities referenced in the
Stakeholder section and this Non-
Financial Information statement. Our
reporting on environmental and social
matters is subject to the oversight of
the Audit Committee.
Key
1 Our FANS and communities 2 Our colleagues 3 Data privacy and security 4 Our suppliers 5 Our planet
POLICY
DESCRIPTION
ESG PRIORITIES
Vulnerable Customer
The policy sets out our approach to identifying and interacting with vulnerable
customers to ensure we deliver fair customer outcomes.
These policies set out our approach to making lending decisions in a structured,
consistent and fair way that is compliant with all relevant regulatory requirements.
They define the way we safeguard both our FANS and the Bank in pursuit of our
goals and how we support our FANS during periods of financial difficulty.
1 2
1
Lending and Arrears
Management Policies
(including Retail,
Business & Commercial
Lending)
Anti-Money
Laundering/Counter
Terrorist Financing
The policy sets out the systems and controls to identify, assess, monitor and manage
financial crime risks and the procedures in place to assess their effectiveness.
1 2
Health and Safety
The policy protects our customers and colleagues. It recognises our statutory duties
and responsibilities under relevant Health and Safety and Welfare legislation.
1 2
Diversity and Inclusion
The policy means that we treat our colleagues fairly. It sets out our commitment to
having a diverse workforce which reflects our customer base, and to employment
policies which follow best practice based on equal opportunities for all colleagues.
Recruitment and
Selection
Whistleblowing
The policy relates to all recruitment-related activities and is relevant for all
colleagues and any third-party recruitment partners. The policy outlines
responsibilities for hiring aligned to our Company objectives/ethos and in
accordance with the relevant legislation and regulation.
The policy encourages colleagues to disclose information, in good faith and without
fear of unfair treatment, when they suspect any illegal or unethical conduct or
wrongdoing affecting the Bank.
Anti-bribery and
Corruption
The policy outlines our approach to managing the risk of bribery and corruption and
to ensure we conduct business in an honest and ethical way, with a zero-tolerance
approach to bribery and corruption.
Conflicts of Interest
The policy provides consistent practical guidance to all relevant parties in relation to
the identification, recording and maintenance of actual and perceived conflicts of
interest.
2
2
2
2
2
28
Metro Bank PLC Annual Report & Accounts 2021
POLICY
DESCRIPTION
Anti-Tax Evasion
The policy sets out our zero-tolerance approach to tax evasion.
Business Continuity
The policy makes sure we are able to continue delivering services to our
stakeholders at acceptable levels if something unexpected were to happen. It
addresses impacts to the continuity of critical business activities in the case of
man-made disasters, natural disasters or other material events.
ESG PRIORITIES
1
1 2 3 4
Data Governance
The policy sets out our objectives and expectations in managing data and data
governance practices. It makes sure that data is managed, governed, accessed,
protected, utilised and disclosed appropriately. It also focuses on the quality of key
data elements and their ongoing maintenance.
1 2 5
Data Protection
The policy is in place to ensure that the Bank is complying with its data protection
obligations and has the adequate level of data protection as prescribed by the
General Data Protection Regulation.
1 2 3
Supplier Management
The policy ensures that when we rely on an external supplier for key processes and
activities, we take the reasonable steps to identify, monitor and mitigate the external
supplier risks.
1 4 5
Modern Slavery
Complaints
The policy describes our approach towards preventing slavery, servitude, forced and
compulsory labour and human trafficking in any of our operations or at any of our
suppliers and, through them, our supply chains.
1 4
The policy sets out the way in which customer complaints are handled promptly and
effectively, with a focus on fair outcomes for our customers and meeting our
regulatory obligations when things go wrong.
1 2
Metro Bank PLC Annual Report & Accounts 2021
29
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
OUR FANS AND
COMMUNITIES
Metro Bank’s strong growth since our
launch in 2010 has been built on our
unwavering commitment to great
customer service. Turning customers
and the communities we serve into
FANS remains our purpose and is
therefore at the heart of everything
we do.
Creating FANS
We create FANS by ‘surprising and
delighting’ customers across every
channel and every interaction –
integrating physical and digital
channels through our technology and
AMAZEING colleagues. We are proud
to have been ranked the number one
high street bank for service eight times
in a row by the Competition and
Markets Authority’s Service Quality
Survey. We were also voted Best Bank
for Customer Service at the Personal
Finance Awards 2021/22.
We continue to invest in customer
experience and in 2021 we delivered
a number of digital servicing features,
such as card activation and payment
warnings in our mobile app, and online
change of details to offer customers
the choice to self-serve on simple
transactions. This was alongside the
Bank’s first ever start-up accelerator
programme to help us identify and
deliver game changing future ‘Magic
Moments’ to our FANS and colleagues.
We have also developed and rolled out
a set of customer promises across the
business that connect customer
experience to the overall ambition
of the Bank and our brand strategy.
We continually monitor customer
service delivery through our Voice
of the Customer (VoC) programme,
which is used right across our business
down to individual store level, to
monitor performance and drive
improvements. The data from this
programme shows we are consistently
delighting our customers at account
opening, both in store and online.
We are continuing to invest in VoC
to ensure we represent what really
matters to our customers in everything
we do.
In keeping with our AMAZEING
values, we always do our best to
make every wrong right. We strive
to make sure our customers’
experience is as positive as possible
by working to resolve complaints as
quickly as possible. We publish
a half-yearly review of customer
complaints data on our website here:
www.metrobankonline.co.uk/help-
and-support/forms/give-us-feedback/
complaints-data.
Extending our services
to new communities
By helping communities thrive we
believe our business will too. As a
community bank, we strive to make
a positive difference through the
local colleagues we employ, the local
businesses we work with and the
local causes we support.
Since our launch in 2010, we have
opened 79 stores across the UK
supporting 2.5 million customer
accounts. We have opened seven
stores during the pandemic: Sheffield
and Cardiff opened in 2020 followed
by Bradford, our most northern store,
in August 2021 offering local residents
and businesses physical access to
banking services available seven
days a week, plus thousands of safe
deposit boxes.
We were overwhelmed by the support
of local residents and businesses at our
new store Grand Opening events in
Bradford in October and Leicester in
February 2022.
Our new AMAZE Direct contact centre
in Bristol opened and took its first
customer calls in June. We expect the
contact centre will ultimately create
100 jobs in Bristol.
30
Metro Bank PLC Annual Report & Accounts 2021
Outcomes
#1voted #1 bank for store service
for both personal and business
customers eight times in a row
by the Competition and Markets
Authority’s Service Quality Survey
100new jobs will be created at our
new AMAZE Direct contact centre
in Bristol
Metro Bank helps
local family butcher
bounce back
Bishop’s Stortford-based family
butcher Farm2Table specialises in
supplying quality free range products
to the retail and catering trade, but
business dried up overnight when the
hospitality sector was forced to close
during the pandemic. Metro Bank
Chelmsford’s Local Business Manager,
Daniel Collins, helped Farm2Table
through the Bounce Back Loan
process, enabling the business to
invest in a consumer website, social
media, new equipment and a small
retail unit, to provide home deliveries
and a click and collect service.
Proprietor Tony Hopkins noted that
pivoting to this new model saw the
business “overwhelmed by local
support which has not only seen this
business grow, but also saved the
livelihoods of many local farmers”.
Supporting communities and
customers through the pandemic
and into the recovery
We have helped our customers and
communities adapt to the ongoing
challenges presented by the pandemic,
working together to find solutions that
meet our customers’ specific financial
needs. We have always been available,
and through 2020 and 2021 the
majority of our stores remained open
seven days a week.
In 2021, our AMAZE Direct contact
centres served 2.3 million customer
calls, 17,000 customer emails and
15,000 postal enquiries as well as
45,000 tweets and Facebook
messages. Importantly we maintained
best-in-class service levels during this
time, with customers waiting on
average just 60 seconds to get
through to us.
Our support during the pandemic has
included offering capital repayment
deferrals, interest roll ups and waiving
overdraft arrangement fees. We
understand that for many people
having access to cash is a vital part of
their everyday lives, and we’ve helped
customers access cash when self-
isolating by nominating another person
to collect cash on their behalf, with
appropriate security checks.
Metro Bank has consistently supported
government-backed business lending
schemes which have provided a vital
lifeline to UK businesses in the last
year, and by the end of 2021 we had
extended £1.6 billion of finance to
37,000 businesses. In 2021, we
became an accredited lender for the
Recovery Loan Scheme, offering
financial assistance to businesses as
they recover from the impact of the
pandemic. Our unique network of
Local Business Managers and
Commercial Relationship Managers,
based in every Metro Bank store,
provides expertise and guidance to
help our customers manage their
finances in the current environment.
Enhancing SME products
and services
We have continued to enhance our
offer to small and medium-sized
businesses. New products and services
include our first insurance offering; our
new online FX tool, which provides
enhanced foreign exchange with
access to real rates and a broader
range of currencies; broadening access
to our Business Account Online
opening process, which allows
businesses to open a new account
digitally; and mobile app features
including in-app invoicing. We are
introducing enhancements to our
business overdraft, allowing customers
to apply, receive a decision and get
access to working capital funding
within minutes.
Metro Bank PLC Annual Report & Accounts 2021
31
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
Colleagues have climbed
mountains, cleared miles
of gardens, collected litter,
planted trees, tended
animals and pets, cooked for
homeless people and much,
much more in support of
local communities.
Backing female entrepreneurs
Metro Bank is a founding signatory
to the Investing in Women Code,
a commitment to support
the advancement of female
entrepreneurship by improving
access to tools, resources and finance.
Our dedicated team continually
reviews our products and services
to make them more accessible to
women; works with external bodies
to ensure they are maximising the
opportunities for women in business
and encouraging female-led start-ups
to get off the ground; and has created
our own series of free events.
Hands-on help for communities
Every year we give all our colleagues
a Day to AMAZE – a paid day for
volunteering within their local
community. In Southend, our
colleagues were part of the first open
air art installation, moving tons of
shingle; while in Ashford, colleagues
reached out to chat with elderly
people isolated by the pandemic.
Elsewhere colleagues have climbed
mountains, cleared gardens, collected
litter, planted trees, tended animals
and pets, cooked for homeless people
and much more in support of local
communities.
Colleagues have walked, run, danced,
played golf and cycled to raise
thousands of pounds for local charities.
They have organised food donations,
baked cakes, slept rough and
volunteered at local hospitals and
hospices. Our stores in the Midlands
not only sponsored a kennel at
Birmingham Dog’s Home, but also
organised dog rehoming days.
Hosting charity events has been a
strong theme this year, so while our
Sheffield store hosted part of a
‘Bears of Sheffield’ interactive art
exhibition, our Harrow store displayed
Tembo the grassy green baby elephant
to participate in Harrow’s Animal
Trail, while our Crawley store displayed
portraits of inspirational local residents.
Supporting vulnerable customers
Our diverse customer base reflects
the broad appeal of our banking
proposition and we welcome
customers from all backgrounds.
We have invested in refresher training
for all Metro Bank colleagues on
supporting customers with additional
needs, including specialist training
delivered by Money Advice Trust to
our customer-facing teams. Colleagues
record where our customers require
additional support so that their future
interactions with Metro Bank can be
made even easier based on their
individual circumstances.
We consider the needs of vulnerable
customers across all areas of the Bank
from product and service design
to communications, through to
customer service. We constantly
strive to ensure we support our
customers in times of need and
continually identify opportunities
to make everyday banking easier for
our customers including those who
require additional support.
In 2021 we became a signatory to the
Financial Abuse Code of Practice and
we are committed to further improving
the support we offer to victim-
survivors of financial abuse to regain
control of their finances and
independence.
Supporting care leavers
Metro Bank supports the Care Leaver
Covenant, a joint promise made by
private, public and voluntary sectors to
provide support for care leavers aged
16-25 to help them live independently.
We have extended a bespoke version
of our free financial education
programme, Money Zone, to care
leavers providing guidance about
budgeting, saving and banking, along
with introducing a special identification
process for care home residents and
care leavers to make it easier for them
to open bank accounts and become
financially independent. In addition, we
have worked with our recruitment
team and the Care Leaver Covenant to
communicate our ‘hire for attitude and
train for skills’ ethos by promoting
suitable roles across the business.
32
Metro Bank PLC Annual Report & Accounts 2021
Supporting kids and families
We are passionate about supporting
the kids in our communities. Every
Metro Bank store runs our Money Zone
financial education programme, which
introduces pupils to key financial skills.
The sessions are linked to wider
Government curriculum guidelines for
Key Stages 2 and 3 and are offered in
English and Welsh. We have educated
230,000 kids through Money Zone
and even the pandemic didn’t stop
us, as this year we launched a virtual
version of Money Zone for Key Stages
2 and 3.
Every store supported a children’s
charity for Christmas via our Magic
Money Christmas Tree campaign,
raising thousands of pounds for
children’s hospitals, hospices, cancer
and Make-A-Wish charities.
We have continued to host our in-store
family extravaganzas including our
Easter, Back to School, Halloween and
Christmas craft events, following all
health and safety precautions. Families
have been able to enjoy our free crafts
in-store or take them away to have fun
at home.
Supporting the Armed Forces
community
In July, Metro Bank was awarded the
Armed Forces Covenant’s Employer
Recognition Scheme Gold Award,
affirming our commitment to
supporting the armed forces
community by proactively seeking
veteran hires, offering time off for
reservist training, mentoring other
organisations in their Armed Forces
Covenant progression, and forces
community engagement.
We signed the Armed Forces
Covenant in July 2019, achieving
Bronze that same year, Silver in 2020
and now Gold, the top-level award,
in 2021. This is the fastest progression
possible and no other organisations
are known to have managed this
trajectory.
Since signing the Covenant in 2019,
we have hired 15 ex-military colleagues,
have run careers events for military
spouses, and we plan to expand our
Money Zone programme into barracks
and armed forces schools.
The forces community is also an
attractive customer segment and
we offer mortgages as part of the
Armed Forces Help to Buy scheme
and are scoping further products
for armed forces customers and
veteran-owned businesses.
Outcomes
230k
kids educated through our free
Money Zone programme
We signed the Armed
Forces Covenant in July
2019, achieving Bronze that
same year, Silver in 2020
and now Gold, the top-level
award, in 2021. This is the
fastest progression possible
for any organisation.
Metro Bank PLC Annual Report & Accounts 2021
33
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
OUR
COLLEAGUES
Our colleagues are what make Metro
Bank unique. People-people banking is
what we do, and our ambition is to
become the UK’s best community
bank. To make that happen, we are
committed to creating an AMAZEING
colleague experience, based on an
inclusive culture and a community
where colleagues feel they can be their
best authentic selves. Community and
connection have never been so
important and, by providing the right
culture for our colleagues, they can
fulfil their potential and provide the
best service to our customers.
All colleagues learn about our culture
in their first interaction with Metro
Bank, through their recruitment
journey, to their very first day where
they participate in our cultural
engagement programme, Visions.
Diversity, equality and inclusion
We have always believed it is
imperative that we represent the
communities we serve; this is the
foundation of our community banking
model. We believe a diverse
organisation with a broad range
of skills, backgrounds, knowledge
and experience is most effective and
we are deeply committed to
promoting greater diversity and
inclusion throughout the Bank
and transparently reporting
against progress.
This year we appointed a Director of
Colleague Experience and Inclusion,
bringing significant experience that
has enabled us to turn the dial on
diversity and inclusion in a short time.
Our recent, independent, Voice of the
Colleague survey demonstrates our
strong foundations for inclusion, with a
company-wide score of 79 in response
to the authenticity question “I can be
myself at Metro Bank”, supported
further by a score of 76 to the question
“Regardless of background, everyone
at Metro Bank has an equal
opportunity to succeed”. These scores
sit above the global benchmark with
comparable organisations and reflect
an inclusive culture on which to build
our strategy. The Inclusion Committee
has met on a monthly basis this year,
bringing together the chairs of our
colleague networks to progress
collaborative inclusion goals and
cross-cutting activity.
This year, we introduced the
Opportunities Programme, a career
development programme for
colleagues from diverse backgrounds
relating to ethnicity, gender, sexual
orientation and socioeconomic
background. We launched a cohort
of 20 colleagues in July, with a
12-month programme of tutorials
focused on enhancing skills and
raising profiles backed by sponsorship
from the Executive Committee and
senior leaders.
Looking forward, we will carry on
using data-informed efforts to support
diversity, equality and inclusion. 2022
will see a new bold diversity and
inclusion strategy, supporting our
ambition to become the UK’s best
community bank.
Gender diversity
We are proud signatories of the
Women in Finance Charter, which aims
to achieve gender balance at all levels
across financial services firms. With
senior executive accountability, we
have committed to the targets for
representation of gender at senior
management levels. In line with the
charter, the target forms part of the
scorecard that affects senior executive
remuneration.
As well as our Women on Work
colleague network, we run mentoring
circles and leadership seminars on key
topics and provide diverse candidate
shortlists to hiring managers.
GENDER DIVERSITY
AS AT 31 DECEMBER 2021
Board (%)
36
64
Male
Female
Executive committee (%)
Male
Female
46
54
Senior leadership team (%)
Male
Female
Male
Female
43
57
All Business (%)
45
55
Gender pay gap
(as at April 2021)
Median pay gap
11.7%
22.1%
Mean pay gap
34
Metro Bank PLC Annual Report & Accounts 2021
Further details on our gender pay
gap can be found on our website
www.metrobankonline.co.uk
Ethnic diversity
The events of 2020 remain a
compelling impetus to do more to
tackle racism and inequality in every
aspect of life. We are proud that our
metrics for overall ethnic diversity at
Metro Bank are positive, yet as we look
forward we know there is more to do
to ensure that ethnic diversity is
reflected at all levels of our business.
We will continue our work to
understand the identities and
experiences of all of our Metro Bank
colleagues. We partner with BAME
Recruitment who provide advice,
guidance and support in attracting and
selecting from a diverse pool of talent.
Mpride
Mpride’s purpose is encouraging
inclusion and striving for equality
within Metro Bank for our LGBTQ+
colleagues and our customers in the
communities we serve. To meet this
purpose, Mpride has three main
objectives: to educate colleagues; to
enable celebrations of diversity; and
to champion positive change for our
colleagues and customers.
This year, with executive sponsorship
from Chief Information Officer,
Cheryl McCuaig, Mpride focused on
inclusion for colleagues who identify
as trans. We introduced optional
gender pronouns on email signatures
and People records, as well as
allowing candidates to select their
preferred gender pronouns when
applying for roles. We have also
added a statement to our office
dress code, encouraging colleagues
to dress in a way that fits with the
gender they identify with.
To celebrate the inclusion of our
LGBTQ+ colleagues, we hosted a
digital pride event in the absence of
in-person events, with colleagues
across the business taking part in
our virtual parade.
We are delighted to be shortlisted
as a Top 10 Inclusive Employer by the
British LGBT Awards for the work
done by Mpride in 2021.
Women on Work
Our Women on Work (WOW)
network focuses on issues that
matter to women and those who
identify as women while welcoming
involvement from male allies.
WOW’s purpose is to support career
journeys within Metro Bank, promote
wellbeing and act as a barometer
and sounding board for the Bank
on issues that matter to female
colleagues. In 2021, with ExCo
sponsorship from Managing Director,
Distribution, Ian Walters, WOW
extended its visibility via monthly
events supported by online content
on spotlight topics, awareness days
and women’s celebrations ranging
from sharing experiences to career
journeys and women’s health
issues, to panel discussions with
guest speakers.
Highlights include supporting around
30 colleagues through launching five
‘Mentoring Circles’; instigating Metro
Bank’s ‘Safe Spaces’ initiative on
social media following high profile
incidents against women in society;
facilitating a Domestic Abuse
Working Group, with the Bank
signing up to the Financial Abuse
Code; and raising awareness on the
menopause, implementing initiatives
to support colleagues in this life
stage and committing to the
Menopause Workplace Pledge.
Metro Bank PLC Annual Report & Accounts 2021
35
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
Mbrace
The Mbrace colleague network,
Metro Bank’s ethnic, racial and
religious diversity group, focuses on
celebrating and educating; provides
a forum for colleagues to collaborate,
network and discuss diversity and
inclusivity; and represents colleagues
and our customers’ needs.
Sponsored by Chief Operating
Officer, Aisling Kane, activities in
2021 ranged from holding internal
‘lunch and learn’ sessions on topics
such as Chinese New Year, Eid and
Islamic Banking, to a panel event for
Black History Month which raised
over £1,000 for two charities. Mbrace
has formed partnerships with
external networks such as the
London Metropolitan Police’s Sikh
Network to share best practice.
Building on the momentum of Black
Lives Matter and the events of 2020,
the Committee has provided a swift
response to public matters which
impact colleagues. For example,
issuing a social media and internal
response following the racist attacks
on players at Euro 2020; and
following the Taliban taking control
of Afghanistan, signposting support
provision to colleagues.
Parents and carers
We offer flexible working
arrangements and 14 weeks’ parental
leave for all new parents, regardless of
gender. We have also revised our
guidance for colleagues that take time
off for fertility treatment.
Mparents
Mparents provides a community and
support network for working parents
and parents-to-be, sponsored by
Brand and Marketing Director,
Jessica Myers.
Since the start of the pandemic, with
schools and childcare sometimes
being subject to restrictions,
Mparents has provided regular
updates and support through online
YamJam sessions and regular coffee
and chat mornings to share advice
and experiences. Membership of the
network has grown strongly during
this period.
Mparents supported more than 50
colleagues with home-schooling via
an initiative to deliver unused iPads.
During Baby Loss Awareness Week
the network held a powerful session
on miscarriage, with colleagues
sharing personal experiences and
connecting with others who have
experienced similar loss. Mparents
worked with the People Team to
review the Bank’s baby loss policy
resulting in a new webpage with
clear information regarding policy
and support.
Social mobility
We are incredibly proud of our work
on social mobility, championing
equality in communities and creating
career opportunities for all colleagues.
We work with a range of charities and
organisations including the Armed
Forces Covenant, the Mayor’s Fund
and many universities and schools.
Our activities include running skills
workshops, providing CV and career
advice for schools in the South and
London regions, teaming up with the
Job Centre to hold CV and interview
skills workshops and partnering with
Open University and Brunel University
to run events. We have also recently
signed the care leavers covenant.
Mental and physical wellbeing
We want our colleagues to be at their
best both at work and at home, and we
have continued to work on enhancing
our holistic health and wellbeing
offering. Based on colleague feedback
we introduced support such as
free subscriptions to Headspace
mindfulness tools and techniques.
More than 60 colleagues have posted
blogs to share their experiences and
offer support. Our health partner,
Vitality, has adapted its offering to
provide online exercise classes, and
rewarded colleagues for healthy
behaviour during lockdown with a
range of benefits that can be accessed
at home.
All colleagues benefit from health and
safety training when they join Metro
Bank. Colleagues are encouraged to
participate in mental health awareness
training and also have access to
employee assistance and the
independent, confidential Bank
Workers Charity contact line which
provides information, advice and
expert support services. We also work
with partners that have had mental
health first aid training, to support with
colleague conversations.
Disability data is collected on a
voluntary basis, encouraging
colleagues to declare and disclose in
the interests of receiving support and
reasonable adjustments that enable
them to perform at their best.
36
Metro Bank PLC Annual Report & Accounts 2021
We are incredibly proud of
our work on social mobility,
championing equality in
communities and creating
career opportunities for all
colleagues.
565colleagues were promoted
in 2021
Mbody
Mbody’s focus is on promoting
health and wellbeing in both mind
and body, including those with both
visible and non-visible challenges,
which is more important now than
ever. 2021 has been about refreshing
the Committee and its agenda,
and with new momentum from the
arrival of the Director of Colleague
Experience and Inclusion and
Executive sponsorship from Director
of Corporate Affairs, Tina Coates,
the network has been revived with
a fresh purpose and objectives.
Developing careers
We offer career development
opportunities to all colleagues:
– Our apprenticeship programmes
support young people to achieve
a qualification in financial services
while starting their career as financial
services customer advisors in our
stores and AMAZE Direct contact
centres.
– Colleagues have access to thousands
of blended learning resources to help
them develop personally and
professionally and take the next step
in their careers.
– We always look for internal
candidates before searching
externally.
– During the year, we promoted 565
colleagues.
We’re committed to supporting
colleagues and investing in their
careers. Our Talent Programmes help
our colleagues develop the skills they
need to succeed, including 25 Local
Business Managers, 12 Local Directors
and 82 new leaders from within our
customer-facing teams and corporate
functions. This year we have also
welcomed new colleagues from
RateSetter by running our cultural
induction programme, Visions.
Now more than ever, we recognise the
importance of adapting our delivery
methods and using technology so that
colleagues can learn in a truly blended
way, incorporating self-led content and
virtual classroom sessions. We have
created over 500 hours of virtual
learning content plus a library of over
3,000 learning items which have been
completed more than 570,000 times.
Colleagues have interacted with our
content nearly 3 million times!
We recognise that colleagues want
to develop more specialist skills
in their roles, so we have collaborated
with experts internally and externally
to create new bespoke content.
This has included training on
supporting vulnerable customers
with the Money Advice Trust; two
new technical knowledge frameworks
for the professional development
of our Risk and People Teams;
and creating a new business and
commercial lending programme
for our relationship managers.
Apprentices
We currently have 13 apprentices
across our store and call centre
networks. We are accredited as an
employer provider and since 2017 we
have run a Level 2 Financial Services
Customer Advisor Apprenticeship
Programme (equivalent to five GSCEs),
with 85 colleagues having graduated.
In May 2021 we introduced a Level 3
Senior Financial Services Customer
Advisor Apprenticeship (equivalent
to two A-Levels) and currently, there
are 11 colleagues on this programme.
In partnership with Cranfield School
of Management, we run the UK’s first
master’s-level apprenticeship for
senior banking professionals, funded
from the Apprenticeship Levy. Initially,
this was exclusive to Metro Bank but
has since opened up to applicants
from other banks. The MSc in Retail
and Digital Banking saw its first cohort
of 17 colleagues graduate in 2021.
Cohort two (six colleagues) started in
October 2019 and is due to finish in
March 2022 and cohort three (19
colleagues) started in March 2021.
Developing leaders
Our leaders support our colleagues to
be their best authentic selves each day.
Our engagement survey results show
that colleagues feel supported by their
leaders. The survey revealed a score
of 79 against the statement “I have
ongoing conversations with my
manager about my performance”,
which is 10 points above benchmark
and stable from the 2020 score.
Metro Bank PLC Annual Report & Accounts 2021
37
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
To ensure our leaders are equipped
to lead, we have provided new and
relevant training options in a mixture of
self-led and virtual classroom formats.
New elements this year included a
refreshed People Management
Essentials series, a new senior
leadership platform offering executive
level leadership learning, and content
on communication and leading teams.
To support the shift from remote
working to hybrid working, leaders
completed a Future Ways of Working
series, covering the journey of leading
colleagues through change as well as
how to get the best results from hybrid
working patterns and meetings, along
with psychometric sessions to enhance
effective collaboration in a remote
working setting.
Rewarding and retaining
our colleagues
We know that our colleagues are
integral to growing our business.
Our reward principles, which reflect
this and apply to all colleagues, are
designed to reward our colleagues for
high performance and retain the talent
upon which our business depends.
We offer a simple approach to reward
for all colleagues which supports our
unique culture and strategy as well as
being aligned to shareholder needs.
The focus is on simplicity, rewarding
the right behaviours and outcomes for
customers and the business, focusing
on long-term growth and discouraging
unnecessary risk-taking.
Retention team is making significant
progress in reducing unnecessary
personal data, reducing the risk of
breaches and cost of storage.
Fraud prevention
We have a range of safeguards and
solutions in place across all channels
to help protect customers against
fraud. We can’t do this alone and
continue to work closely with other
stakeholders including other banks,
network operators and law
enforcement agencies.
We continue to evolve our processes
and systems to fight the ever-
increasing levels of sophistication
deployed by fraudsters. We were one
of the first banks to sign up to the
Authorised Push Payment (APP)
voluntary code – this gave consumers
significantly increased protections
against authorised push payment
scams and we are always working to
enhance our security, whilst ensuring
that customers enjoy a convenient
banking experience.
Customer fraud awareness is a key
part of fraud prevention and we’re
active supporters of UK Finance’s Take
Five fraud awareness campaign. We
have an extensive online security
centre that provides information on
how we protect customers’ accounts
and how they can keep their personal
details safe. We continually update and
share via social media the latest threats
and advice on practices to guard
against them. In 2021 we launched a
‘scam of the month’ campaign, which
has received extensive press coverage,
to help protect our FANS and
consumers more widely, and raise
awareness of the latest fraud trends.
DATA PRIVACY
AND SECURITY
We have continued to evolve and
mature our cyber capabilities, building
on the substantial improvements made
in 2020. We have also improved our
broader information security, rewriting
our policy and standards to better
align to international best practice
standards (ISO 27001/2) and
refreshing our information security
strategy with input from across
the business.
Cyber defence
Our Security Operations Centre is now
fully operational and we have been
running simulation exercises to fine
tune both our technical detection
capability and our response processes.
Our Upgrades and Patching
programme has been very successful,
leading to a vulnerability risk rating
that consistently beats the benchmark
for the sector. We have introduced
multi-factor authentication,
strengthened cyber controls in our
regular supplier risk reviews and
prioritised upgrades to improve the
resilience of our infrastructure. These
actions will continue throughout 2022
and into 2023.
Cyber fraud
The motivation behind many cyber
attacks is to attempt to steal money.
Our cyber and fraud teams continue to
work closely together, tracking fraud
techniques and sharing data and
intelligence with other banks and the
law enforcement community. This
allows us to react quickly to an attack
and minimise the impact on the Bank
and our FANS.
Data privacy
The privacy of our customers’ data
remains a top priority and a long-term
area of investment for us. We have
significantly strengthened our Data
Privacy team, making data privacy
assessments a key part of our overall
data governance and process
management. Our Data Protection
Operations team continues to respond
quickly and efficiently to customer
data requests and our new Data
38
Metro Bank PLC Annual Report & Accounts 2021
Modern slavery
Our philosophy is to conduct all
business in an appropriate manner.
Slavery, servitude, forced labour and
human trafficking (modern slavery) is
a crime and violation of fundamental
human rights. We have zero tolerance
of modern slavery and continue to be
committed to acting professionally,
fairly and with integrity in all our
business dealings and relationships
wherever we operate, including
enforcing appropriate systems and
controls to ensure, on a risk basis, that
modern slavery is not taking place in
our business or supply chains.
During 2021 we continued to follow
and progress our processes to support
our Modern Slavery Policy, including:
– Publishing Metro Bank’s fifth Modern
Slavery Statement, approved by the
Board and signed by the CEO, on our
website in June 2021 (https://www.
metrobankonline.co.uk/about-us/
modern-slavery/).
– Delivering the fourth report of the
Modern Slavery Champion to the
Board in April 2021, including:
i) The annual review of our Modern
Slavery Policy.
ii) Carrying out a risk assessment
using the toolkit designed by the
Liechtenstein Initiative to spot any
gaps within our policies and
procedures.
iii) Updating on progress against the
Modern Slavery Statement and
Action Plan.
iv) Working on developing plans for
sustainable banking, responsible
business conduct and
environmental and social risk,
including modern slavery risk.
– Metro Bank continues to leverage
FSQS to support due diligence on
suppliers before contracting and
ongoing during the relationship, on a
risk basis. In 2021, we managed 1,415
active third parties. 24 (1.7%) were
either based in riskier locations
(where the 2019 Measurement Action
Freedom score, an independent
assessment of government progress
towards UN Sustainable
Development Goal 8.7, is less than
50) or were more likely to be
exposed to modern slavery risk due
to the nature of the services. In
accordance with our Modern Slavery
Policy further investigation was
conducted, following which, all
suppliers demonstrated adequate
controls to mitigate modern
slavery risk.
– All colleagues were required to
undertake modern slavery computer-
based training during 2021.
Tax
As a large business and a major
employer, investor and purchaser
of goods and services, we recognise
our responsibilities and make a
significant contribution to the UK
exchequer each year. Paying our fair
share of tax helps deliver benefits for
society: our customers, colleagues
and communities. We pride ourselves
on always acting with integrity,
honesty and transparency with regard
to tax and we continually adhere to
the highest standards of corporate
governance. In 2021, we made a total
tax contribution of £152.5 million,
which comprised £91.6 million of taxes
we paid and £60.9 million of taxes we
collected on behalf of the government.
OUR
SUPPLIERS
It is important to us that we work
with suppliers who uphold our values.
We assess and monitor the controls
put in place by our suppliers across a
range of areas including data and
information security, anti-bribery and
corruption and modern slavery. We are
introducing a new Supplier Code of
Conduct, explaining in one place what
we expect from the suppliers we
engage with.
We are active members of the
Financial Services Supplier
Qualification System (FSQS) and
encourage all our suppliers to become
members. Membership allows our
suppliers to share details on their
control environments with us, reduces
duplication of effort in responding to
due diligence requests, and benefits
us by sharing resources and best
practice within the financial services
community. We also operate a formal
supplier management regime as well
as conducting supplier assurance
reviews using a risk-based approach.
Anti-bribery and corruption
We are committed to maintaining
the highest standards of ethics and
integrity. We protect our customers
and the Bank by setting out and
regularly training our colleagues
on our Anti-Bribery and Corruption
Policy; this helps us to make sure all
our colleagues are conducting
business in an honest and ethical way,
which reflects our zero tolerance
approach to bribery and corruption.
Our Whistleblowing Policy ensures
that all colleagues are encouraged
to raise any concerns they may have
about the conduct of others in the
business or the way in which the
business is run in good faith and
without fear of unfair treatment.
Metro Bank PLC Annual Report & Accounts 2021
39
Strategic reportFinancial statementsGovernanceAdditional information Environmental, social and
governance review continued
OUR
PLANET
We recognise that climate change is
one of the biggest challenges facing
society and understand the important
role we can play in tackling climate
change. We are committed to working
with our customers, colleagues and
communities to support their transition
to a resilient, Net Zero economy.
We are now able to announce two new
climate pledges which accelerate our
plan to tackle climate change and
apply it across our operations; by
making our own operations Net Zero
by 2030, and by driving material
reductions in the climate impact of
our financing activity and value chain
by 2050.
We have also set intermediate targets
to support meeting our climate
pledges:
– We plan to reduce our direct
emissions (Scope 1 and 2 emissions)
by at least 82% by 2026 (compared
to 2019 levels).
– We will maintain travel carbon
emissions below 70% of pre-
COVID-19 (2019) levels, embedding
for the long-term the reduced levels
of commuting and business travel
seen during the pandemic and
supporting colleagues to switch
to low carbon transport.
– We will reduce our paper usage by
25% by 2026 (compared to 2019
levels), while maintaining optionality
for customers who need or have
a preference to receive paper
communications.
We are working on formulating our
Net Zero strategy, including setting the
decarbonisation pathways to achieve
them. In 2021, our Board and ExCo
reviewed our sustainability ambition,
including a deep dive session on
climate with external experts. As a
result, we’ve repositioned climate
change to be a pillar of our ESG
strategy and increased our ambition
in this area. Our approach is to
prioritise three strategic focus areas:
New climate pledges
2030
Our climate commitment for 2030
Net Zero: operational emissions
2050
Our climate commitment for 2050
Net Zero: all operational, supply
chain and financed emissions
10%
10% YOY reduction in Scope 1 and 2
emissions by 2022 from 2021
82%
82% reduction in Scope 1 and 2
emissions by 2026 from 2019
baseline
25%
25% reduction in paper use
by 2026 from 2019 baseline
70%
Travel carbon emissions below 70%
of pre-COVID-19 levels
measurable. For key portfolios,
respective targets, and time horizons
will be set and progress tracked and
monitored against interim targets.
We continue to believe that
comprehensive, robust and
comparable disclosures are essential
to enabling stakeholders to understand
our activity and progress in managing
our climate-related opportunities and
risks. In our report this year, we are
pleased to have been able to enhance
our level of disclosure – further
meeting the TCFD recommendations
and demonstrating an evolution in our
response to climate change, from the
point of view of our governance, our
strategic approach, and an increasingly
sophisticated approach to our
management of climate risk.
1. Identifying and managing the
impact of climate change on the
business by integrating climate
considerations into risk
management frameworks and
stress testing our portfolios, and
setting risk appetites to help steer
our portfolios in line with the Paris
Agreement.
2. Supporting our customers’
transition to a low-carbon economy
by promoting awareness of
customer GHG emissions and, in the
future, developing products and
services that promote a reduction
in GHG emissions.
3. Reducing the impact that the
business has on the environment
by reducing emissions in our
operations and supply chain, and
offsetting residual CO2 emissions.
In 2022, we will begin to integrate
climate KPIs into our strategic planning
framework with a view to making
the achievement of the strategy
40
Metro Bank PLC Annual Report & Accounts 2021
Section 172 statement
Stakeholder engagement is essential to the execution
of our strategy to become the UK’s best community bank.
OUR SIX KEY STAKEHOLDERS
OUR
FANS
OUR
COMMUNITIES
REGULATORS
Our business model depends upon
attracting customers and turning them
into FANS. Our reputation and
creating FANS is at the core of
our values.
We are proud to be an integral part
of the communities we serve.
Following our Regulators’ Principles,
Rules and Guidance helps us to put
FANS at the heart of everything
we do.
OUR
COLLEAGUES
OUR
INVESTORS
OUR
SUPPLIERS
As a growing business we need to
attract new talent. We also want to
ensure our colleagues are happy and
engaged so that they provide excellent
service to each and every customer.
We engage openly and transparently
with our investors, who are helping
us to grow and shape the Bank for
the future.
We pride ourselves on doing the right
thing, and maintaining the highest
values in everything we do, and this
extends to the suppliers we work with.
The Board must act in accordance
with the duties set in the Companies
Act 2006 (‘the Act’). Under section
172, the Board has a duty to promote
the success of the Company for the
benefit of its members as a whole.
When making decisions, the Board
ensures that it acts in the way it
considers, in good faith, would most
likely promote the Bank’s success
for the benefit of its members as a
whole, and in doing so have regard
(among other matters) to matters
set out in Section 172(1) of the Act.
The different needs of stakeholders
are considered throughout the
whole decision-making process.
The Board at all times has regard
to the impact of material decisions
on the different stakeholder groups.
However, it is not always feasible to
provide pragmatic outcomes for all
stakeholders and the Board at times
has to make decisions based on the
competing priorities and needs of
the Bank.
S.172 FACTOR
RELEVANT DISCLOSURES
(a) the likely consequences of
any decision in the long-term
(b) the interests of the
Company’s employees
– Our purpose and strategy framework – pages 4–5
– Business model – pages 10–13
– Risk report – pages 52–91
– Focus on Strategic Priorities – page 99
– Non-financial information statement – page 26
– Our colleagues – pages 34–38
– Colleague engagement – page 100
– Board activity and stakeholder engagement – pages
98–99
(c) the need to foster the
Company’s business
relationships with suppliers,
customers, and others
– Board activity and stakeholder engagement – pages
98–99
– Environmental, Social and Governance Review – pages
26–40
– Supplier engagement – page 102
(d) the impact of the Company’s
operations on the community
and the environment
– Stakeholder engagement – page 102
– Board activity and stakeholder engagement – pages
98–99
– TCFD – pages 42–51
– Environmental, Social and Governance Review –
pages 26-40
(e) the desirability of the
Company maintaining
a reputation for high standards
of business conduct
– Whistleblowing – page 115
– Anti-bribery and corruption – page 39
– Audit Committee Report – pages 110–117
– Modern slavery – page 39
(f) the need to act fairly between
members of the Company
– Stakeholder engagement – page 101
– Annual general meeting – page 148
– Share capital – page 148
Metro Bank PLC Annual Report & Accounts 2021
41
Strategic reportFinancial statementsGovernanceAdditional information
Task Force on Climate-related
Financial Disclosures
We are committed to reporting the impact of climate change on
our business in a transparent manner, and taking responsibility for
the actions required to make positive changes to reduce our
impact on the environment.
This new section of our annual report includes our climate-related financial disclosures in line with the recommendations
of the Task Force on Climate-related Financial Disclosures (TCFD) and the requirements of PRA’s Supervisory
Statement 3/19, and provides an update on our progress and areas of future focus.
We have made good progress during 2021 to update our governance and risk management framework to consider
climate change, analysing climate risks and opportunities and developing our scenario analysis capability. We’ve been
working hard to overcome some of the challenges, especially around data, tools and metrics. There remains work to do
to assess the impact of climate-related risks and opportunities on our businesses, strategy, and financial planning, and
to refine and enhance coverage and application of climate-related metrics as our tools and methodologies mature.
TCFD RECOMMENDATION
KEY ACHIEVEMENTS
FUTURE DEVELOPMENTS
Strategy
page 43
Governance
page 45
Risk management
page 47
Metrics and targets
page 49
– Conducting a materiality assessment to
identify the Bank’s priority ESG issues
– Established climate scenario analysis to
quantify physical and transition risk
– Established climate risk governance, including
refreshed ToRs for Board and Executive-level
committees
– Held bespoke education sessions on climate
change with the Board
– Maintained responsibility for climate risk with
the CRO under SM&CR
– Refresh the Bank’s ESG strategy, with new
aspirations, aligned to the Bank’s overall
strategy
– Develop scenario analysis capabilities to
inform future strategy refreshes, evolving
origination strategies and extending the range
of product offerings
– Expand dialogue with customers on climate-
related risks and opportunities
– Set up ESG governance forums and KPI
framework to communicate and report back
to key stakeholders
– Performed a preliminary assessment of
climate-related risks
– Update credit risk policies and standards to
reflect any changes to origination strategies
– Embedded climate change as a cause in the
– Evolve scenario analysis tools in line with
Bank’s Enterprise Risk Management
Framework
industry benchmarks and regulatory guidance
– Undertake climate scenario analysis for less
– Developed dedicated Climate Change Credit
Risk Standard to support the management of
climate change as a cause of credit risks
– Created internal modelling capabilities to track
the exposure of the Bank’s lending portfolios
to climate risk, including initial flood risk and
transition risk analysis
material portfolios
– Set stretching aspirations and initial short-to-
– Develop roadmap and interim milestones to
medium term targets for reduction in scope 1,
2 and 3 emissions
move towards 2030 aspirations
– Participate in industry-led forums to advance
our carbon accounting and the setting of
science-based targets
– Evolve climate risk appetite and metrics, with
ongoing climate risk MI
42
Metro Bank PLC Annual Report & Accounts 2021
Strategy
While changes associated with the
transition to a lower-carbon economy
present risks, they also create
significant opportunities for
organisations focused on climate
change mitigation and adaptation
solutions. In line with our strategic
ambition to become the UK’s best
community bank, we have an
important role to play in facilitating
the UK’s transition to a low-carbon
economy, leveraging the opportunities
and managing the risks we are
exposed to from climate change.
We are committed to supporting
customers and businesses in their
transition to a low-carbon economy,
and to building our own resilience by
identifying and managing the impact
of climate change on the business, and
reducing the impact that the business
has on the environment.
We recognise that climate change
presents both risks and opportunities
to our business model and strategy
over short, medium and long-term
horizons:
– Short-term (0-1 years): The time
horizon for annual financial planning
– Medium-term (1-5 years): The time
horizon for strategic and financial
planning cycles
– Long-term (>5 years): This timeframe
is considered through the use of
scenario analysis
We see these emerging through three
key channels:
1. Business opportunities arising as
economies and customers transition
to a low-carbon economy;
2. Transition risks arising from
potential disruptions and shifts
associated with the transition to
a low-carbon economy; and
3. Physical risks arising from the
physical impacts of climate change
which could disrupt the business,
operations, or supply chains of
the Bank and its customers.
Identifying and managing
the impact of climate change
on the business
The ability to identify, understand and
manage risk is critical to our long-term
strength and stability. Climate risk is
no different in this regard, although it
requires us to address risks that may
be present over a much longer period
of time than that covered by more
traditional approaches to risk
management. We broadly categorise
climate risks into two types: transition
risk and physical risk. Within these
broad categories we identify a number
of factors arising from climate change
which we monitor over the short,
medium and long term.
Our first step has been to identify
and quantify risks to the business. We
have begun progressively embedding
climate risk into our key risk processes
throughout 2021. We continued to
develop our own internal climate
scenario analysis and stress testing
capability in line with emerging
industry methodologies. We have used
outputs from initial methodology
developments in 2021 to develop an
initial impact assessment to inform
considerations in formulating our
strategic response. At present we do
not believe climate risk to have a
material impact on the Bank.
Risks to the Bank in the medium-term
primarily result from transition risks,
with physical risks representing a
longer-term risk (primarily from our
mortgage portfolio) and the most
material risks expected to crystallise
over the long term.
– Changes in extreme variability
in weather patterns may lead to
increased incidence and severity
of physical risks which, in addition
to the disruption felt by customers,
can lead to a decrease in the
valuations of property taken as
collateral to mitigate credit risk.
In addition, tightening minimum
energy efficiency standards for
domestic buildings may lead to
transition risks which could impact
the value of mortgaged properties
or the ability of borrowers to
service debt.
– Exposures to physical and transition
risks may also arise through our
commercial lending portfolio due
to changes in policy, consumer
preferences or technology. As a retail
bank, we are not heavily exposed to
certain carbon-intensive industries.
– Operational risk exposures arise
from physical damage to key office
locations and physical and transition
risks via key suppliers, which could
result in business disruption or
increased costs.
Given our low exposure to carbon-
intensive industries within our
commercial lending portfolio, we start
from a strong place. We have a robust
credit decisioning process on carbon-
related commercial lending. However,
we recognise the significant challenge
of improving the energy efficiency
of the UK’s housing stock, which will
support the transition to Net Zero.
Achieving Net Zero across the
economy will require a combination
of industry initiatives and cooperation,
government policy and regulation, a
change in consumer behaviour and the
development of products and services
from lenders.
In 2022, we will continue to review and
assess the risks and opportunities that
could have a material impact on the
business and environment, and refine
our approach to climate change
scenario analysis, taking into account
what we have learned in our initial
development work during FY21. As
these methodologies continue to
develop, we will be progressively
drawing on our scenario analysis to
inform strategic planning; providing
insight into/for our strategy, business
model and financial plans.
More information about the specific
climate-related risks faced by the Bank,
their materiality, and the processes
through which they are identified,
assessed and managed, is available
in the Risk management section.
Metro Bank PLC Annual Report & Accounts 2021
43
Strategic reportFinancial statementsGovernanceAdditional information Task Force on Climate-related Financial
Disclosures continued
Supporting our customers’
transition to a low-carbon economy
We recognise the importance of
climate change to our customers and
are actively addressing the risks and
exploring the opportunities with them
in mind. We will continue to enhance
and extend our support for customers
as the UK makes the transition to a
greener future, by launching new
customer propositions that will
support a more sustainable future and
calculating preliminary estimates of
our financed emissions. This work will
support future planning and setting
science-based targets to reduce these
emissions over time.
The key opportunities identified to
date relate to our lending portfolios,
particularly within mortgages and
commercial lending. As retail
customers become more influenced
by green issues, we expect there to
be opportunities to build our green
retail propositions, including greener
mortgage products to incentivise
green purchases and to support
customers to retrofit their homes,
green/sustainable bonds to fund green
lending products, and reduced carbon
footprint from increased customer
digitisation. In addition, we will
continue to work with our commercial
customers to help them understand
what the transition means for them,
and then help deliver the financing
needed to achieve it.
This increasing public focus on
climate-related issues may create
reputational risks as we balance the
speed of transition to a low-carbon
economy against the costs of doing so.
However, it also creates opportunities
to enhance our reputation by
demonstrating that we understand
both the importance and urgency of
climate change, and have a clear sense
of our role in accelerating the transition
to a low-carbon economy.
We will also adapt our strategy to
respond to external developments,
particularly those in governmental
policy and their adoption. We are
supportive of a cross-industry
sector approach, underpinned by
government strategy, guidance
and assistance for customers to
help them to improve the efficiency
of their home.
Reducing the impact that the
business has on the environment
During 2021, we continue to make
significant progress in managing the
environmental impact of our own
operations and have subsequently
targeted delivering Net Zero
operational emissions by 2030.
We have maintained a strong position
in managing our emissions from
colleague business travel and property,
and we continued investing in energy
efficiency measures, sending zero
waste to landfill, supplying from
renewable sources, and recycling
wherever possible.
Operations
We started the year in a strong
position with the majority of our
electricity being generated from
renewable sources, continuing to
reduce waste as far as possible and
maximise recycling rates. We delivered
zero waste to landfills, which we have
achieved consistently since 2020.
This helped us exceed our targeted
reduction of combined Scope 1 and 2
emissions in 2021 and we have
achieved a 57% reduction in emissions
against a 2019 baseline across our
Scope 1 and 2 emissions. As we are
now using close to 100% renewable
energy, our market-based footprint for
Scope 1 market-based emissions will
reduce further in 2022. We will pay
close attention to the quality of
Renewable Energy Guarantee of Origin
(REGO) certificates, given the UK
government’s ongoing review of
the REGO system. During 2021,
we have improved our ability to track
unplanned and unpredictable energy
consumption, installed electric vehicle
charging infrastructure, introduced
software to power off PCs in the
evening, modernised air conditioning
and cooling systems, and replaced
lighting with LED lights. In 2022,
we will review our property strategy
to set out a clear path to reduce
our overall location-based energy
consumption, as well as deliver
further energy efficiency and carbon
reduction initiatives.
With the unprecedented impact of
COVID-19 causing a shift in ways of
working, there has been an 80%
reduction in corporate travel in 2021
compared to 2019 and enabled us to
design a future way of working that
permanently reduces the need for
people to travel into and between
office locations. Our new model
provides colleagues with the flexibility
to design the way of working that suits
them and their team best, enabling
the majority of colleagues to work
remotely. We will use data on
colleagues’ home energy usage and
commuting to inform our future
approach to the balance between
homeworking and business travel as
we seek to minimise our carbon
footprint, while balancing the need
for collaboration.
We also reduced our paper usage
by 9% this year, while maintaining
optionality for customers who need
or have a preference to receive paper
communications.
44
Metro Bank PLC Annual Report & Accounts 2021
Suppliers
We are focused on better
understanding our indirect (Scope 3)
emissions and building a roadmap to
reduce the emissions linked to our
suppliers and partners. We are taking
further steps to build climate change
considerations into our procurement
and supply chain management
processes – both in the selection and
ongoing management of suppliers. We
are cooperating with c.50 other banks
and FIs on ESG due diligence through
the Financial Services Supplier
Qualification System. We will focus on
continued reduction in the operational
emissions we already track, while
extending our data capabilities to
capture more of our indirect Scope 3
emissions relating to suppliers. Initially,
we will work with the suppliers with
the largest footprint to gather data
on their carbon emissions and to
understand their plans to embed
sustainability into their organisation.
We are introducing a new Supplier
Code of Conduct, which has a specific
focus on environmental management
requirements, including establishing
operational practices that minimise
the impacts on the environment, and
deploying measures to prevent and
reduce environmental harm. Through
the Code of Conduct, we also expect
suppliers to track performance and
report environmental improvements,
as well as setting environmental
targets and commitments.
Governance
Board oversight of climate-
related risks and opportunities
The Board has ultimate accountability
for all climate change risk-related
matters. During 2021, the Board has
been engaged in the development
of our ESG strategy and will receive
periodic updates on the execution
of this strategy from the Executive
Committee and members of the Senior
Leadership Team. The Board will
review our ESG strategy, which
includes climate-related risks and
opportunities, as part of the annual
strategic and financial planning
process to ensure our approach to
ESG matters evolves with emerging
developments.
The Risk Oversight Committee has
oversight of the framework for
managing and reporting the risks
from climate change, through the
Enterprise Risk Management
Framework. A review of the Risk
Oversight Committee charter resulted
in its responsibilities in relation to
climate-related risks being updated.
The Committee is now formally
required to oversee the activity
being undertaken to embed the
identification, assessment and
management of climate change risk
into the risk management process,
and receives reports regarding the risk
profile associated with climate change.
The Committee can escalate any
climate-related risk matter to the
Board. In 2021, the Risk Oversight
Committee was updated on the
progressive integration of climate
into risk management processes and
considered an initial assessment of
the impact and implications of climate
risk across our credit portfolios,
highlighting key areas of focus
and sensitivity.
The Audit Committee approved the
approach to disclosures and the TCFD
requirements, and reviews climate-
related financial disclosures as part of
its wider role in reviewing our Annual
Report and Accounts.
The Board has been building their
understanding of the financial risks
and opportunities from climate change
throughout the year. This year the
Board attended two bespoke climate
change training sessions. These
sessions covered the implications, risks
and opportunities to financial services
of climate change and the transition
to a Net Zero economy, and a deep
dive into climate change risk and
the changing expectations of our
investors and regulators, and the role
of the Board.
Board oversight
Executive oversight
Board
Audit Committee
Risk Oversight Committee
Executive Committee
Executive Level Risk Committees
Advisory forums
Climate Change Working Group
Metro Bank PLC Annual Report & Accounts 2021
45
Strategic reportFinancial statementsGovernanceAdditional information Task Force on Climate-related Financial
Disclosures continued
Management’s role in assessing
and managing climate-related
risks and opportunities
Climate risk responsibilities extend
across the organisation, based on
a ‘three lines of defence’ approach,
in line with the Enterprise Risk
Management Framework. As climate
risk impacts through existing risk
channels, it requires integration across
multiple risk frameworks. With
coordination from second-line Risk
oversight, Risk Owners are integrating
climate into existing risk control
frameworks, policies and strategies.
The accountability for our ESG
strategy sits with the CEO and is
devolved to relevant members of
the Executive Committee. The Chief
Risk Officer has Senior Manager
Function responsibility under the
Senior Managers and Certification
Regime for our approach to managing
financial risks from climate change,
which includes:
– embedding the consideration of
financial risks from climate change in
governance arrangements;
– incorporating the financial risks from
climate change into risk management
practices;
– using long-term scenario analysis to
inform strategy setting, risk
identification and assessment; and
– developing approaches to disclose
the financial risks from climate
change in line with the TCFD
framework.
The Enterprise Risk Management
Framework and Climate Change Credit
Risk Standard also articulate clear roles
and responsibilities for managing and
monitoring climate change risk across
the Bank, with a summary provided in
the table.
Team
Roles and responsibilities
First-line Risk
– Identification, assessment and management of climate change risks
– Monitoring and reporting of climate change risk
– Enhancing decision-making to embed climate change
Treasury
– Ownership of the climate change risk stress testing scenarios
Second-line
Risk oversight
– Ownership of the Climate Change Credit Risk Standard
– Development of climate change scenario analysis capabilities
– Ownership climate change risk governance and reporting
– Ownership of climate-related financial disclosures
Internal Audit
– Independent assurance of activity to embed climate risk
management
Climate Change Credit Risk
Working Group
We also established a Climate Change
Credit Risk Working Group to bring
together first- and second-line risk
management from across key risk
types to support the 2021 work plan
to embed climate risk into the RMF
and support our wider ESG goals and
ambitions. This Group focused on
driving the delivery of credit risk-
related activities during 2021 and
planning for future activities.
We will continue to update and
engage with the Board and other
committees as the ESG agenda,
data capabilities and our analysis of
financial risks and opportunities from
climate change evolve. The new
Environment Committee will help to
accelerate progress and prioritisation,
particularly in relation to our climate
change response.
Executive Risk Committee
The Executive Risk Committee has
delegated authority from the Risk
Oversight Committee for overseeing
our exposures and approach to
managing the financial risks from
climate change. During the year, the
Committee received updates on the
progress of the climate change risk
management plan, including the
outputs of the scenario analysis
stress test.
Credit Risk Oversight Committee
The Credit Risk Committee has specific
responsibility for oversight of climate-
related aspects of credit risk including
recommending strategies to adjust the
credit risk portfolio to react to change
in the prevailing market or physical
environmental conditions. During the
year, the Committee received updates
on the credit risk aspects of climate
change, including climate risk specific
analysis relating to lending portfolios.
Asset and Liability Committee
The Asset and Liability Committee
focuses on our financial risks including
capital, funding, liquidity and interest
rate risk to ensure that the activity
complies with regulatory and
corporate governance requirements
and also delivers our policy objectives.
As appropriate, this includes the
impact of climate change on aspects
under its remit.
46
Metro Bank PLC Annual Report & Accounts 2021
Risk management
Credit risk
Identification and assessment
We classify climate-related risks as
either physical risks – those that arise
from the physical effects associated
with changes to the climate such as
extreme weather events – or transition
risks – those that may arise from the
shift to a low-carbon economy. We are
exposed to physical and transition risks
arising from climate change. Risks
arising from climate change materialise
through various channels: 1) through
the financial services and support we
provide to customers who may
themselves be exposed to the risks
of climate change; 2) the operation of
our own infrastructure, business and
premises which may be exposed to
both transition and physical risk; and
3) through a deteriorated perception
of the Bank if we do not adequately
support a transition to a low
carbon economy.
To form a view on materiality, and
to understand the broad financial
impacts across different time horizons,
the Enterprise Risk Management
Framework was assessed through a
climate change lens to identify how
climate change could manifest in
each of our principal risks. Due to the
longer timeframes associated with
climate impacts, a short, medium and
long-term horizon is being applied
to the consideration of impacts.
This assessment has been included
in the 2021 ICAAP and identified our
top three climate change risks as:
Credit, Capital and Operational. Credit
risk is the most material climate
change risk due to our mortgage
portfolio exposures.
PHYSICAL RISK EXAMPLES
TRANSITION RISK EXAMPLES
TIME HORIZON
Repayment challenges from
obligors due to reduced
profitability or asset devaluation
because of climatic shifts.
Failure to adapt to changes
in policy, regulation, and
technology resulting in negative
impact to obligors.
Medium-Term
to Long-Term
Secured lending
We have controls in place to mitigate against flood risk, subsidence, and landslip in our
residential mortgage portfolio. Where it is identified that a property has previously
been affected by flooding or is situated on a flood plain, new or increased lending is
only provided where certain conditions are met. We do not lend where the risk could
render a property uninsurable. Specific requirements are in place on lending to
properties rated below EPC E. In accordance with the Minimum Energy Efficiency
Standards Regulations, all buy-to-let properties must have a minimum EPC rating of E.
Climate-related risks, including flooding and subsidence, along with energy
performance, are used to inform the potential impact on future property values at the
point of a secured lending decision for both retail and non-retail lending. All physical
valuations must be completed by registered valuers to utilise their local knowledge and
expertise, including the assessment of physical risks and climate-related information.
The valuation methodology includes controls to exclude the use of automated
valuations in vulnerable areas, for example, properties in areas with a high potential for
flood risk.
During 2021, we engaged a third-party provider and started to receive open-source
property data for our mortgage portfolio to enhance our portfolio risk identification
and monitoring processes. Our secured lending policies and standards will continue
to evolve in response to the external environment, increasing regulation, investor and
other stakeholder interest. Work is underway to plan how climate risks will be
incorporated into credit decisioning in the future.
Commercial lending
Our approach to commercial lending and collateral management incorporates
environmental risk considerations. We have identified those sectors particularly
susceptible to climate change risk, with restrictions on lending to specific carbon-
intensive industries. Customers in these sectors face additional due diligence to
understand their exposure and vulnerability to climate-related risks. Our Commercial
Lending Policy also outlines the prohibited and restricted industries where we have
either no or limited appetite to lend. To support these updates, training and supporting
material on climate risks were provided to colleagues in first- and second-line roles.
During 2022, further enhancements will be made to credit assessment processes.
A large proportion of our business lending customers are privately owned and/or
SMEs. Very few lending customers therefore report against voluntary disclosure
initiatives such as CDP, Sustainability Accounting Standards Board or TCFD. Our focus
will be on how we can support customers with adaptation and mitigation, and have
started engaging in conversations with commercial customers with regard to ESG and
sustainability. This is supported by third party reports, which signify the nature of and
the extent to which ESG issues either provide an opportunity to enhance or hinder
firms’ business performance.
A top-down assessment of sectors (and sub-sectors) which may have a higher
likelihood of being impacted by transition risks has been performed. It highlighted that
our direct exposure to commercial lending segments with high emissions is relatively
low. We continue to enhance and refine this work at both counterparty and sector level,
considering both risks and opportunities as we look to support our customers’
responses to climate change. The output will be used to inform the evolution of our
credit policies and risk appetite measures to monitor the portfolio exposure to
transition risk.
Metro Bank PLC Annual Report & Accounts 2021
47
Strategic reportFinancial statementsGovernanceAdditional information Task Force on Climate-related Financial
Disclosures continued
Capital and liquidity risk
RISK EXAMPLES
– The Bank’s capital position is indirectly subject to climate risk
through Bank-wide exposures across all risk types.
– Longer-term climate change risks may adversely impact the
Bank’s future revenue through customer behaviour, balance sheet
or strategy changes over the longer term in response to climate
change risk factors.
– Market dislocation could also impact the value or the ability to
monetise liquidity buffers or incremental client deposits run-off
resulting from transition risk drivers.
TIME HORIZON
Medium-Term
to Long-Term
Consideration of climate risk will be embedded in key processes where investment
decisions are made and the level of climate risk being taken is material. The output of
the climate scenario analysis and stress test is used to inform the understanding of how
capital management may be impacted. Climate change risk has been considered as
part of the 2021 ICAAP. This includes a qualitative assessment of the potential financial
implications of climate-related risk. The ICAAP is a key planning process for the Bank
and facilitates the Board and senior management in identifying, measuring and
monitoring our risks and ensures that we hold adequate capital to support our risk
profile. Based on our current assessment the capital requirement for physical risk
would be immaterial.
Climate risk and broader ESG considerations are now reflected in the bank’s Treasury
portfolio investment strategy, with implications for securities that can be included in
the Liquidity Pool. The 2022 ILAAP will outline the potential funding and liquidity risks
that may arise as a result of certain physical risks or transition risks.
The impacts of climate change will continue to be assessed within both the ICAAP and
ILAAP.
Operational risk
PHYSICAL RISK EXAMPLES
TRANSITION RISK EXAMPLES
TIME HORIZON
Business interruptions due to
extreme weather events and
damage to facilities. Disruptions
in supply chain.
Increased operating costs for
facilities and higher capital
expenditures for resiliency and
carbon reduction measures.
Medium-Term
Climate change is included as part of existing Risk Control Self-Assessment. All loss
events are recorded in the Bank’s incident management system, enabling the
identification of climate-related risk events.
Scenario analysis is performed to assess the potential effects of climate-driven events
including disruption to business services, damage to physical assets, and health and
safety. Physical risk data has been obtained in relation to key data centres and office/
Store locations to support our assessment of future risk. The results of the scenario
analysis are used to plan, prepare and respond to potential disruptions. There are also
plans in place to help resume business operations as quickly as possible in the
aftermath of an extreme climate event to minimise operational disruptions.
We are also taking steps to build climate change considerations into its procurement
and supply chain management processes, including exploring different methods to
collect environmental performance data from third parties. More broadly, the
Operational Resilience programme will outline the requirements (including
requirements of suppliers) to respond to business disruption.
We will continue to identify, manage and disclose material sustainability and climate-
related risks across the Bank and their impacts on the Bank and our financial planning
processes, in line with the TCFD framework.
During the year, the Bank-wide
Risk Appetite Statement has been
expanded to include a qualitative
statement in relation to climate
risk. In support of this appetite,
complementary quantitative risk
appetite metrics are being developed
which will be included in future
disclosures. Metrics will be further
enhanced as data and capability
evolves and will leverage scenario
analysis outputs.
Response
Climate change has been embedded
as a cause into the Enterprise Risk
Management Framework, together
with the frameworks, policies and
standards for these principal risks.
For Credit risk, we have also developed
a dedicated Climate Change Credit
Risk Standard to aid the embedding,
management and monitoring of
climate change risk as a cause to our
credit risks. Climate change is a risk
driver that intensifies impact within
existing risk types. As such it is not a
new risk and we are managing climate
change already in a variety of ways as
it emerges.
Scenario analysis
As the understanding and importance
of climate risk progresses, climate
scenario analysis is becoming an
essential capability and risk
management tool. Scenario analysis
assists the identification, measurement
and ongoing assessment of climate
risks over the longer-term, and the
potential threats to our strategic
objectives. During FY21, we have
developed scenario analysis
capabilities to enhance our ability to
identify climate-related risks and
opportunities and assess the resilience
of our business model.
In 2021, we undertook climate scenario
analysis for our retail mortgages and
commercial real estate portfolios using
scenarios published by the Bank of
England as part of the 2021 Biennial
Exploratory Scenario on the Financial
Risks from Climate Change. The three
climate scenarios explore the physical,
transition and economic impacts of
climate change on lenders:
48
Metro Bank PLC Annual Report & Accounts 2021
– Early Policy Action – The transition to
a carbon-neutral economy starts
early and is gradual and orderly. The
Paris Agreement target of global
warming staying below 2°C is met.
– Late Policy Action – The global
climate goal is met but the transition
is delayed until 2030 and is more
sudden and severe. The Paris
Agreement target are met.
– No Additional Policy Action – No
policy action beyond that which has
already been enacted is delivered.
Carbon emissions continue to
increase and physical events become
more frequent and severe as Paris
Agreement targets are not met.
We have developed new capabilities
to assess and quantify the physical and
transition risks from climate change,
using new data sources and modelling
approaches. Based on data provided
by the Environment Agency, National
Resources Wales, the British Geological
Survey and the Ministry of Housing,
we can track the exposure of our
residential mortgage and commercial
real estate portfolios to climate
physical risks and energy efficiency.
Using this data, we have developed
new models that provide a forward-
looking assessment of credit losses
over long time horizons (30-60 years).
From a physical risk perspective, the
climate scenario assessment captured
the deterioration in river, coastal and
surface water flooding, as well as
subsidence and coastal erosion risks
aligned to RCP 2.6 and RCP 8.5 IPCC
scenarios up to 2080. Key physical
risks identified and analysed were the
risk that certain properties could
reduce in value due to frequent
flooding, coastal erosion. We modelled
the impacts of these risks on property
values, probability of default and credit
losses based on risk likelihood and
expected physical damage.
From a transition risk perspective,
properties were assessed at a ‘cost’
to upgrade from their current energy
performance grade to the maximum
potential grade, as well as at a cost to
acquire a heat pump. The key
transition risk identified was the
potential loss in value of certain
properties due to lagging energy
efficiency or owners required to
retrofit, incurring large costs. The value
of properties that cannot be upgraded
beyond EPC grade F was reduced to
the value of the land. Increased energy
costs were factored into loan
affordability. The impact of these
assumptions on property values,
probability of default and credit losses
were modelled.
The scenario analysis showed the
biggest impacts on credit losses to be
associated with the “No Additional
Policy Action” scenario. In this scenario,
a proportion of properties in our
portfolio are affected by physical risks,
especially flood risk, with increasing
frequency and severity. This results in
the properties becoming unlivable or
uninsurable and losing most of their
value. The “Late Policy Action” scenario
showed the crystallisation of climate
transition risks, macroeconomic risks
and some climate physical risks,
driving increased credit losses. The
main driver of losses in the “Early
Policy Action” scenario was transition
risk. Due to early policy action,
retrofitting costs were assumed to be
subsidised. Costs therefore remained
lower across all property types.
We are considered to have sufficient
capital to withstand the losses
associated with the climate scenarios
that have been assessed. As this
capability is established and further
developed, the assessment will be run
on an ongoing basis to inform scenario
planning and monitoring of the
portfolio composition to ensure no
undue concentrations. The results of
the scenario analysis will be used to
support the evolution of origination
strategies in line with our overarching
strategic objectives and risk appetite
to factor in climate change risks and
opportunities. It will also inform
product opportunity assessment
and extending the range of product
offerings to support customers’
transition to improved energy
efficiency or reduce exposure to
physical risks.
Metrics and targets
Our climate change metrics are
anchored to our ambitions to make
our own operations Net Zero by 2030,
and to drive material reductions in the
climate impact of our financing activity
and value chain by 2050. Recognising
that there is more to do to fully
understand the impact of climate
change across our business, we
are working on developing further
metrics as our and the industry’s
understanding continues to mature.
These metrics will aid discussions and
inform strategic decisions made by
management and the Board. The
metrics will be shared in various
committees, through the climate
change governance model, to support
committee responsibilities.
Operational emissions
Greenhouse gas (GHG) reporting is
undertaken in line with our obligations
under The Companies Act 2006
(Strategic Report and Directors’
Report) Regulations 2013, and the UK’s
recently released Streamlined Energy
and Carbon Reporting regulations.
GHG emissions are reported in
accordance with the GHG Protocol,
which sets a global standard for how
to measure, manage and report
emissions. To reflect the needs of our
climate commitments, we have
modified the manner in which we
account GHG emissions. Up until 2020,
we reported our GHG emissions using
the operational control approach.
As part of introducing new targets in
2022, we have moved to the financial
control approach and now have
developed a complete Scope 3
emission inventory. To ensure
comparability and transparency
between years, we have revised our
2020 and 2019 inventories.
We report GHG emissions in
accordance with the financial control
approach, to define our boundary
of responsibility. The only material
estimated omissions in the GHG
emission data relate to: business travel
where data for all individuals was not
Metro Bank PLC Annual Report & Accounts 2021
49
Strategic reportFinancial statementsGovernanceAdditional information Task Force on Climate-related Financial
Disclosures continued
Scope 1 emissions
Scope 2 emissions (location based)
Scope 2 emissions (market based)
Scope 3 emissions
Total GHG emissions (location based)
Total GHG emissions (market based)
FTE
Total emissions per FTE
Energy consumption (MWh)
2021
2020
Water consumption (m3)
2021
2020
Paper used (tonnes)
2021
2020
40,136
15,607
15,656
62,070
189,000
208,000
available; or energy consumed in
properties where actual meter
readings were not available before
year end. In this latter instance, an
average rate per kWh has been used.
We have seen a further reduction in
Scope 1 and 2 emissions this year as
detailed in the table below. Electricity
continues to be the main source
of Scope 1 and 2 emissions in our
operations, although purchases
of certified renewable energy have
dramatically reduced the amount
of electricity emissions. With the
unprecedented impact of COVID-19
causing a shift in ways of working, the
majority of our colleagues now work
from home. This has caused a
reduction in energy consumption
across our buildings and through
reduced travel, resulting in lower
carbon emissions. We have not
included the emissions as a result of
employees working from their homes
– these would be captured as Scope 3.
We are aware that emissions may not
stay at this level as further changes in
work patterns take place in 2022.
We recognise that the climate impact
of our operations goes beyond carbon
emissions from fuel consumption and
electricity purchased. Therefore, we
have measured our Scope 3 emissions
from our own operations in 2021,
which is also laid out in the table
below. The most significant
contributions to Scope 3 emissions in
our value chain come from Category 1
– Purchased Goods & Services and
Category 15 – Investments. In 2021,
Purchased Goods & Services were
estimated to generate 78,860 t CO2-e/
year and accounted for approximately
50% of Scope 3 emissions. Investments
were estimated to generate 69,189t
CO2-e/year and accounted for
approximately 45% of Scope 3
emissions, with the reduction from
2019 due in large part to the mortgage
portfolio sale in 2020 and reduced
commercial lending volumes. Other
categories contributed relatively
modest emissions.
50
Metro Bank PLC Annual Report & Accounts 2021
2021
2020
2019
336
3,327
1,194
155,182
158,845
156,712
4,184
38.0
67
3,799
729
190,333
194,199
–
3,850
50.4
319
4,247
3,256
248,979
253,538
–
3,555
71.3
In addition to tracking the emissions
for buildings, water and waste
consumption are measured across our
sites. We continue to divert 100% of
our waste from landfill. We have seen
a larger reduction in energy, paper
and waste consumption this year in
comparison to previous years, which
can be attributed to the increase in
home working due to COVID-19.
The evolution of this trend will be
dependent on future working patterns.
As part of our new action plan, we
have now committed to making our
own operations Net Zero by 2030 and
have set a number of targets against
emissions, with some metrics still
under development due to the
additional work required to enhance
data capabilities and set baselines in
these areas. These targets comply with
guidance from the Science-Based
Targets Initiative (SBTi), although have
not been officially approved by SBTi.
Financed emissions
This year, we set ourselves the
challenge to making our financing
activity and value chain Net Zero by
2050 and to do what is necessary to
achieve alignment with the 2015 Paris
Agreement. Financing activity refers
to the loans and investments on our
balance sheet. We recognise that
measuring financed emissions is
fundamental to analyse scenarios, set
targets, inform actions and disclose
progress. We will use financed
emissions as a key metric to estimate
the climate impact of our financing
activity on the real economy. Financed
emissions are absolute GHG emissions
that we finance through its lending and
investment activity. These activities fall
within Scope 3, Category 15 of the
GHG protocol.
Energy – coal mining
Oil and gas
Utilities – electric and gas
Agriculture, forestry and fishing
Construction
Transportation
Concrete, chemicals and metal manufacture
Commercial real estate
2021
£m
–
–
–
9
67
49
1
912
% lending
–
–
–
0.4%
2.7%
1.9%
0.02%
36.1%
2020
£m
–
–
–
8
64
48
1
1,067
% lending
–
–
–
0.3%
2.4%
1.8%
0.02%
39.8%
financing to improve the energy
efficiency of their properties and
business operations, and adapting to
climate change through, for example,
flood protection measures at a
property or community level.
Whilst we have not yet set science-
based targets for Scope 1, 2 and 3
emissions, there are plans to explore
this to enable the Bank to track our
progress towards a carbon emissions
target aligned to Net Zero. In line with
the Science Based Targets Initiative,
for key portfolios, respective targets
and time horizons will be set and
progress tracked and monitored
against interim targets. These activities
form the foundation of future risk
analysis and target setting activities,
leading to mitigating activities to
help reduce risks to the Group in the
future. All metrics and targets will be
developed in line with the Science-
Based Targets methodology to ensure
consistency, accountability and
achievability.
We are still in the early stages of our
journey and need to develop the data
and technology required to accurately
assess and manage our carbon-related
assets and exposures. Accounting for
53% of our customer lending as at
December 2021, the residential
mortgage portfolio has been identified
as an area of material climate-related
risk and opportunity for the Bank,
and hence a priority for calculating
emissions baselines and developing
green propositions. While progress
has been made, we will continue to
develop climate-related data across
the portfolios, to enable more in-depth
analysis and reporting, which will
support our efforts to achieve Net
Zero by 2050 or sooner. The
Partnership for Carbon Accounting
Financials (PCAF) Standard provides
methods to measure financed
emissions and will enable us to assess
data quality challenges and recognise
areas for improvement.
Physical risks
Physical climate risk data was matched
for 95% of the properties in the
portfolio, with the incremental impact
of river, coastal and surface flooding
assessed to 2050. The assessment
shows that the flood risk of the
properties in our residential mortgages
portfolio is broadly in line with the
national average. Our scenario analysis
results suggest physical risks arising
from climate change should have a low
impact on our mortgage portfolio over
the next 30 years.
Flood risk rating
% of properties
Negligible
Low
Medium
High
94.3%
3.2%
1.7%
0.6%
Transition risks
The use of EPC data has been critical
to our understanding of the impact
of transition risk. EPC ratings of the
mortgage portfolio are monitored
to provide a view on the energy
efficiency of our housing stock. The
table below shows a summary of EPC
ratings on the mortgage book. 75% of
mortgaged properties were matched
to an EPC rating. The most common
EPC rating in our mortgage book is D,
which is slightly lower than the UK
average, with approximately 36% of
the book currently rated EPC C or
better on an interpolated basis.
EPC rating
% of properties
A
B
C
D
100% includes loans which benefit
from additional forms of collateral, such as debentures. The value of this additional collateral is not included in either the
DTV or the expected credit loss but provides an additional level of credit risk mitigation. DTV >100% also includes
government-backed lending where the facility does not also benefit from property collateral. The increase in DTV>100% in
2021 reflects the increase in lending under the government’s recovery loan scheme.
For commercial there have not been any changes to the collateral management or lending policies that significantly impact
the quality of our collateral in 2021.
Supporting our commercial customers through COVID-19
We have remained focused on supporting customers through COVID-19 and have participated in the various government
support schemes. Payment deferrals and temporary payment conversion to interest-only for loans, interest-free overdrafts,
and extensions of credit have all been made available.
We have provided BBLS to our customers with loans of between £2,000 and £50,000. These are available for up to 10
years, with no repayments due in the first year, at a fixed rate. The ‘Pay As You Grow’ scheme (PAYG) allows customers to
apply for an interest only payment period of six months (up to a maximum of three periods), take a repayment holiday for
both capital and interest for up to six months, and extend the term of the facility up to a maximum of 10 years. These loans
are 100% guaranteed by the government.
CBILS allows for loans of over £50,000 to a maximum of £5 million. These have been made available at variable rates of
lending with no arrangement fees and 0% interest for the first 12 months. The government has guaranteed 80% of the loss
and pays the fees as well as the interest for the first 12 months. The maximum term of these loans is six years.
CLBILS provides loans of over £50,000, up to a maximum of £200 million. These have also been made available at a
variable rate of lending, with terms ranging between three months and three years. The government guarantees 80% of
any loss on these loans.
RLS provides for term loans above £25,000 and up to a maximum of £10 million. These have been made available with
terms ranging from three months to six years. The government guarantees 80% of any loss on these loans.
At 31 December 2021 we have £1,304 million of loans for BBLS, £165 million in CBILS, £37 million in CLBILS, and £157
million in RLS. Whilst these loans are guaranteed by the government, costs to collect are expected, and the risks associated
from these loans is being closely monitored and reassessed where necessary, particularly as new government guidance is
made available. In addition, we have provided an on-line portal enabling our BBLS customers to select from PAYG options.
As at 31 December 2021 14,225 customers have applied for one or more of the PAYG options which is 39% of all eligible
BBLS accounts.
76
Metro Bank PLC Annual Report & Accounts 2021
The following table provides an overview of the lending provided via COVID-19 government support schemes.
Table 15: COVID-19 government-backed loans
BBLS
CBILS
CLBILS
RLS¹
Total
Number of drawn
customers
36,116
319
4
675
Balance
£’millon
1,304
165
37
157
37,114
1,663
Average loan
amount
£’000
36
517
9,364
233
44
1. Recovery loan scheme includes £66 million acquired from third parties under forward flow arrangements.
Interest-only lending
Interest-only lending in the commercial portfolio totals £1.1 billion (31 December 2020: £1.3 billion), which is predominately
comprised of professional buy-to-let loans.
Table 16: Commercial term lending by repayment type (excluding BBLS)
Audited
Repayment
Interest
Capital and interest
Total commercial term loans
31 December 2021
31 December 2020
Professional
buy-to-let
£’million
Other term loans
£’million
Total
commercial
term loans
£’million
Professional
buy-to-let
£’million
Other term loans
£’million
Total
commercial
term loans
£’million
897
53
950
230
1,883
2,113
1,127
1,936
3,063
1,058
59
1,117
281
1,971
2,252
1,339
2,030
3,369
Undrawn commitments
At 31 December 2021, we had undrawn loan facilities of £1,245 million (2020: £769 million). This includes commitments
of £302 million (2020: £351 million) in respect of credit card and overdraft facilities. These commitments represent
agreements to lend in the future, subject to certain conditions. We mitigate credit risk in respect of these undrawn balances
by regular customer monitoring to allow undrawn limits to be removed if we observe credit quality deterioration. We also
have exposure to Invoice Finance assets where the amount drawn is capped both by the discounted value of available
invoices and a set relationship cap. Similarly, we have a small exposure to commercial Real Estate Development Finance,
where a limit to draw down is agreed in principle and funds are released in stages, throughout the development and
following satisfactory surveyor reports. In commercial lending, undrawn commitments are regularly reviewed to ensure
relationship caps remain appropriate. This has been particularly evident as we seek to support customers through COVID-19.
Investment securities
As well as our loans and advances, the other main area where we are exposed to credit risk is within our Treasury portfolio.
At 31 December 2021 we held £5.6 billion (31 December 2020: £3.4 billion) of investment securities, which are used for
balance sheet and liquidity management purposes.
We hold investment securities at amortised cost or fair value through other comprehensive income depending on our
intentions regarding each asset. We do not hold investment securities at fair value through profit and loss.
Table 17: Investment securities by credit rating
Audited
Credit rating
AAA
AA- to AA+
Total
31 December 2021
31 December 2020
Investment
securities held at
amortised cost
£’million
Investment
securities held at
FVOCI
£’million
3,675
1,101
4,776
376
422
798
Total
£’million
4,051
1,523
5,574
Investment
securities held at
amortised cost
£’million
Investment
securities held at
FVOCI
£’million
2,184
456
2,640
385
388
773
Total
£’million
2,569
844
3,413
Metro Bank PLC Annual Report & Accounts 2021
77
Strategic reportFinancial statementsGovernanceAdditional information Risk report continued
We have a robust securities investment policy which requires us to invest in high-quality liquid debt instruments.
At 31 December 2021, 73% of our investment securities were rated as AAA (31 December 2020: 75%) with the remainder
rated AA- or higher, the majority of which comprises of UK gilts.
Additionally, we hold £3.6 billion (31 December 2020: £3.0 billion) in cash balances, which is either held by ourselves or
at the Bank of England where there is minimal credit exposure.
IFRS 9 macroeconomic scenarios and use of expert judgement
Scenarios, weightings, and macroeconomic assumptions
The ECL recognised in the financial statements reflects the effect on expected credit losses of a range of possible
outcomes, calculated on a probability-weighted basis, based on a number of economic scenarios, and including
management overlays where required. These scenarios are representative of our view of forecasted economic conditions,
sufficient to calculate unbiased ECL, and are designed to capture material ‘non-linearities’ (i.e. where the increase in credit
losses if conditions deteriorate, exceeds the decrease in credit losses if conditions improve).
In line with our approved IFRS 9 models, macroeconomic scenarios provided by Moody’s Analytics are used in the
assessment of provisions. The use of an independent supplier for the provision of scenarios helps to ensure that the
estimates are unbiased. Since the inception of COVID-19, the macroeconomic scenarios are assessed and reviewed monthly
to ensure appropriateness and relevance to the ECL calculation. The weightings of these scenarios reflect the UK economic
outlook arising from COVID-19. The selection of scenarios and the appropriate weighting to apply are considered and
discussed internally and proposed recommendations for use in the IFRS 9 models are made to the monthly Impairment
Committee (designated Executive Risk Committee for impairments) for formal approval.
Our credit risk models are subject to internal model governance including independent validation. We undertake annual
model reviews and have regular model performance monitoring in place. The impairment provisions recognised during the
year reflect our best estimate of the level of provisions required for future credit losses as calibrated under our weighted
economic assumptions and following the application of expert credit risk judgement overlays.
A fourth (more severe downside) macroeconomic scenario has been introduced in 2021 across all portfolios to ensure the
set of scenarios adequately reflect a wider range of downside risks which have been previously included within
management overlays. Scenarios and probability weights are as follows:
Table 18: Macroeconomic Scenario Weightings
Baseline
Upside
Downside
Severe downside
31 December
2021
%
31 December
2020
%
40%
20%
30%
10%
40%
30%
30%
–
The macroeconomic scenarios reflect the current macroeconomic environment as follows:
– Baseline scenario (40% weight) – Reflects the projection of the median, or ‘50%’ scenario, meaning that in the assessment
there is an equal probability that the economy might perform better or worse than the baseline forecast.
– Upside scenario (20% weight): This above-baseline scenario is designed so there is a 10% probability the economy will
perform better than in this scenario, broadly speaking, and a 90% probability it will perform worse.
– Downside scenario (30% weight): In this recession scenario, in which a deep downturn develops, there is a 90%
probability the economy will perform better, broadly speaking, and a 10% probability it will perform worse.
– Severe Downside scenario (10% weight): In this recession scenario, in which a deep downturn develops, there is a 96%
probability the economy will perform better, broadly speaking, and a 4% probability it will perform worse.
Key assumptions underpinning the baseline scenario include:
– The existing vaccines are effective against the new variant, and the death rate remains low compared with the previous
winter.
– The UK government is offering booster jabs for vulnerable segments of the population.
– The unemployment rate spikes in the first quarter of 2022 as a result of the end of the Coronavirus Job Retention Scheme,
which was extended to the end of September, and the recovery remains fragile in the second half of the year.
– Inflation starts to accelerate because of the reopening of the economy, the increase in demand, and the energy crisis.
It reaches 3.6% by the start of 2022.
78
Metro Bank PLC Annual Report & Accounts 2021
– The government supports the economy through massive fiscal stimulus during the first half of 2021, while the Bank of
England keeps monetary policy extremely loose for several quarters.
– The UK government extends Northern Ireland ‘grace periods’ for the third time and postpones imposing checks on EU
goods until 2022.
The base case macroeconomic estimates and assumptions used at 31 December 2020 reflected the COVID-19 uncertainty
and the stage the UK economy was in at that time. The impact of the successful vaccine roll-out programme, vaccines
proving effective against new COVID-19 variants and the economic recovery as lockdown restrictions were lifted resulted
in more positive base case assumptions for 2021 and the forecast period. This has resulted in improvements in the GDP
and unemployment levels.
The following variables are the key drivers of ECL:
– UK interest rate (five-year mortgage rate).
– UK unemployment rate.
– UK HPI change, year-on-year (adjusted in the downside scenarios for regional concentration).
– UK GDP change, year-on-year.
Macroeconomic scenarios impact the ECL calculation through varying the PD and LGD. We use UK HPI to index mortgage
collateral which has a direct impact on LGD. A wide range of potential metrics were initially considered, representing
drivers which capture trends in the economy at large, and may indicate economic trends which will impact UK borrowers.
This included variables which impact economic output, interest rates, inflation, stock prices, borrower income and the UK
housing market. Statistical methods were then used to choose the subset of drivers which had the greatest significance
and predictive fit to our data.
The use of estimates, judgements and sensitivity analysis
Economic scenarios
Following the initial four-year projection period, the Upside and Downside scenarios converge to the Baseline scenario.
The rate of convergence varies based on the macroeconomic factor, but at a minimum convergence takes place three
years from the initial four-year projection period. We note that the scenarios applied comprise our best estimate of
economic impacts on the ECL, and the actual outcome may be significantly different.
Table 19: Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2021 are as follows:
Interest rates (%) –
five year mortgage rate
UK unemployment (%)
UK house price index –
% change year-on-year¹
UK GDP – % change
Base
Upside
Downside
Severe downside
Base
Upside
Downside
Severe downside
Base
Upside
Downside
Severe downside
Base
Upside
Downside
Severe downside
2022
2.7%
3.0%
2.3%
2.1%
4.7%
3.9%
6.2%
7.2%
3.4%
14.2%
(12.8%)
(16.3%)
3.9%
7.7%
(2.3%)
(3.9%)
2023
3.3%
3.6%
2.8%
2.6%
4.4%
3.3%
6.6%
7.5%
6.0%
8.5%
(8.1%)
(10.3%)
3.1%
1.7%
5.7%
5.4%
2024
3.7%
4.2%
3.1%
2.9%
4.4%
3.5%
6.5%
7.2%
5.2%
4.8%
(1.9%)
(2.5%)
1.4%
1.2%
2.4%
2.2%
2025
4.1%
4.6%
3.1%
3.1%
4.5%
3.8%
6.3%
7.1%
3.7%
2.1%
4.4%
4.3%
1.0%
1.1%
1.7%
1.8%
1. The HPI economic forecast has been stressed on the downside and more severe downside scenarios to reflect our geographical concentration risk.
Metro Bank PLC Annual Report & Accounts 2021
79
Strategic reportFinancial statementsGovernanceAdditional information Risk report continued
We have also assessed the IFRS 9 ECL sensitivity impact at a total portfolio level, by applying a 100% weighting to each
of the four chosen scenarios, which is set out in table 20.
The sensitivities represent example scenarios and may not represent actual scenarios which occur in the future. If one of
these scenarios did arise then at that time the ECL would not equal the amount disclosed above, as the amounts disclosed
do not take account of the alternative possible scenarios which would be considered at that time.
Post model overlays and individually assessed provisions are reflected in the sensitivities as are any resulting movements
in staging allocation.
Table 20: IFRS 9 ECL sensitivity impact
Audited
31 December 2021
Baseline
Upside
Downside
Severe downside
Weighted
Stage 1
£’million
Stage 2
£’million
Stage 3
£’million
Total
£’million
42
39
56
62
47
39
35
58
71
49
70
69
76
78
72
151
143
190
211
169
Use of Post Model Adjustments and Post Model Overlays
During the year we have continued to apply expert judgement to the measurement of the expected credit loss in the
form of post model overlays and adjustments. As at 31 December 2021 post model overlays and adjustments made up
£9.1 million and £35.0 million of the ECL stock respectively (31 December 2020: £23.1 million and £54.0 million). Further
details on these can be found on pages 203 to 204.
Liquidity and funding risk
Liquidity and funding risk management
Appetite
We have a moderate appetite for Liquidity Risk and Funding Risk. We shall be able to survive a combined name-specific
and market-wide liquidity stress event for at least three months, at a level of severity determined by our internal stress test,
utilising our Liquidity Pool. Equally, we shall maintain a prudent funding profile by using stable funding to fund illiquid
assets, without reliance on wholesale funding markets, whilst ensuring that funding is not inappropriately concentrated
by customer, sector, or term, as identified during our liquidity stress testing.
Mitigation
Deposit-funded approach
Our deposit base remained stable and resilient throughout the pandemic. We aim to attract deposits that are diverse and
are low cost, which are less sensitive to competition within the deposit market. At 31 December 2021, 48% of our deposits
came from commercial customers (31 December 2020: 44%) with the remaining 52% (31 December 2020: 56%) coming
from retail customers. Additionally, 44% of deposits at year end (31 December 2020: 39%) were in the form of current
accounts, with the remainder split between a combination of instant access and fixed-term savings products.
Liquidity management (audited)
We continue to hold a prudent level of liquidity to cover unexpected outflows, ensuring that we are able to meet financial
commitments for an extended period. We recognise the potential difficulties in monetising certain assets, so set higher-
quality targets for liquid assets for the earlier part of a stress period. We have assessed the level of liquidity necessary to
cover both systemic and idiosyncratic risks and maintain an appropriate liquidity buffer at all times. Our Liquidity Coverage
Ratio ensures that we comply with our own risk appetite as well as regulatory requirements.
80
Metro Bank PLC Annual Report & Accounts 2021
Assets and liabilities by maturity (audited)
The tables below set out the maturity structure of our financial assets and liabilities by their earliest possible contractual
maturity date; this differs from the behavioural maturity characteristics in both normal and stressed conditions. The
behavioural maturity of customer deposits is much longer than their contractual maturity. On a contractual basis, these are
repayable on demand or at short notice; however, in reality, they are static in nature and provide long-term stable funding
for our operations and liquidity. Equally, our loans and advances to customers, specifically mortgages, are lent on longer
contractual terms; however, are often redeemed or remortgaged earlier.
The total balances depicted in the analysis do not reconcile with the carrying amounts as disclosed in the consolidated
balance sheet. This is because the maturity analysis incorporates all the expected future cash flows (including interest),
on an undiscounted basis.
Total equity and liabilities
(22,587)
(14,910)
Deposits from customers
(16,448)
(14,910)
(348)
Deposits from central banks
(3,800)
Table 21: Contractual maturity
Audited
31 December 2021
Cash and balances with the
Bank of England
Loans and advances to
customers
Investment securities
Other assets
Total assets
Debt securities
Repurchase agreements
Lease liabilities
Other liabilities
Total liabilities
Equity
Derivative cash flows
Cumulative liquidity gap
Audited
31 December 2020
Cash and balances with the
Bank of England
Loans and advances to
customers
Investment securities
Other assets
Total assets
Debt securities
Repurchase agreements
Lease liabilities
Other liabilities
Total liabilities
Equity
Carrying
value
£’million
Repayable
on demand
£’million
Up to
3 months
£’million
3–6 months
£’million
6–12 months
£’million
1–5 years
£’million
Over 5 years
£’million
No
contractual
maturity
£’million
Total
£’million
3,568
3,568
–
–
–
–
–
–
3,568
489
427
791
4,740
10,850
349
17,646
12,290
5,574
1,155
–
–
–
22,587
3,568
123
–
612
(588)
(169)
(269)
(278)
–
–
–
–
–
(3)
–
(20)
(6)
–
9
–
436
(350)
(3)
(23)
–
(6)
–
672
4,488
–
1,463
(458)
(18)
(24)
(92)
(13)
–
–
9,228
(303)
(3,924)
(672)
(63)
(94)
–
451
–
11,301
–
–
–
–
(224)
30
1,147
1,526
5,773
1,147
28,134
(122)
(16,491)
–
–
–
–
(3,948)
(719)
(175)
(343)
(214)
–
(214)
(21,552)
(14,910)
(377)
(382)
(605)
(5,056)
(224)
(336)
(21,890)
(1,035)
–
–
(377)
(3)
–
–
–
–
(1,034)
(1,034)
(382)
(605)
(5,056)
(224)
(1,370)
(22,924)
–
(2)
(6)
–
–
(11)
–
(11,342)
(11,107)
(11,053)
(10,195)
(6,023)
5,054
Carrying
value
£’million
Repayable
on demand
£’million
Up to
3 months
£’million
3–6 months
£’million
6–12 months
£’million
1–5 years
£’million
Over 5 years
£’million
No
contractual
maturity
£’million
Total
£’million
2,993
2,993
–
–
–
–
–
–
2,993
12,385
3,413
3,788
–
–
–
22,579
2,993
(600)
(196)
(327)
(287)
–
–
–
–
–
332
281
634
4,551
11,424
284
17,506
87
2,568
2,987
(641)
(692)
–
–
(7)
–
233
–
514
(864)
(588)
(23)
–
(7)
–
221
–
855
(1,233)
2,768
–
7,319
(702)
(1,500)
(1,033)
(24)
(49)
(15)
–
(719)
(155)
(115)
–
140
–
11,564
–
–
–
–
(273)
59
1,220
1,563
3,508
3,788
27,795
(119)
(16,109)
–
–
–
–
(3,813)
(766)
(204)
(417)
(287)
–
(287)
(21,290)
(12,550)
(1,340)
(1,482)
(2,821)
(2,724)
(273)
(406)
(21,596)
(1,289)
–
–
–
–
–
–
(1,289)
(1,289)
Deposits from customers
(16,072)
(12,550)
Deposits from central banks
(3,808)
Total equity and liabilities
(22,579)
(12,550)
(1,340)
(1,482)
(2,821)
(2,724)
(273)
(1,695)
(22,885)
Derivative cash flows
Cumulative liquidity gap
–
(3)
(3)
(2)
–
–
(8)
(9,557)
(7,913)
(8,882)
(10,851)
(6,258)
5,033
Metro Bank PLC Annual Report & Accounts 2021
81
Strategic reportFinancial statementsGovernanceAdditional information
Risk report continued
Monitoring (audited)
The Treasury function has responsibility for our compliance with liquidity policy and strategy. We have a dedicated
Treasury Risk team who monitor our liquidity and funding risk including ensuring compliance with the policies we have
developed. The Regulatory Reporting team also monitors compliance with LCR.
The Asset and Liability Committee is responsible for liquidity and funding risk. Liquidity and funding cannot be considered
in isolation, and we have regard to liquidity risk, profitability and capital optimisation when considering funding sources.
Liquidity and funding risk measurement
Our asset and liability management system is used to capture all positions across the Bank and evaluate their liquidity. We
calculate our LCR and perform stress testing of our liquidity daily. Forward-looking short-range forecasts are produced at
least monthly. Early warning indicators are set out in the Bank’s Recovery Plan. Colleagues monitor these on a regular basis
and bump-up any triggers. A cost of funds model is used to help colleagues account for liquidity, capital and interest rate
risk in pricing.
We perform an ILAAP every year for the identification, measurement, management and monitoring of liquidity, having due
regard for the PRA Rulebook section ‘Internal Liquidity Adequacy Assessment’. The Treasury team seeks ILAAP input from
a range of teams including Finance, Risk, and Products, before taking the ILAAP through a robust governance process.
The conclusions of the ILAAP are reviewed and approved by the Board, assisting in: identification of our material liquidity
risks; deciding the management of material liquidity risks; and determining the Bank’s risk appetite.
For liquidity risk, we assess against internal and external requirements. The main external requirement is the LCR, and a
series of internal requirements are set and maintained through our ILAAP. Our LCR has remained strong throughout the
year, ending 2021 at 281% (2020: 187%).
Market risk
Market risk management
Appetite (audited)
We have a moderate appetite for Market Risk, and do not have a trading book. Market Risk arises naturally as a result of
taking deposits from customers and lending to customers. Market Risk is closely monitored and managed to ensure the
level of risk remains within appetite, with key metrics reported to senior management and the Board.
Mitigation (audited)
Interest rate risk
We benefit from natural offsetting between certain assets and liabilities, which may be based on both the contractual
and behavioural characteristics of these positions. Where natural hedging is insufficient, we hedge net interest rate risk
exposures appropriately, including, where necessary, with the use of interest rate derivatives. We enter into derivatives
only for hedging purposes and not as part of customer transactions or for speculative purposes.
Our Treasury and Treasury Risk teams work closely together to ensure that risks are managed appropriately – and that we
are well-positioned to avoid losses outside our appetite, in the event of unexpected market moves.
We have hedge accounting solutions in place to reduce the volatility in the income statement arising from these
hedging activities.
Foreign exchange exposure
We have very limited exposure to foreign exchange risk. Foreign exchange assets and liabilities are matched off closely in
each of the currencies we operate and less than 5% of our assets and liabilities are in currencies other than pounds sterling.
We do not have any operations outside the United Kingdom. We offer currency accounts and foreign exchange facilities to
facilitate basic customer requirements only.
Measurement
We measure interest rate risk exposure using methods including the following:
– Economic value sensitivity: calculating repricing mismatches across our assets and liabilities and then evaluating the
change in value arising from a change in the yield curve. Our risk appetite scenario is based on a parallel rate movement
of 2% to all interest rates, but we evaluate based on a series of other parallel and non-parallel rate changes. The scenarios
are designed to replicate severe but plausible economic events and to have regard to risks that would not be evident
through the use of parallel shocks alone.
– Interest income sensitivity: the impact on 12-month future income arising from various interest rate shifts. Our risk appetite
scenarios are based on parallel rate movements of 2% and of divergences of up to 1.15% between Bank of England base rate
and LIBOR (from January 2022 LIBOR has been replaced with SONIA) against a constant balance sheet. We also evaluate a
series of other parallel, non-parallel and non-instantaneous rate changes.
82
Metro Bank PLC Annual Report & Accounts 2021
– Interest rate gaps: calculating the net difference between total assets and total liabilities across a range of time buckets.
The frequency of calculating and reporting each measure varies from daily to quarterly, appropriate to each risk type.
We use an integrated asset and liability management system, which consolidates all our positions and enables the
measurement and management of interest rate repricing profiles for the entire Bank. The model takes into account
behavioural assumptions as specified in our Market Risk Policy. Material assumptions can be updated more frequently at
the request of business areas, in response to changing market conditions or customer behaviours. The model also takes
into account future contracted or expected growth in lending and deposits.
We measure and monitor our exposures to foreign exchange risk daily and do not maintain net exposures overnight in any
currency other than pounds sterling, above 5% of our total assets and liabilities.
Monitoring (audited)
Interest rate risk measures have limits set against them through the Market Risk Policy, and these are monitored on a
regular basis by the Treasury Risk team. Measures close to the limits are escalated to Treasury in order to ensure prompt
action and limit excesses are escalated to the Asset & Liability Committee. A digest of interest rate risk measures and
details of any excesses are presented monthly at the Asset & Liability Committee.
Internal Asset & Liability Committee Limits are set for the economic value of equity and net interest income based on the
worse of a +200bps or -200bps instantaneous symmetrical parallel shock to interest rates. The economic value of equity
and net interest income limits are monitored daily by risk. Performance against limits is reported monthly to the Asset &
Liability Committee (with exceptions communicated by email) and more regularly to senior management, as well as being
noted by the ROC and the Board.
Furthermore, limits are set for a set of asymmetrical movements between LIBOR and the Bank of England base rate. Our
Treasury Risk function runs a series of other interest rate risk simulations on a monthly basis to ensure that the Asset &
Liability Committee is kept updated of any other risks not captured by the policy measures. From January 2022 LIBOR is
replaced with SONIA.
We also enter into hedging arrangements when the natural hedging in our book is insufficient to enable us to remain within
our limits.
All derivatives are entered into macro or micro fair value hedge accounting arrangements in order to minimise volatility in
the profit and loss account.
Interest rate risk
The tables below set out the interest rate risk repricing gaps of our balance sheet in the specified time buckets, indicating
how much of each type of asset and liability reprices in the indicated periods, after applying expected non-contractual and
out-of-course early repayments in line with the Market Risk Policy.
Table 22: Repricing analysis
Audited
31 December 2021
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities
Other assets
Total assets
Deposits from customers
Up to
3 months
£’million
3,472
4,335
2,282
–
10,089
(7,023)
Deposits from central banks and repurchase agreements
(3,800)
Debt securities
Other liabilities
Equity
Total equity and liabilities
Interest rate derivatives
Interest rate sensitivity gap
Cumulative gap
3–6 months
£’million
6–12 months
£’million
1–5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
Total
£’million
–
635
–
–
635
(747)
–
–
–
–
1,479
273
–
–
5,666
2,667
–
1,752
8,333
(1,251)
(6,904)
(99)
–
–
(70)
(588)
–
–
–
–
175
352
–
527
(523)
–
–
–
–
96
3,568
–
–
1,155
1,251
–
–
–
(547)
12,290
5,574
1,155
22,587
(16,448)
(3,969)
(588)
(547)
–
(1,035)
(759)
(28)
(55)
(193)
(11,582)
(775)
(1,405)
(7,755)
(523)
(547)
(22,587)
264
(1,229)
(1,229)
(90)
(230)
(429)
(82)
255
833
–
4
(1,459)
(1,541)
(708)
(704)
–
704
–
–
–
Metro Bank PLC Annual Report & Accounts 2021
83
Strategic reportFinancial statementsGovernanceAdditional information
Risk report continued
Audited
31 December 2020
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities
Other assets
Total assets
Up to
3 months
£’million
2,913
4,665
2,343
2,568
12,489
3–6 months
£’million
6–12 months
£’million
1–5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
Total
£’million
–
538
65
–
603
–
–
1,083
5,924
–
–
910
–
1,083
6,834
–
175
95
–
270
–
–
–
–
–
–
–
270
(686)
80
–
–
1,220
1,300
–
–
–
(614)
2,993
12,385
3,413
3,788
22,579
(16,072)
(4,004)
(600)
(614)
–
(1,289)
(614)
(22,579)
–
686
–
–
–
Deposits from customers
(8,761)
(1,091)
(1,657)
(4,563)
Deposits from central banks and repurchase agreements
(3,808)
Debt securities
Other liabilities
Equity
Total equity and liabilities
Interest rate derivatives
Interest rate sensitivity gap
Cumulative gap
–
–
(886)
(13,455)
389
(577)
(577)
–
–
–
(40)
(1,131)
(125)
(653)
(47)
–
–
(149)
(600)
–
(79)
(284)
(1,783)
(5,596)
–
(700)
(264)
974
(956)
(1,230)
(1,930)
A positive interest rate sensitivity gap exists when more assets than liabilities reprice during a given period. A positive gap
position tends to benefit net interest income in an environment where interest rates are rising; however, the actual effect
will depend on multiple factors, including actual repayment dates and interest rate sensitivities within the banding periods.
The converse is true for a negative interest rate sensitivity gap.
Table 23 shows the sensitivity arising from the standard scenario of a +200bps and -200bps parallel interest rate shock
upon projected net interest income for a one-year forecasting period.
Table 23: Interest rate sensitivity
Audited
31 December 2021
31 December 2020
Capital risk
200bps increase
£ million
200bps decrease
(not floored
at zero)
£ million
5.7
19.8
(5.3)
(20.1)
Capital risk management
Appetite (audited)
We have a low appetite for Capital Risk and our aim is to maintain a surplus of capital resources above regulatory
requirements.
Mitigation (audited)
We manage our capital risk via our Capital Adequacy Framework which includes policies, strategy, limit setting, continuous
monitoring and stress testing. Our ICAAP is a key component of this framework and is used to analyse material risks and
assess our strategy and objectives under various stress scenarios. Capital ratios continued to be maintained within Board
risk appetite and regulatory requirements throughout 2021.
Sustainable profit growth
The main long-term mitigation to capital risk is the sustainable generation of additional capital through the accumulation of
profits. The Board and Executive Committee are focused on ensuring the successful delivery of the strategic plan to ensure
the return to sustainable profitability and are currently on track in delivering this.
Balance sheet optimisation
Another key mitigation that we can use to manage capital risk is the efficient deployment of our existing capital resources.
One of our strategic priorities is improving our balance sheet optimisation to ensure we maximise our risk-adjusted returns
whilst remaining above regulatory requirements. As part of this we bought the RateSetter back book loans in March 2021.
84
Metro Bank PLC Annual Report & Accounts 2021
Raising of additional capital
As we grow we need to raise additional regulatory capital to support lending growth. The ability to raise additional capital,
as well as the associated cost, is dependent upon market conditions and perceptions. The sale of the mortgage portfolio
removed the need for us to raise additional capital in the near term.
Measurement (audited)
We measure our capital resources in line with regulatory requirements. In order to appropriately manage our capital
resources, we produce regular reports on the current and forecasted level of capital for the Board and management.
This includes the undertaking of routine stress testing on an ongoing basis.
The key assumptions and risk drivers used to create the stress tests are regularly monitored and reported, and are used
in determining how we will evolve our capital resources and ensure they are appropriate for growth.
The ICAAP is used to assess the adequacy and efficiency of our capital resources required to support our business model.
Monitoring
We consider both short-term forecasts and medium-term plans, and our overall agreed risk appetite.
We also develop appropriate strategies under market stress conditions to manage those risks to capital and consider both
past events and customer behaviour to inform our analysis, and to validate our robustness. This process is used to ensure
that we apply appropriate management buffers to regulatory capital requirements in line with risk appetite.
We manage and monitor capital in accordance with prudential rules issued by the PRA and FCA, in line with the EU Capital
Requirements Directive, in addition to our own internal reporting measures. We are committed to maintaining a strong
capital base under both existing and future regulatory requirements.
During the course of 2021 we prepared for the implementation of CRD V/CRR 2 which came into effect on 1 January 2022.
Table 24: Regulatory capital
CET1 capital
Risk-weighted assets
CET1 ratio
Total regulatory capital ratio
Total regulatory capital plus MREL ratio
Regulatory leverage ratio
Table 25: Capital resources
Audited
Ordinary share capital
Share premium
Retained losses
Other reserves
Intangible assets
Other regulatory adjustments
Total Tier 1 capital (CET1)
Debt securities (Tier 2)
Total Tier 2 capital
Total regulatory capital
2021
£ million
936
7,454
12.6%
15.9%
20.5%
4.4%
2020
£ million
1,192
7,957
15.0%
18.1%
22.4%
5.6%
31 December
2021
£ million
31 December
2020
£ million
–
1,964
(942)
13
(243)
144
936
249
249
1,184
–
1,964
(694)
19
(254)
157
1,192
249
249
1,441
Metro Bank PLC Annual Report & Accounts 2021
85
Strategic reportFinancial statementsGovernanceAdditional information Risk report continued
Model risk
Model risk management
Appetite
We have a moderate appetite for risk due to errors on the development, implementation or use of models which we
mitigate via effective governance over the specification and design, implementation and running of our models and over
model input data.
Assessment and monitoring
Assessment
Model risk assessment underpins and supports a robust model risk governance process. An overarching model governance
policy sets out the roles and responsibilities of the various stakeholders in the model risk management framework,
including those of the three lines of defence, and underpinned by model development, monitoring, validation, and
implementation standards. Model risk is assessed across several dimensions as set out in the model governance policy
including materiality, regulatory reporting, loss computations and model risk complexity. These ensure that high and
medium material models are escalated through to oversight committees.
Monitoring
The Credit Risk Modelling team is responsible for assessing the ongoing performance of credit risk models against pre-
specified tolerances approved by the Model Governance Committee as part of model monitoring standards. Non-credit
risk models are subject to a similar monitoring process; however, this is undertaken by the relevant user areas. Model
performance is regularly monitored, and results are discussed both at the Model Governance Committee and Model
Oversight Committee, where actions are agreed and tracked to completion.
Mitigation
Governance
The main mitigant to model risk is a robust governance process established by the Bank, which includes two dedicated
model committees:
– Model Oversight Committee – which is the designated committee for the management of model risk.
– Model Governance Committee – which is the technical sub-committee of the Model Oversight Committee overseeing
model risk lifecycle.
High and Medium materiality models are presented to the Model Oversight Committee for approval via the Model
Governance Committee, ahead of implementation or model changes.
The Model Oversight Committee defines and approves standards relevant to model risk and recommends changes to the
model governance policy and model risk appetite to the Risk Oversight Committee for approval on an annual basis. The
Model Governance Committee owns the minimum standards and target operating models to mitigate model risk. It also
defines roles and responsibilities, with clear ownership and accountability.
The Model Governance function maintains a model inventory, which records key features of models including inter alia,
ownership, governance status, materiality, and review schedules. The Model Governance function also tracks model risk
and actions from both the Model Oversight Committee and Model Governance Committee.
Independent review and challenge
We have established, in line with industry best practice, an independent Model Validation team. The team is responsible for
reviewing and challenging all financial and non-financial model development submissions to ensure appropriateness and
alignment with regulatory expectations. It maintains a model validation action log to track model risk remediation plans.
Measurement
Model risks are measured through the creation and presentation of a model risk appetite reporting framework to the
various governance committees. This risk appetite is defined using several key risk indicators reported in a RAG (Red,
Amber, Green) assessment status across each indicator. These are regularly reported and discussed based on materiality
at the Model Governance Committee, Model Oversight Committee with a quarterly update provided to Executive Risk
Committee and Risk Oversight Committee. All amber and red status indicators are discussed in the various governance
forums and remediation action approved at the Model Oversight Committee.
86
Metro Bank PLC Annual Report & Accounts 2021
Financial crime risk
Financial crime risk management
Appetite
We have no appetite for establishing or maintaining customer relationships or executing transactions that facilitate financial
crime and have no appetite for sanctions breaches. Relationships with customers where it is felt that the financial crime
risks are too great to manage effectively will be ended and continual investment is made in our expertise, partnerships and
systems to improve our management of risk in this area. We will not tolerate any deliberate breach of financial crime laws
and regulations that apply to our business and the transactions we undertake.
Assessment and monitoring
We monitor compliance with policies and standards through a range of checking and assurance activities completed by
dedicated and skilled resources. This includes quality checking and assurance within operational and first line risk teams,
supported by Assurance and Internal Audit reviews of key Financial Crime controls carried out by second and third line
teams. In addition we complete a Financial Crime Risk Assessment to assess and manage inherent and residual risk.
Mitigation
Investment in our systems and controls
Our Financial Crime Improvement Programme, which was mobilised in 2020, continued to deliver enhancements to our
financial crime systems and controls throughout 2021. Looking forward into 2022, the programme will continue to invest
in strategic technology solutions to ensure that our approach to Financial Crime risk management remains effective as the
Bank grows.
We continue to conduct horizon scanning activity to identify emerging trends and typologies as well as to identify and
prepare for new legislation and regulation to ensure our policies and standards are appropriate. This includes participating
in key industry forums (or associations) such as those hosted by UK Finance. As required, we will update our control
framework to ensure emerging risks are identified and mitigated.
Screening for politically exposed persons and customer transaction monitoring is carried out by Financial Crime
Operations. Sanctions screening for payments is carried out by the payments team in the first line. The effectiveness and
performance of these systems are discussed through internal governance and independently tested on a periodic basis.
Resourcing and training
Resourcing continues to be a significant focus for the Bank to ensure the Financial Crime Framework is implemented
effectively. Over the course of 2022, we continued to invest in skilled resource with headcount increasing across
operational, first and second line Financial Crime teams.
All colleagues have a key role to play in our management of Financial Crime risk. To this extent, all colleagues receive
financial crime training, ensuring they are able to meet their personal regulatory obligations. Over 2021, we also invested
in risk-based, role-based training to provide further Financial Crime training for colleagues. For colleagues in specialist
Financial Crime roles, we continue to invest in their development to improve capabilities through industry-recognised
financial crime qualifications.
Sanctions compliance
We comply with applicable sanctions regimes and have delivered a number of enhancements to sanctions controls over
the course of 2021. We continue to review our sanctions compliance framework with the support of external advisers,
following our notifications to regulators on the sanctions matters discovered in 2017 and 2019.
Anti-money laundering and combating terrorist financing prevention
We comply with all relevant UK Anti-Money Laundering and Combating Terrorist Financing legislation and have a
framework in place to ensure the implementation of these requirements into our systems and controls. In 2020 and 2021,
the Financial Crime Improvement Programme has delivered enhancements to key anti-money laundering and counter-
terrorism financing controls including customer due diligence capabilities and customer screening capabilities.
Anti-bribery and corruption and anti-tax evasion compliance
We comply with the UK Bribery Act 2010 and have no appetite for undertaking and/or facilitating bribery and/or
corruption and will always avoid giving or receiving improper financial or other benefits in our business operations. We also
comply with the Criminal Finances Act 2017 and have no appetite to any facilitation of tax evasion. We are committed to
acting professionally, fairly and with integrity in all our business dealings and relationships.
Measurement
Our Financial Crime Risk appetite is reflected in key risk appetite metrics – a set of quantitative metrics, reported monthly
through our governance. Where control performance is assessed as outside of our risk appetite, the issue plus remediation
activity is escalated and tracked through our risk committees.
Metro Bank PLC Annual Report & Accounts 2021
87
Strategic reportFinancial statementsGovernanceAdditional information Risk report continued
Regulatory risk
Regulatory risk management
Appetite
We have a low appetite for regulatory risk. We seek to minimise regulatory risk by maintaining robust systems and controls
that are designed to meet existing regulatory requirements and to comply with future changes to the regulatory landscape.
Mitigation
The following controls and procedures help to mitigate regulatory risk:
– A Regulatory Risk Framework (with supporting policy and standards), sets out our Regulatory Risk Appetite Statement,
key regulatory requirements, defined governance and approach to risk identification and monitoring.
– Ongoing development, maintenance and reporting of Regulatory Risk appetite measures (aligned to the risk taxonomy)
to the Executive Risk Committee and the Board.
– Oversight and ongoing review of regulatory risk and issues (including breaches) in relevant business risk and oversight
risk committees, including key regulatory change initiatives, incidents and remediation.
– Ongoing horizon scanning in preparedness of upcoming regulatory change and agility to business prioritisation.
– Maintenance of proactive and coordinated engagement with our regulators.
– Consideration of regulatory requirements in the context of product and proposition development, ongoing review, and
associated appropriate governance.
– A risk-based assurance framework, designed to monitor compliance with regulation and assess customer outcomes.
Measurement
Regulatory Risk is measured on a quantitative and qualitative basis which includes a progress review of top risks and issues
under management against material regulatory initiatives and our relationship with our regulators, as well as a defined set
of Board-approved Level 1 risk appetite metrics relating to major/critical regulatory breaches, high risk assurance and audit
findings, incidents and implementation of material regulatory change.
Monitoring
Regulatory Risk is considered by all three lines of defence as part of their oversight and assurance activities. A Combined
Risk Assurance plan, approved by the Executive Risk Committee on an annual basis, independently assesses areas of the
control framework underpinning compliance with laws and regulations.
Additionally, a clear governance structure is in place which enables escalation of Regulatory Risk from the first line risk
committees through to the relevant second line oversight committees, including track and challenge of adherence to our
risk appetite through the Bank Risk Report. Our Board, Risk Oversight Committee and Executive Risk Committee in turn
monitor and oversee our focus on maintaining regulatory compliance. As well as the Bank Risk Report, this also includes
periodic reporting on regulatory themes and key focus areas aligned to the regulators strategic priorities, regulatory
changes on the horizon and the regulatory environment, alongside supporting key risk appetite measures and Board-
approved frameworks.
Conduct risk
Conduct risk management
Appetite
We have a low appetite for conduct risk. We seek to minimise conduct risk by maintaining robust systems and controls that
consistently deliver fair customer outcomes. Where unfair outcomes are identified they must be remediated effectively to
minimise risk, prevent recurrence and reduce customer harm.
Mitigation
The following controls and procedures help to mitigate conduct risk:
– A Conduct Risk Framework (with supporting policy and standards), sets out our Conduct Risk Appetite Statement, key
regulatory requirements, principles and expectations including drivers of customer harm, defined governance and
approach to risk identification and monitoring.
– Ongoing development, maintenance and reporting of Conduct Risk appetite measures (aligned to the risk taxonomy)
inclusive of customer outcome measures, to the Executive Risk Committee and the Board.
– Oversight and ongoing review of conduct risk and issues in relevant business risk and oversight risk committees, including
progress against key customer remediation projects, complaints, vulnerable customers and arrears.
88
Metro Bank PLC Annual Report & Accounts 2021
– Maintenance of proactive and coordinated engagement with our regulators around key customer initiatives, e.g.
vulnerable customers, and customer impacts where material incidents are identified.
– Consideration of customer profiles, target markets, fair value, and customer needs and vulnerability in the context of
product and proposition development, ongoing review, and associated appropriate governance.
– Ongoing quality assurance and review measures to assess delivery of fair customer outcomes, supported and embedded
through training.
– Embedding of delivering fair customer outcomes as part of our culture through the AMAZEING values which includes
‘make every wrong right’ that where conduct risks are identified, resources and expertise are dedicated to swift
remediation action to appropriately mitigate any issues, avoid recurrence and, if detriment has occurred, the scale of the
harm is quantified to address this with impacted customers.
– A risk-based assurance framework, designed to monitor compliance with regulation and assess customer outcomes.
Measurement
Conduct Risk is measured on a quantitative and qualitative basis which includes a progress review of top risks and issues
under management against key conduct priorities set by the Regulator, as well as a defined set of Board-approved Level 1
risk appetite metrics relating to Expressions of Dissatisfaction, Arrears, Vulnerable Customers and Product Governance
performance and customer outcome delivery.
Monitoring
Conduct Risk is considered by all three lines of defence as part of their oversight and assurance activities. A Combined Risk
Assurance plan, approved by the Executive Risk Committee on an annual basis, independently assesses our ability to
appropriately mitigate this risk through its controls and decision making (where relevant).
Additionally, a clear governance structure is in place which enables escalation of Conduct Risk from the first line risk
committees through to the relevant second line oversight committees, including track and challenge of adherence to our risk
appetite through the Bank Risk Report. Our Board, Risk Oversight Committee and Executive Risk Committee in turn monitor
and oversee our focus on managing appetite against this risk. As well as the Bank Risk Report, this also includes periodic
reporting on key conduct themes, alongside supporting key risk appetite measures and Board-approved frameworks.
Operational risk
Operational risk management
Appetite
We maintain a low appetite for Operational Risk. We aim to minimise incidents and losses arising from operational risk
issues by maintaining a resilient infrastructure, including robust systems, employing and training the right colleagues,
minimising the impact of external events and having a framework in place to ensure that operational risks are identified,
assessed, responded to and monitored.
Assessment and monitoring
We continuously develop and embed our approach to the management of Operational Risks and maintain robust
operational processes, systems and controls, including conducting Risk and Control Self-Assessments across the Bank, in
accordance with our Operational Risk Management Framework. Operational risk is overseen by the CRO and teams in the
first and second lines of defence, monitored via reporting to the Business Risk Committees, second-line risk oversight
committees, Executive Risk Committee and Risk Oversight Committee.
Mitigation
We have detailed frameworks, policies, standards and controls in place designed to mitigate Operational Risks both
through minimising impacts suffered in the normal course of business (expected losses) and to avoid or reduce the
likelihood of suffering a large extreme (or unexpected) loss.
Measurement
Material Operational Risk events are identified, reviewed and escalated in line with criteria set out in the Enterprise and
Operational Risk Management Frameworks. Root cause analysis is undertaken and action plans are implemented to
prevent recurrence and continually improve our processes. We measure Operational Risk using a number of quantitative
metrics, via which compliance with our risk appetite is reported to the committees set out above. We conduct regular
Operational Risk scenario workshops to identify severe yet plausible events which could impact the Bank, to ensure that
we quantify the potential losses that such events could cause and hold sufficient capital against them.
Metro Bank PLC Annual Report & Accounts 2021
89
Strategic reportFinancial statementsGovernanceAdditional information Risk report continued
Cyber and information security
Our Chief Information Security Officer (CISO) is responsible for ensuring robust cyber and information security. We
continuously invest in our cyber and information security infrastructure in order to improve services, protect customer data
and minimise the risk of disruption. We also take pre-emptive actions to safeguard the end-to-end resilience of critical
processes. We continue to enhance the control environment, recognising the changing cyber landscape and the increased
focus on digital capabilities and reliance on home working, as well as the changing risk profile of the business.
Operational resilience
Operational Resilience is an outcome of our ability to proactively prevent, adapt, respond, recover, and learn from
operational disruption events. By identifying and monitoring our Important Business Services, we continue to ensure that
adequate controls remain in place, including management of the technology upon which they rely, to minimise disruption.
Fraud prevention
We have continued to invest in fraud prevention tools and capabilities in 2021. This, in addition to historic investment, has
resulted in significant savings by preventing attempted frauds against our customers and the Bank itself and involves our
dedicated team monitoring fraudsters targeting our customers through authorised and unauthorised payment fraud
attempts, with scams in particular presenting a growing threat. We share fraud prevention trends and best practice via our
various communication channels to help protect our customers against such attacks.
Viability statement
Assessment of principal risk
The Board is responsible for monitoring the nature and extent of the principal risks it faces as well as determining the level
of appetite it is willing to take in order to achieve its strategic objectives. The principal risks the Group actively monitors
and manages are described on pages 52 to 90 which includes the Group’s appetite, measurement, monitoring and
mitigation approach.
In line with the requirements of the Corporate Governance Code (“the Code”), the Directors have performed a robust
assessment of the principal risks facing the Group, including those that would threaten its business model and impact the
Group’s performance, capital or liquidity. The Group’s business model is set out on pages 10 to 13 which also show how this
links to the Group’s principal risks.
Risk management and internal controls
As described in the Corporate governance report on page 108, 115 and 150 as well as the Risk report on pages 56 to 58, the
Group’s risk management and internal control systems are monitored at Board level. A review of the effectiveness of those
systems has been performed incorporating all material controls, including financial, operational and compliance controls.
Assessment of prospects
The Directors have an obligation in accordance with provision 31 of the Code to confirm that they believe that the Group
will be able to continue in operation, and to meet their liabilities as they fall due.
The Group’s prospects are assessed primarily through its strategic planning process (“Long Term Plan”), the first year of
which reflects the Group’s 2022 budget. This process includes an annual review of the ongoing plan, led by the CEO
through the Executive Committee and Board. The Board participates fully in the annual process and is responsible for
signing off the plan and in doing so consider whether the plan continues to take appropriate account of the external
environment (see external market review on pages 16 to 19 for further details). The latest updates to the Long Term Plan
(covering the period 2022 to 2026) were formally approved by the Board in February 2022.
The Group’s business model and strategic priorities (see pages 10 to 13 and 20 to 21) are central to an understanding of its
prospects. The nature of the Group’s activities is long-term and the Group’s business model has remained unchanged since
it was founded 11 years ago. The Group’s current strategy was launched at the start of 2020 and good progress has been
made in delivering this, (see Chief Executive Officer’s statement on pages 8 and 9 for further details). The Group’s strategy
is subject to the ongoing monitoring to ensure it remains appropriate.
The Group’s strategy is based on a combination of balance sheet management, revenue growth and cost control.
Alongside this the strategy focuses on infrastructure investment, with decisions on new investment being taken based on
the long term benefits they will provide. Although decisions are taken for the long term any investment has to align with the
Group’s appetite for risk as well as be able to demonstrate an appropriate payback period. The Directors have reviewed the
assumptions underpinning the Group’s plan and strategy and have determined they are appropriate in the context of the
Group’s overall risk profile.
90
Metro Bank PLC Annual Report & Accounts 2021
Whilst the Group’s Long Term Plan covers a five year period to 31 December 2026, the Directors have assessed prospects
and viability for the four years through to 31 December 2025. This is felt appropriate as this is the period over which
forecasts have a greater level of certainty (although the fifth year still provides a robust planning tool against which
strategic decisions can be made). The assessment has included reviewing the plan against the Group’s principal risks (as
detailed on pages 52 to 90) to examine those matters that could prevent the Group from delivering on its strategy. Of the
Group’s principal risks only:
– operational failure (operational risk);
– a lack of liquidity (liquidity and funding risk); or
– insufficient capital (capital risk)
were felt could directly lead to the business not being able to continue in its current form if they were to occur (although a
failure of the Group’s other principal risks could lead to one of these events). Of these three risks, insufficient capital is
where there is most uncertainty and where extra consideration was given by the Directors in their assessment. These key
risks were also considered as part of the assessment of the Group’s viability, as explained below.
One of the key assumptions in the Long Term Plan is the Group’s ability to raise qualifying debt over the forecast period to
fund anticipated growth and to meet regulatory requirements. This raising of qualifying debt may require changes to the
organisational structure of the Group, as well as various regulatory approvals.
Assessment of viability and going concern
Although the Group’s Long Term Plan reflects the Directors’ best estimate of the future prospects of the business, they
have also tested the potential impact on the Group by examining the sensitivity to ‘severe but plausible’ changes to the
assumptions. This has been undertaken via the creation of scenarios that reflect downside (stressed) cases by overlaying
additional risks into the forecasts (primarily reflecting the aforementioned principals risks).
The main downside scenarios tested included:
– Increased costs of raising qualifying debt compared to those envisaged in the plan.
– An economic stress.
– Delays in the delivery of key strategic priorities which are assumed as part of the plans (see pages 20 and 21).
The results of this stress testing showed that the Group would be able to withstand the impact of these scenarios over the
assessment period and would retain sufficient capital (over and above regulatory minima).
In addition to the scenarios above, the Directors also considered a more severe scenario that combined elements of some
of the standalone scenarios. In this scenario the Group temporarily fell below regulatory minima for a limited period of time
before quickly recovering. The Directors considered the appropriate actions that could reasonably be deployed to allow
the Group to continue to remain above regulatory minima. This involved making reasonable adjustments to the Group’s
operating plans, including temporary cost reductions and additional balance sheet management in the form of portfolio
disposals. These mitigating actions are in line with those the Group has previously undertaken and therefore did not of
themselves constitute any additional risk.
In addition to the scenarios outlined above the Group undertakes routine stress testing on an ongoing basis for both
management and regulatory purposes. This includes conducting reverse stress tests, whereby the Group looks at the
factors and assumptions that would have to exist for it not to be viable. The results are then assessed to understand the
likelihood of such events occurring and what mitigating actions could be taken if necessary. The results of the stress testing
performed to date are in line with the assessment outlined above and has not given rise to any additional factors that
would impact either the Group’s viability or going concern.
Viability
Based on their assessment of prospects and viability above, the Directors confirm that they have a reasonable expectation
that the Group will be able to continue in operation and meet its liabilities as they fall due over the four year assessment
period to 31 December 2025.
Going concern
The Directors also considered it appropriate to prepare the financial statements on the going concern basis, as explained in
the basis of preparation paragraph in note 1 to the accounts.
This Strategic Report was approved by the Board and was signed on its behalf by:
Daniel Frumkin
23 March 2022
Metro Bank PLC Annual Report & Accounts 2021
91
Strategic reportFinancial statementsGovernanceAdditional information
Corporate governance
introduction
ROBERT SHARPE
CHAIR
I am pleased to set out Metro Bank’s
corporate governance report on
behalf of the Board as I mark my
first full year since being appointed
as Chair in November 2020. While
there remains significant internal
and external headwinds, our
performance this year has shown
the robustness of our strategy
centred on our five strategic pillars
and the strength of the Bank’s
management team.
Despite the challenges we face, I am
pleased with the progress we have
made towards returning to profitability.
The RateSetter integration has
continued to progress well and the
business is making significant steps
in developing our unsecured lending
offering, which is a key driver of
revenue for the Bank.
We held our first strategy away day
in September this year in Manchester.
As part of the two-day session, the
Board got the opportunity to meet
with colleagues from the Manchester,
Sheffield, Liverpool and Bradford
stores. It was great to see the zest and
dynamism of our colleagues, despite
the challenges they have faced as a
result of the pandemic. My fellow
Board members and I were pleased to
have the opportunity for detailed
discussions including in-depth
challenge with the Executives that the
strategy day provided. In particular, we
considered a range of proposed new
initiatives which will better meet the
needs of our customers and accelerate
the Bank’s journey to profitability.
More information on the strategy away
day can be found on page 97.
In 2021, the Board made the difficult
decision to close three Metro Bank
stores. This decision was made after
great deliberation and detailed
consideration of the impact this will
have on our stakeholders.
I would like to thank the Financial
Reporting Council for the letter
received in relation to their review of
our Annual Report and Accounts for the
year ended 31 December 2020. The
results were positive and the suggested
matters for review have been discussed
by our Audit Committee and relevant
actions or amendments, where
appropriate, have been considered and
reflected in this year’s Annual Report.
The PRA investigation into our
regulatory reporting concluded
in December 2021. A provision for
the settlement of the related FCA
investigation is included in the accounts.
Leadership
We made a number of changes to the
membership of the Board in 2020.
During 2021 the Board and I have
continued to build our knowledge of the
business and develop our working
rapport with one another. I am pleased
to report that the new Board has
embedded well and is working together
effectively. This was reflected in both
the results of our internal Board
evaluation and the PRA Governance
Review which was carried out earlier
in the year. Monique Melis has been
appointed as Senior Independent
Director (subject to regulatory approval),
following Sir Michael Snyder’s retirement
at the end of October. I would like
to take this opportunity to thank Sir
Michael on behalf of the Board for his
significant contribution to the Bank
during his tenure. He served in a
number of roles, including Audit
Committee Chair,
Senior Independent Director
and latterly Interim Chairman. His
strength of leadership and tenacity
has been of great value to the Bank.
Following Monique’s appointment
as Senior Independent Director (SID),
I took over the role of Chair of the
Nomination Committee and I look
forward to leading the important work
of this committee during 2022
and beyond.
As announced on 15 February 2022,
David Arden, Chief Financial Officer,
agreed with the Board to step down
from the Board with immediate effect
and leave the business on 1 April 2022.
On behalf of the Board I would like to
thank David for the important work
that he has done to strengthen
Metro Bank’s financial controls over
the past two years. He has played an
instrumental role in helping to deliver
the Bank’s strategic priorities and
turnaround plan and leaves with our
best wishes for the future. The
Nomination Committee will oversee
the search for a short-medium and
long-term replacement for the role.
This year, the Nomination Committee
has directed its attention to long-term
succession planning, and the mix of
skills, experience, diversity and
independence on our Board and Board
Committees. More information on the
work of our Nomination Committee
can be found on pages 122-125.
As part of the agenda for 2021, the
Board received regular updates on
culture, including current and future
initiatives to define, measure and
sustain culture at the Bank as well as
updates from our Non-Executive
Director for Colleague Engagement. At
Metro Bank, our unique and pervasive
culture is what sets us apart. Being part
of a strong culture brings a sense of
purpose, belonging and unity. When
our culture is thriving, it can be felt and
experienced by anyone who interacts
with the Bank, from customers to
colleagues to shareholders, and it is
woven into every decision we make.
This is what will ultimately assist us in
creating more FANS and creating a
profitable, safe and sustainable
organisation for the future.
92
Metro Bank PLC Annual Report & Accounts 2021
Governance
Our aim in this corporate governance
report is to provide a clear and
meaningful explanation of how the
Bank applies the principles of the 2018
UK Corporate Governance Code (the
‘Code’) and how our Board provides
oversight of the Bank and discharges
our governance duties. It also outlines
the governance initiatives we have
undertaken during the year.
Following the externally facilitated
Board evaluation in 2020, this year
we conducted an internal evaluation
with the assistance of the Company
Secretary. This evaluation focused on
our overall effectiveness, building
upon the themes that came out of the
previous external evaluation as well as
specific areas of focus as agreed with
the Board and Committee Chairs.
Overall, the results were positive and
are testament to the progress we have
made as a new Board and the strength
of our working relationships and
practices. The details of this evaluation
can be found on page 107.
The continuing restrictions imposed by
COVID-19 meant that our AGM in May
2021 was held virtually for the second
year in a row. I would like to thank
shareholders for the overwhelming
support received for all resolutions,
including to implement the new
Directors’ Remuneration Policy. Our
Remuneration Policy is now better
aligned with wider market practice
and is linked to our turnaround plan,
thereby creating better incentive for
colleagues to deliver the plan. I am
very much looking forward to our
2022 AGM, which I hope will provide
us with an opportunity to meet with
shareholders face to face.
Future Priorities
I fundamentally believe that to be a
successful bank, we must continue to
offer both physical and digital services.
The Bank remains committed to the
community banking model, with our
store presence being the differentiator
for our customers and FANS. We
continue to be rated the top high
COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE
(THE CODE)
Good corporate governance is essential to our ambition in becoming the
UK’s best community bank.
The table below details where key content on the compliance with the
Code can be found in this report. During 2021, there was one instance of
non-compliance with the detailed provisions of the Code and we have set
out our explanation below.
Board Leadership and Company Purpose
Corporate governance introduction – page 92
Section 172 Statement – page 41
Board of Directors – page 94
2021 governance at a glance – page 97
Strategic priorities – page 20
Business model – page 10
Division of Responsibilities
Board roles and responsibilities – page 106
Board and Committee attendance – page 97
Composition, Succession and Evaluation
Board of Directors – page 94
Board and Committee Evaluation – page 107
Audit, Risk and Internal Controls
Board Independence – page 97
Nomination Committee report – page 122
Audit Committee report – page 110
Risk Report – page 52
Remuneration
Remuneration Committee report – page 126
Annual report on Remuneration – page 137
Provision 38 – The pension contribution rates
for executive directors, or payments in lieu,
should be aligned with those available to
colleagues.
Explanation – As per the Bank’s Remuneration
Policy, any new Executive Director hire will
have a maximum pension contribution at a
level aligned with those available to colleagues,
which is currently at a rate of 8% of base salary.
The pension contribution rate for the former
CFO was 10% of base salary during the year
under review. This will be reduced to a level
aligned with those available to colleagues
for any new hire into the role. In line with the
latest FRC Guidance we have recognised
this as an area of non-compliance with the
Code during 2021, and as explained, we are
committed to ensuring our executive
pension contributions are fully aligned with
the provisions of the Code.
street bank for overall service quality
for personal and business customers
in the latest Competition and Markets
Authority (CMA) Service Quality
rankings and number one for store
service for the eighth time running.
I was delighted to see the successful
grand opening of our newest store in
Leicester in late February 2022. We
have made great advances in our
digital products for both personal and
business customers and we continue
to invest further into creating products
and services that meet the needs of
our diverse customer base and create
an even better consumer experience
for our FANS. Looking forwards to
2022, I remain very positive about
the future of the Bank and the further
progress we will make as we get even
closer to the return to profitability.
As a Board, our focus will be on
continuing to provide effective
oversight of management to ensure
we have a robust capital position,
a strong discipline on costs, and an
unrelenting focus on serving our
customers and shareholders.
Robert Sharpe
Chair
23 March 2022
Metro Bank PLC Annual Report & Accounts 2021
93
Strategic reportFinancial statementsGovernanceAdditional information Board of Directors
as at date of publication
N
A N
R
ROBERT SHARPE
CHAIR
Appointed to the Board
1 November 2020
Robert has over 45 years’ experience
in retail banking. He is currently Chair at
Hampshire Trust Bank plc, Honeycomb
Investment Trust plc and Aspinall
Financial Services Limited. He has had
an extensive number of appointments
both in the UK and the Middle East
including Chair of Bank of Ireland (UK)
plc, Vaultex Limited and RIAS plc. He
has also been a NED at Aldermore Bank
plc, George Wimpy plc, Barclays Bank
UK Retirement Fund, LSL Properties
plc, and several independent NED roles
at banks in Qatar, UAE, Oman and
Turkey. Robert was previously CEO at
West Bromwich Building Society, a role
he took to chart and implement its
rescue plan. Prior to this, he was CEO
at Portman Building Society, Bank of
Ireland (UK)’s consumer business in the
UK and Bank of America’s UK retail
banking business.
DANIEL FRUMKIN
CHIEF EXECUTIVE OFFICER
ANNA (MONIQUE) MELIS
SID
ANNE GRIM
INED
Appointed to the Board 1 January 2020
Appointed to the Board 20 June 2017
Appointed to the Board 20 April 2020
Daniel is responsible for leading
the Bank – with a focus on driving
long-term growth by delivering great
customer service at the right cost, to
create even more FANS. Prior to joining
Metro Bank, Daniel worked in America,
the UK, Eastern Europe and Bermuda.
He has performed business, risk,
product and commercial executive
level roles throughout his career. Most
recently, Daniel was Group Chief
Operating Officer at Butterfield Bank,
with responsibility for eight jurisdictions
across the globe covering a range of
business and support areas.
Monique is a Managing Director and
the Global Service Line Leader of the
Financial Services Regulatory practice
at KROLL Advisory Ltd. She is also a
Director of the KROLL Luxembourg
Management Company Board. With
extensive financial services and
regulatory experience across
established and growth markets, her
appointments have included Executive
Board member at Kinetic Partners and
roles at the Cayman Islands Regulator
and Stock Exchange, the Financial
Services Authority and the Securities
and Futures Authority. Monique has
recently been appointed as a NED at
The Bank of London.
Anne is currently a NED of Plus500,
Insight Investment Funds Management
Limited and Openwork Holdings
Limited. Anne is an experienced
executive turned advisor, consultant
and NED with more than 30 years in
senior financial services leadership
roles at Barclays, Wells Fargo,
American Express, Mastercard and
most recently as Chief Customer
Officer at Fidelity International. Her
expertise is in customer experience,
strategic planning and execution,
technology innovation and business
transformation. In addition, she is
currently an advisor to the Investment
Association’s FinTech Engine, a Trustee
on the UK board of Opportunity
International and a Director of CXpertin
Ltd. Anne was a NED of Retail Money
Market Ltd (RateSetter) until
31 December 2021.
R
N
A O
ONR
MICHAEL TORPEY
INED
Appointed to the Board
1 September 2019
Michael retired from the position of
Chief Executive of the Corporate &
Treasury division and Member of the
Group Executive Committee at Bank
of Ireland in August 2018. He has
extensive experience in senior roles
across financial services. His past
appointments include: Head of Banking
at the National Treasury Management
Agency in Ireland; Group Treasurer
at Irish Life and Permanent plc; Senior
Treasury Adviser at Irish Financial
Regulator; Finance Director at Ulster
Bank Group; and Finance Director at
First Active plc.
PAUL THANDI CBE
INED
Appointed to the Board 1 January 2019
Paul is an experienced CEO, Chair and
NED with diverse international media
and service-led experience with an
emphasis on people, innovation, data
and culture. Paul is CEO of the NEC
Group in Birmingham and has
successfully steered the NEC on a
journey from public sector ownership,
to a £307 million management buyout
in 2015, and then an acquisition of the
NEC Group by Blackstone in 2018.
In addition, Paul sits on the Board of
the West Midlands Growth Company
Limited, the British Allied Trades
Federation, is a patron of Marie Curie
and sits on the Advisory Board of
Bowel Cancer UK. Paul is Deputy
Lieutenant of West Midlands
Lieutenancy, representing the Queen
in the region, and was awarded a CBE
for services to the economy in The
Queen’s New Year’s Honours List 2020.
CATHERINE BROWN
INED
Appointed to the Board 1 October 2018
Catherine holds various NED roles
including: NED of FNZ (UK) Limited
and NED of QBE Underwriting Limited
and QBE UK Limited, and
Chair and NED of Additive Flow Limited
and The Plastic Economy Limited.
Until 31 March 2020, she was a NED at
the Cabinet Office. In mid-2019, she
joined QBE Underwriting Limited (QBE
UK Ltd), one of the world’s leading
international insurers, as a NED for the
UK. She is a Trustee of Cancer Research
UK, one of the UK’s largest charities.
Catherine has extensive experience
in organisational transformation in
financial services and a wide range
of experience in leadership and
operations. Her previous appointments
include: Group Strategy Director at
Lloyds Banking Group, Executive
Director of Human Resources at the
Bank of England and Chief Operating
Officer at Apax Partners.
A R
SALLY CLARK
INED AND DNED FOR COLLEAGUE
ENGAGEMENT
Appointed to the Board 1 January 2020
Sally is a NED and Chair of the Audit
Committee for Citigroup Global Markets
Ltd, as well as a member of the Risk and
the Nomination Committees. Sally is
also a Director and advisor at Acin, the
data standards firm for non-financial
risk and controls. She is on the Advisory
Board of Career Masterclass, a platform
providing training, events, mentoring
and other content to enable BAME
colleagues to reach their potential.
Sally is also an Executive Coach and
Leadership Advisor to Board and
C-suite clients which she does through
Pelham Street Leadership Advisory.
Previously, she was Chief Internal
Auditor at Barclays Internal Audit (BIA)
from 2014 to 2019. Her role was to run
the 650-strong global function providing
assurance to key stakeholders on the
effectiveness of the control environment
at Barclays. A qualified executive coach
and Fellow of the Institute of Leadership
and Management, Sally also mentored
staff within Barclays and was the ExCo
sponsor for the wellbeing agenda. She
served on the Council of the Institute of
Internal Auditors for three years and
was Deputy President in 2018/19.
94
Metro Bank PLC Annual Report & Accounts 2021
KEY TO COMMITTEES
A
O
N
R
Audit
Risk Oversight
Nomination
Remuneration
A O
O
IAN HENDERSON
INED
NICHOLAS WINSOR MBE
INED
MELISSA CONWAY
COMPANY SECRETARY
Appointed to the Board 20 April 2020
Appointed to the Board 20 April 2020
Appointed 1 December 2020
Ian is currently CEO of Kyckr, an
Australian listed RegTech business
providing global KYC solutions to
banks, payments services providers
and other regulated businesses. He
joined Kyckr after a 30-year career in
retail and business banking and wealth
management. Ian is also a Member
Trustee of the Chartered Bankers
Institute. Since 2012, he has been
actively involved in the UK challenger
bank sector holding CEO roles at
Arbuthnot Latham & Co Limited,
Kensington Mortgages, and Shawbrook
Bank. Prior to this, he was Chief
Operating Officer of the Private
Banking Businesses in Barclays Wealth
and before that he was with RBS for 21
years. His final role there was as CEO of
RBS International. He also held the
positions of Chief Operating Officer
Retail Banking and Marketing Director
RBS & NatWest. Ian holds degrees in
Economics and Finance from Scottish
and Canadian universities and an MBA.
Nick is an independent consultant and
NED. He is a NED of Schroder Oriental
Income Limited, Chair of its Nomination
and Remuneration Committee and a
member of its Audit and Management
Engagement committees. He is also a
NED of the States of Jersey Development
Company, Chair of its Remuneration and
Nomination Committee and a member of
the Deal Advisory Panel. Nick has more
than 35 years of international banking
experience with HSBC Group in a number
of markets: Brunei; Channel Islands; Hong
Kong; India; Japan; Qatar; Singapore;
Taiwan; United Arab Emirates and the
United Kingdom. He was Chief Executive
Officer of HSBC Group’s businesses in
Channel Islands and Taiwan and a Director
of HSBC Bank Middle East Limited. Nick
is also Chair of Autism Jersey and was
awarded an MBE for services to the
community in the Queen’s 2020 Birthday
Honours List. He holds a Masters in
Physics from Oxford University and is
a Fellow of the Institute of Directors.
Melissa joined Metro Bank as Deputy
Company Secretary in 2017 and was
appointed as Company Secretary in
December 2020. During that time
she was responsible for building the
Company Secretary function and
worked closely with the Board on
a number of key governance tasks
including the appointment of the new
CEO and permanent Chair. Melissa is
an experienced Company Secretary
with extensive listed company
experience having held roles at HSBC
Group and Henderson Global Investors
(now Janus Henderson) prior to joining
Metro Bank. Melissa acts as Secretary
to the Board, the Remuneration
and Nomination Committee and
also supports the Bank’s Executive
Committee. She holds a Bachelor of
Laws degree from the University of
Sheffield and is an associate of the
Institute of Chartered Secretaries
and Administrators.
Overview of Board skills as at date of report
(% of Board Directors)
Retail Banking
Risk and Compliance
Regulatory
Board Resignation
After Year-End
100
DAVID ARDEN
CHIEF FINANCIAL OFFICER
Appointed to the Board 29 March 2018
and resigned on 15 February 2022
90
90
Finance, Audit and Accounting
50
People and Culture
Digital and Technology
Transformation
30
70
80
0
20
40
60
80
100
Metro Bank PLC Annual Report & Accounts 2021
95
Strategic reportFinancial statementsGovernanceAdditional information Executive Committee
as at date of publication
DANIEL FRUMKIN
CHIEF EXECUTIVE OFFICER
Daniel is responsible for leading the
Bank with a focus on driving long-term
growth by delivering great customer
service at the right cost, to create even
more FANS.
MARTIN BOYLE
CHIEF TRANSFORMATION
OFFICER
TINA COATES
DIRECTOR OF CORPORATE
AFFAIRS
Martin is responsible for developing
and delivering the Bank’s transformation
and change agenda.
Tina is responsible for safeguarding
and promoting the Bank’s culture and
reputation, and driving excellence in
the Bank’s communication.
CAROL FROST
CHIEF PEOPLE OFFICER
Carol is responsible for all aspects of
Metro Bank’s People function, with a
focus on developing diverse talent and
capability across every level to build on
the Bank’s unique culture.
AISLING KANE
CHIEF OPERATIONS OFFICER
RICHARD LEES
CHIEF RISK OFFICER
Aisling looks after everything that
makes Metro Bank run smoothly,
including its call centres, all banking
and lending operations, customer
support, financial crime prevention, and
facilities and property management.
Richard is responsible for management
and oversight of the risk and control
framework across the Bank.
RHYDIAN LEWIS OBE
MANAGING DIRECTOR,
CONSUMER FINANCE
JESSICA MYERS
DIRECTOR OF BRANDS AND
MARKETING
Rhydian is responsible for the Bank’s
unsecured lending to consumers and
businesses under both the Metro and
RateSetter brands.
.
Jessica’s role focuses on shaping
Metro Bank’s brand strategy, building
transformational marketing capabilities,
and investing in brand and marketing
communications that exemplify the
brand to drive business growth.
CHERYL MCCUAIG
CHIEF INFORMATION OFFICER
Cheryl is responsible for running and
developing Metro Bank’s IT, ensuring
that customers’ money and information
are safe and secure, and that customers
can access their banking 24 hours
a day.
DAVID THOMASSON
MANAGING DIRECTOR, BANKING
PRODUCTS AND DIGITAL
IAN WALTERS
MANAGING DIRECTOR,
DISTRIBUTION
David is responsible for planning,
implementing, and managing all
product, digital and customer analytics-
related functions; both day to day and
for the long term; including the
development of new products and
services for customers and to deliver
the Bank’s commercial plan.
Ian is responsible for the Bank’s Retail,
Business and Commercial teams. He is
passionate about helping customers
achieve their ambitions through the
personal and nimble relationship
service Metro Bank provides.
CHIT GHEE YEOH
CHIEF INTERNAL AUDITOR
Chit Ghee is responsible for providing
assurance to ensure that the Bank
operates in a safe and sustainable way.
96
Metro Bank PLC Annual Report & Accounts 2021
2021 governance at a glance
Board Gender Diversity (%)
as at 31 December 2021
Board Tenure
as at 31 December 2021
Board Independence (%)1
as at 31 December 2021
Male
Female
36
64
0–1 years
1–3 years
3–5 years
3
8
Independent
Directors
Non-Independent
Directors
20
80
HIGHLIGHTS
2021 Board changes
Sir Michael Snyder stepped
down as Senior Independent
Director and Non-Executive
Director of the Bank, effective
as of 31 October 2021, following
six years of service. Monique
Melis became the Bank’s Senior
Independent Director, effective
31 October 2021.
AGM
New Remuneration Policy
approved. The new policy
is in line with wider market
practices and provides greater
levels of transparency and
incentive to our people.
Board training sessions
during the year
Climate risk held in April; and
Directors’ duties held in May.
Upcoming training sessions
for 2022: regulatory; non-
executive director market
trends; cyber; and evolving risk
landscape, climate, and ESG.
Employee engagement
scores for 2021
73%
Overall score for culture –
reflecting our colleagues’
enduring positive sentiment
for our unique culture
79%
Agreed “I can be myself
at Metro Bank”
76%
Agreed that “Regardless of
background, everyone at
Metro Bank has an equal
opportunity to succeed”
2021 Board and Committee attendance
Robert Sharpe
Sir Michael Snyder1
Daniel Frumkin
David Arden2
Catherine Brown
Monique Melis
Paul Thandi3
Michael Torpey
Sally Clark
Nick Winsor
Ian Henderson4
Anne Grim5
Board
8 meetings
8
7
8
8
8
8
8
8
8
8
6
8
Audit
8 meetings
ROC
10 meetings
Rem
7 meetings
10
10
10
10
8
3
8
8
8
4
7
7
7
2
Nom
3 meetings
3
3
3
3
2
1. Sir Michael Snyder resigned from Board 31/10/21
2. David Arden resigned from Board 15/02/22
3. Paul Thandi resigned from Audit Committee 31/03/21; appointed to Nomination Committee 01/04/21
4. Ian Henderson was not able to attend two Board meetings for personal reasons
5. Anne Grim resigned from Audit Committee 31/03/21; appointed to Remuneration Committee 01/04/21
Board Strategy Days
In September 2021, the Bank held its first strategy away day with the Board and senior leadership.
As part of the two day session, the Board also got the opportunity to meet with colleagues from
the Manchester, Sheffield, Liverpool and Bradford stores.
The Board considered the
following areas:
Actions, considerations, and priorities for
the Board, the Bank, and senior leadership
team for 2022:
How do we continue to use
our service leadership to grow
customer and account numbers?
How can we grow revenue and
expedite revenue initiatives?
What actions are required to further
optimise our balance sheet?
Do we have the right level of
momentum on the delivery of our
strategic objectives?
How do we attract, retain, and
motivate our people to deliver on
our transformation?
Service is our differentiator and we
will continue to invest to improve our
customer experience
Continue to focus on balance sheet
and close management of the Bank’s
capital position
Maintain cost discipline whilst delivering
a number of new revenue initiatives to
expedite the Bank’s return to profitability
Ensure that we evolve our talent
acquisition strategy; strengthen our
colleagues’ skills through internal
development; continue our focus on
differentiated culture and our diversity
and inclusion agenda
Ensure that operations, IT and Risk
continue to develop the core capabilities
required to support our strategy
1. This calculation excludes the Chair in line with the requirements of the Code.
David Arden resigned from the Board on 15 February 2022. The information on this page is for the full financial year and therefore David’s statistics have been included.
Metro Bank PLC Annual Report & Accounts 2021
97
Strategic reportFinancial statementsGovernanceAdditional information
Board activity and
stakeholder engagement
Key activities in 2021
Our stakeholders
Our stakeholders are considered at all times throughout the decision-making process:
Our FANS
Our colleagues
The communities we serve
Our suppliers
The regulators
Our investors
Board activities
The Board has a forward plan
for its meetings which includes
regular updates from the
Executive Committee and on
financial, risk management and
operational matters. Each Board
Committee has defined Terms of
Reference with delegated specific
areas of responsibility to ensure
that all areas for which the Board
has responsibility are addressed
and reviewed during the year.
Reports from the CEO, CFO and
CRO are standing items on every
agenda. The Company Secretary
reports on governance matters
and updates the Board on any
changes to their statutory duties
or the regulatory environment
which are pertinent to their role.
The Chair of each Committee
reports on the proceedings of the
previous Committee meeting at
the next Board meeting, and
minutes of the Disclosure
Committee are also included
in the Board papers.
The Executive Committee, senior
management team and advisers
are invited to attend Board and
Committee meetings to present,
contribute to the discussion,
and advise members of the Board
or its Committees on particular
matters. The involvement of
the Executive Committee and
senior management at Board
and Committee discussions
strengthens the relationship
between the Board and senior
management and helps to provide
the Board with a greater
understanding of operations
and strategic direction. Further,
it also enables the Board to
scrutinise and challenge
management on the delivery
of strategic objectives. The
Chair, assisted by the Company
Secretary, is responsible for
ensuring that the Directors
receive accurate and timely
information. The Company
Secretary compiles the Board and
Committee papers, which are
circulated to Directors in advance
of meetings. The Company
Secretary also ensures that any
feedback or suggestions for
improvement on Board papers
is fed back to management. The
Company Secretary provides
minutes of each meeting and is
responsible for following up on
any action items.
ESG
The Board has always been
focused on doing the right
thing for our colleagues,
customers, shareholders and
other stakeholders. This year the
Board has spent time considering
and agreeing two new operational
climate pledges and an ESG
roadmap to implement ESG
actions. More information on how
we plan to work with customers,
colleagues and communities
to support their transition to a
resilient, Net Zero economy can
be found on the ‘our planet’
section on page 40 and the
Taskforce for Climate-related
Financial Disclosures section
on page 42.
Stakeholders considered:
The Pandemic
The Board have kept the Bank’s
response to the pandemic under
continuous close consideration.
The Board recognises the
incredible effort made by
colleagues who continue to work
in our stores and offices to ensure
we support our communities
throughout the pandemic. The
Board also had oversight of the
return to the office for colleagues
who had been able to work
remotely during the pandemic
and then, in line with government
guidance, subsequently returned
to working remotely in December
2021. Throughout the year, the
Board have kept Colleague
attrition and wellbeing under
review and the Bank oversaw
the management team’s rapid
response to the ‘pingdemic’ and
spread of new variants. During
2021, the Board had oversight of
the Bank’s continued support of
its communities through new
UK government-backed BBLs
top-ups and Recovery Loan
Schemes as well as continued
monitoring of the government-
backed loan schemes which were
offered in 2020.
Stakeholders considered:
Board and Committee
meetings
Jan
Board
ROC
Audit
RemCo
RemCo x2
Feb
Board
ROC
NomCo
Audit
RemCo
RemCo x2
Audit x2
Mar
ROC
Audit
Apr
Board
ROC
May
Board
ROC
NomCo
Audit
RemCo
Key announcements,
decisions, and Board
activity
Started offering the
government-backed
BBLS top-ups
2021 Results
announcement
We completed the
sale of a portfolio
of owner occupied
mortgages to
NatWest Group on
2 February. The
portfolio had a
gross book value
of £3.1 billion
AGM held and
new Remuneration
Policy approved by
shareholders
RateSetter
transaction
completed on
2 April 2021.
The Portfolio
had an aggregate
book value
of £337 million
at completion
98
Metro Bank PLC Annual Report & Accounts 2021
Jun
ROC
Jul
Board
ROC
Audit
Aug
Dec
Sep
Board
ROC
Oct
Board
ROC
NomCo
Audit
RemCo
Nov
Board
ROC
Audit
RemCo
In June 2021, we
completed the
disposal of the
RateSetter car dealer
finance loan portfolio
to LE Capital UK
(Asset 1) Limited.
The Portfolio had an
aggregate book value
of £15 million and
formed a non-core
part of the RateSetter
back book acquired
by us in April 2021
Board strategy
Sir Michael Snyder
On 18 November
Conclusion of the
days held
stepped down as
2021, we and Carlyle
PRA Investigation,
Senior Independent
agreed to terminate
resulting in a
discussions regarding
c.£5 million fine.
the possible offer for
The Bank fully
the Bank
cooperated with the
investigation and
agreed the resolution
of this matter with
the PRA
Director and
Non-Executive
Director of
Metro Bank plc,
effective as of
31 October 2021,
following six years
of service
Monique Melis
became the Bank’s
Senior Independent
Director, effective
31 October 2021
Communication
The Bank continuously
communicates to its internal
stakeholders, such as its
colleagues, and externally to
its FANS, investors, communities,
regulators, and suppliers – all
with the aim to strengthen our
relationship and engagement.
We’ve done lots of work to
showcase what makes Metro Bank
stand out from the crowd, from
our small business banking
campaign to our refreshed
RateSetter website. This year saw
us increase our spend on digital
and performance marketing and
a launch onto the social media
platform Facebook.
To ensure smooth integration
of our new colleagues from
RateSetter, both Sally Clark and
Anne Grim had the opportunity to
attend RateSetter Townhalls and
answer questions.
Stakeholders considered:
Focus on
Strategic Priorities
Costs
In July 2021, the Board considered
cost priorities to ensure the return
to profitability in the near term.
The Board made the difficult
decision to close three Metro
Bank stores. Taking into account
the needs of all the Bank’s
stakeholders, the Board felt
the right thing to do was to
close the stores in line with their
performance and the life of the
leases, as is the usual procedure
at many retail firms.
The Bank remains committed to
the store model, with the Bank
opening the Leicester store most
recently in February 2022.
The Board considered the store
closures again during the
November 2021 Board meeting
and a clear plan was developed to
support our stakeholders through
this process. We also liaised with
our Regulators to ensure any
vulnerable customers’ needs
were fully considered, any risks
mitigated, and are pleased to
have implemented a range of
initiatives to help identify those
customers who might need
additional support and guidance.
The Board oversaw the purchase
of four freehold stores and the
consolidation of our call centre
operations to three main sites.
Stakeholders considered:
Revenue
Throughout the year the Board
has had oversight of the Bank’s
pivot toward specialist lending
and was pleased to be able to
offer a number of new products
to our customers.
The Board also oversaw the
Bank’s entry into the insurance
market. The Board believes that
diversifying revenue streams
provides our customers with
the choice that they need as
well as supporting the Bank’s
strategic objectives.
We also considerably
strengthened our consumer
lending operations, with customers
now able to take a loan through
the RateSetter platform in-store,
online and via our mobile app,
as well as on the main aggregator
sites and on RateSetter’s
own website.
Stakeholders considered:
Infrastructure
The Board considered throughout
the year what part of the Bank’s
infrastructure would benefit from
investment or upgrade. We
invested in the Bank’s IT resilience
and delivered upgrades and
improvements that reduced
vulnerability by 67%, as well as
decommissioning more than 200
unused servers. Multi-Factor
Authentication was successfully
rolled out, protecting our
colleagues, our FANS, and
importantly the Bank’s data.
The Bank has focused on its
regulatory requirements and
introduced Strong Customer
Authentication and card migration
to meet PSD2 requirements.
There has been progress in our
Financial Crime Improvement
Programme and GDPR
programmes, which have both
delivered a range of
improvements to meet our
regulatory commitments.
Stakeholders considered:
Balance Sheet
During the year the Bank was
focused on enhancing risk-
adjusted returns on capital
through the ongoing focus on
balance sheet optimisation.
The Board considered a number
of balance sheet actions with this
in mind, including the acquisition
of the RateSetter back book.
The Board debated the long term
consequences of the decision
and the interests of the Bank’s
employees and concluded that
the acquisition would strengthen
the Bank in the long term. The
Board felt that the acquisition was
in the best interests of the Bank’s
shareholders, colleagues and
FANS, as it was expected to
accelerate the optimisation of
our balance sheet.
We completed a sale of a
£3.1 billion portfolio of owner
occupied mortgages to NatWest
Group plc. The sale creates
additional lending capacity
and enables the Bank to
rebalance asset mix towards
higher yielding assets such as
specialist mortgages and
unsecured loans.
Stakeholders considered:
Jun
ROC
Jul
Board
ROC
Audit
Aug
Sep
Board
ROC
Oct
Board
ROC
NomCo
Audit
RemCo
Nov
Board
ROC
Audit
RemCo
Dec
In June 2021, we
completed the
disposal of the
RateSetter car dealer
finance loan portfolio
to LE Capital UK
(Asset 1) Limited.
The Portfolio had an
aggregate book value
of £15 million and
formed a non-core
part of the RateSetter
back book acquired
by us in April 2021
Board strategy
days held
On 18 November
2021, we and Carlyle
agreed to terminate
discussions regarding
the possible offer for
the Bank
Conclusion of the
PRA Investigation,
resulting in a
c.£5 million fine.
The Bank fully
cooperated with the
investigation and
agreed the resolution
of this matter with
the PRA
Sir Michael Snyder
stepped down as
Senior Independent
Director and
Non-Executive
Director of
Metro Bank plc,
effective as of
31 October 2021,
following six years
of service
Monique Melis
became the Bank’s
Senior Independent
Director, effective
31 October 2021
Metro Bank PLC Annual Report & Accounts 2021
99
Board and Committee
meetings
Jan
Board
ROC
Audit
RemCo
RemCo x2
Feb
Board
ROC
NomCo
Audit
RemCo
RemCo x2
Audit x2
Mar
ROC
Audit
Apr
Board
ROC
May
Board
ROC
NomCo
Audit
RemCo
Key announcements,
decisions, and Board
activity
Started offering the
2021 Results
government-backed
announcement
BBLS top-ups
AGM held and
new Remuneration
Policy approved by
shareholders
RateSetter
transaction
completed on
2 April 2021.
The Portfolio
had an aggregate
book value
of £337 million
at completion
We completed the
sale of a portfolio
of owner occupied
mortgages to
NatWest Group on
2 February. The
portfolio had a
gross book value
of £3.1 billion
Strategic reportFinancial statementsGovernanceAdditional information Stakeholder engagement
OUR FANS
Our diverse range of FANS all have their own individual
needs, but what binds them together is the desire for
AMAZEING service and a range of banking services. We are
rated the top high street bank for overall service quality for
personal and business customers in the latest CMA rankings
and number one for store service for the eighth time running.
self-serve options online and via our mobile app. Our FANS
can view and share IBAN and SWIFT information, view
payment warning messages and an HMRC warning
message, activate their card and change their address
and email address online, with over 5,000 customers
self-serving already.
What matters most to them
– Continuity of business throughout the pandemic
– A wide range of banking services and products that are
easily accessed
– AMAZEING service
– Product enhancements
How we engage
– Voice of the Customer programme allows us to monitor
customer service delivery
– Creating FANS and meeting their needs is one of our core
values and the Board takes our customers into account in
every decision it makes
– Regular external communications, social media, and
advertising
We have continued our programme of launching new
products and services for our SME community. This includes
our new Business Account Online opening process, which
also allows ‘multi-director’ businesses to open a new business
account with us digitally; our first insurance offering;
enhanced foreign exchange giving customers access to real
rates and broader range of currencies; and new mobile app
features including in-app invoicing.
We implemented a new Make a Great Idea Count (‘MAGIC’)
initiative to generate AMAZEING ideas from our colleagues
to find best ways to serve our FANS.
2021 outcomes and highlights
– Investment into our digital infrastructure – all to heighten
the consumer experience
This year we have invested into our digital channels by
upgrading our online banking platform and enhancing
– New Business Account Online opening process
– Launch of RateSetter loans in store
OUR COLLEAGUES
We understand that our colleagues are what makes the Bank
different. We do people-people banking and to live up to that
ethos we ensure we support and invest in our people.
What matters most to them
– Health, safety and wellbeing
– Development and career opportunities
– Inclusion, diversity, culture
– Fair pay, reward, opportunity to make a difference
– Agile and flexible working practices
How we engage
– Voice of the Colleague (VOC) surveys
– Have your say cafés, colleague meetings with leaders
– Revolution Updates with ExCo members
– Remuneration Working Groups
– “Get Chatty with Sally” – colleagues have the opportunity
to meet and provide feedback to our designated NED for
Colleague engagement, Sally Clark
The Board reviews VOC surveys and receives updates on
People and Culture, as well as Culture Monitoring updates to
ensure we keep track of how our culture is evolving and that
it continues to be strong, healthy and reflects our purpose
and beliefs. The VOC surveys assist the Board in understanding
the feedback from our colleagues and the actions taken by
Management to address this.
We engage with our colleagues through our internal
networks, including: Women on Work (WOW), Mpride for our
LGBTQ+ colleagues, Mbrace for our Black, Asian and Minority
Ethnic (BAME) colleagues, Mparents for all working parents,
parents-to-be or non-parents, and MBody which is focused
on Colleague wellbeing. During the year, the Board and ExCo
were invited to speak at Colleague network events. To ensure
smooth integration of our new colleagues from RateSetter,
both Sally and Anne had the opportunity to attend RateSetter
Townhalls and answer any questions they may have regarding
the acquisition.
The Board also took time to visit our colleagues in our
Manchester store during the Strategy Day. The store visit
enabled the Board to engage directly with our colleagues and
understand their views, feedback, and priorities for the future.
Our “MAGIC Yammer” page allows our colleagues to share
their ideas, individually or as a team, on how the Bank can
improve its customer experience. The ideas are reviewed
by the MAGIC committee, which assesses the ideas and puts
them through to the next stage – Zest Den. The selected
colleagues going through to Zest Den, have the chance to work
alongside an ExCo nominated sponsor, to prepare and build
the concept into an AMAZEING pitch to our ExCo panel.
The Board received Colleague Engagement updates
throughout the year. More information on how we engaged
with our colleagues is on page 103 of the DNED Letter.
2021 outcomes and highlights
– Engagement score of 69/100
– Revolution Updates and Welcome Back sessions
– ‘Get Chatty with Sally’ on Teams
– Online Q&As with senior leadership (Yam Jams)
– Board presence at RateSetter townhalls
– Appointed a Director of Colleague Experience
and Inclusion
100
Metro Bank PLC Annual Report & Accounts 2021
OUR INVESTORS
Engaging with our investors to keep them up to date on our
performance, share our vision for the future and understand
their views continues to be very important to us. We engage
openly and transparently with our investors, who are helping
us to grow and shape the Bank for the future.
We ensure the needs and views of our shareholders are
brought into the boardroom and are considered at all times
throughout the decision making process. The Board regularly
receives updates from the Investor Relations team to remain
informed on investor view, the market and latest trends.
What matters most to them
– Successful delivery of the strategic plan
– The path to profitability
– Successful RateSetter integration
– Ability to maintain cost discipline and profile of ‘Change the
Bank’ expenditure
– ESG
– Timing and outcome of the Bank of England’s planned
MREL consultation and the effect on our future capital
requirements and progress on AIRB
We provide comprehensive updates to the market at half
and full year, with condensed trading statements at Q1 and
Q3. The results presentation and Q&A with management
provides stakeholders with clear guidance on our capital
planning priorities alongside strategic updates and financial
results. The announcements are reviewed and approved by
the Board.
2021 outcomes and highlights
– 95.11% approval of the new Remuneration Policy at the
2021 AGM
How we engage
– 2021 Annual General Meeting and Annual Report
– Quarterly results meetings
– Investor roadshows and conferences
– Proxy adviser and institutional investors meetings
THE REGULATORS
We are subject to financial services regulations and
approvals in the markets in which we operate. We engage
with our regulators to ensure we meet all the relevant
regulations and ensure we do the right thing. The Bank is
committed to promoting integrity, transparency and
engaging in a collaborative and open manner with the
regulators.
The Board has reviewed and engaged with the PRA in
relation to the investigation into the RWA adjustment.
The Bank has made significant improvements to, and
substantial investment in, its regulatory reporting processes
and controls. It has also strengthened its broader risk
management and governance, demonstrating our commitment
to improving our regulatory reporting controls.
The Board spent a considerable amount of time reviewing
the Bank’s capital position. We understand that this is
important to our investors and during the year we have
undertaken a programme to apply for AIRB accreditation.
The full application is still progressing.
2021 outcomes and highlights
– Application for AIRB accreditation
What matters most to them
– Compliance with relevant laws and regulations
– Governance and accountability
– Support to local economies and the communities we serve
– Transparency and openness
– Proactive and constructive engagement
How we engage
– Annual PRA presentation at Board meetings
– Open, constructive and regular meetings with the
Chairman, NEDs, Executives and the FCA and PRA
We aim to maintain our positive relationship with regulators
through an approach of early and regular engagement,
particular on areas of critical importance. The FCA and PRA
receive copies of our Board papers.
We have engaged constructively with our regulators during
2021 with respect to key initiatives and will continue this
engagement across upcoming changes to the regulatory
landscape in 2022 and beyond.
Metro Bank PLC Annual Report & Accounts 2021
101
Strategic reportFinancial statementsGovernanceAdditional information Stakeholder engagement continued
OUR SUPPLIERS
Our supply chain helps us to deliver banking products and
services to all of our stakeholders.
What matters most to them
– Collaboration
– Open and fair terms of business, including payment terms
and practices
– Social and ethical business relationship
– Long term partnerships
How we engage
– Report on supplier payment practices
– Introduction of Supplier Code of Conduct
– Consistent supplier feedback loop
– Dedicated relationship manager with the Bank
– Supplier surveys
We are committed to paying our suppliers within clearly
defined terms and we have processes for dealing with any
payment issues that may arise. The Audit Committee reviews
and approves the Bank’s disclosure on supplier payment
practices, and, as required by law, we publicly report this
information on a bi-annual basis. For the last reporting period
between 1 July 2021 to 31 December 2021 we had an average
invoice payment turnaround of 29 days. We continue to
review and improve our processes with the aim of ensuring
all of our suppliers are consistently paid within defined terms.
We understand the risks posed by our suppliers and ensure
that they are appropriately managed by the Bank. All
suppliers have a relationship owner within the Bank and a
Supplier Commercial Manager within the Procurement,
Supplier Risk and Commercial Management teams. We
maintain effective relationships with our suppliers and
consider their interests when making relevant decisions.
We actively solicit suppliers’ feedback on their relationship
with Metro Bank and act on it as appropriate. In 2021, we held
our first ever supplier conference to improve communication
channels with our key suppliers and foster open relationships.
We also introduced a supplier survey so we can gather their
perspective on working with the Bank.
2021 outcomes and highlights
– Supplier conference
– Introduction of a Supplier Code of Conduct (from 2022
onwards)
– Further steps to ensure climate change considerations
are imbedded in the procurement process
We have supported our colleagues in joining a Community
Champion Group of their choice. Champions give back by
helping our local communities and registered charities.
In 2021, we were proud to be the only bank to keep all of our
stores open, to enable us to provide face to face support for
our customers who were also navigating their way through
this difficult time. In making this decision, the Board had
oversight of how colleagues could be kept safe through
various adaptations to our stores and ways of working and
how the adjusted store hours would impact the communities.
The Board considered the interest of the communities when
it reviewed and approved the amendments to the Capability
and Innovation programme, which included store delivery,
Mcard and Mpay opportunities.
2021 outcomes and highlights
– Opened new store in Bradford
– Only bank to keep all of our stores open during 2021
THE COMMUNITIES WE SERVE
We are proud to be an integral part of the communities we
serve and they are at the heart of our ambition to be the UK’s
best community Bank. Our communities bring Metro Bank to
life, providing vital services to local people and businesses, as
well as employment opportunities when we expand into new
locations. The people and businesses close to our stores are
crucially important to us, as we deliver on our ambition to
become the UK’s best community Bank.
What matters most to them
– Effective engagement and communication
– Safe and friendly environment in store and outside
– Impact on the local economies
How we engage
– Money Zone, our financial educational programme for
school children and young adult care leavers
– Networking and community events
– Days to AMAZE volunteering
– Fundraising for charities
The Board understands how important it is to have a physical
presence in our communities and are proud to have opened
our new stores in Bradford and Leicester. In deciding where
to build a new store, we take into account where we can
reach the most people so that we can continue to offer
convenient banking at a time that suits our FANS.
102
Metro Bank PLC Annual Report & Accounts 2021
Letter from Non-Executive Director
for colleague engagement
SALLY CLARK
INDEPENDENT
NON-EXECUTIVE
DIRECTOR
I’m very pleased to set out my letter to Metro Bank’s
stakeholders as I celebrate my first full year in the role
as the designated Non-Executive Director for Colleague
Engagement (DNED).
As I reported last year, the ongoing pandemic has meant that
staying connected to our colleagues, listening to them, and
supporting them, continues to be of the upmost importance.
This year, I’m pleased to report that the Board has made great
strides in measuring, defining, and monitoring culture at the
Bank. The current and future initiatives we have planned aim
to further strengthen a sense of belonging and inclusion.
The FRC published a report earlier in the year exploring
the different approaches firms have taken to providing a
workforce voice in the boardroom and how effective they have
been from both a management and a workforce perspective.
With the support of the Company Secretarial team, I conducted
a gap analysis against the FRC’s conclusion on the principles
of good practice and our practices for Colleague engagement
at the Bank. I’m pleased to report that the Bank was already
in a good position and the potential areas for improvement
identified have been discussed and actions agreed.
2021 DNED Engagement Activities and Feedback
The DNED Working Group, comprised of myself, the Director
of Corporate Affairs, the Chief People Officer, and members
of the Company Secretarial team, meet periodically throughout
the year to discuss the DNED schedule of events, feedback
from colleagues, and the strategy for engagement.
Throughout 2021, I have had many opportunities to speak
to colleagues and listen to what they like about working
at Metro Bank and also what leadership can do to enhance their
experience to ensure their careers are truly AMAZEING. The
general consensus is our colleagues love the culture at the Bank,
they feel they can be themselves, and that we all work together
as one team towards a common goal in becoming the best
community bank.
Our people informed me at one of the ‘Get Chatty…’ sessions that
they would like more communication on the activities of the Bank
(especially the positive steps the Bank is undertaking to ensure a
return to profitability), how the Bank operates and makes money,
and that the messaging should be in simple, plain language. I
have notified this to the relevant teams and an action plan has
been agreed. In 2022, we will also invite other Non-Executive
Directors of the Bank to take part in “Get Chatty…” sessions.
RateSetter Engagement
With respect to our RateSetter colleagues, Anne Grim
and I were both delighted to be invited to attend the January
and February RateSetter Town Halls to have the opportunity
to introduce ourselves and observe managements updates and
the Q&A session. I also took the opportunity to explain more
about the remit of the Colleague Engagement role and in
ensuring Colleague views are heard by the Board.
From the RateSetter Town Halls, the observations from Anne
and myself were of a few concerns around the transfer into the
Bank, which is natural for employees of a recently acquired
company, focused principally around the differences in culture
and job stability. In response to this, the Bank’s leadership
teams have ensured they have communicated with, and
reassured, RateSetter colleagues and it was pleasing to see
that as the consultation process progressed, there were fewer
concerns being raised. I thank the Consultation Representatives
for their support on this.
Looking Forward
My role as the Non-Executive Director for Colleague
Engagement is to ensure that the views and experiences
of colleagues continue to be brought into the boardroom.
I remain committed to my role in guaranteeing that the Board
recognises its responsibility to listen, engage, and consider
the impact on colleagues when making decisions. The Board
collectively recognises the impact that true engagement with
the workforce can have on creating a sense of purpose, trust,
and unity. We have some exciting Colleague engagement plans
in the pipeline for 2022 and I look forward to meeting more of
our AMAZEING people.
Sally Clark
Independent Non-Executive Director
23 March 2022
2021
Q1
Q2
Q3
Q4
Colleague
contact
– Attended virtual store
tours of St Albans and
Earls Court
– Attended Finance Function
– Met with MParents
Team call
– Attended Colleague network
Champion
– Attended February
event with MPride
RateSetter Town Hall
to give an oversight
of the DNED role
– Hosted ‘Get Chatty with Sally’
Teams event
– “Get Chatty with Sally” Teams event
– Met with Director of Reward and
Performance to consider feedback
from remuneration focus groups
– Attended Colleague network chairs
meeting with Director of Customer
Experience and Inclusion
Colleague
insight
– Reviewed Colleague
feedback and comments
on Yammer
– Voice of the Colleague Survey
– Reviewed Colleague feedback
and comments on Yammer
– Reviewed Colleague
feedback and
comments on Yammer
– Voice of the Colleague Survey
– Remuneration focus groups
– Reviewed Colleague feedback and
Formal/
informal
reporting
– DNED letter published in
Annual Report
– Update to Board
– Informal feedback from “Get
Chatty with Sally” shared with
leadership
comments on Yammer
– Update to Board
Metro Bank PLC Annual Report & Accounts 2021
103
Strategic reportFinancial statementsGovernanceAdditional information Board leadership and
company purpose
The Board has a robust and coherent corporate governance
structure with clearly defined responsibilities and accountabilities.
These have been designed to provide prudent oversight of the
strategic and operational direction of the Bank.
Governance framework
BOARD
The Board’s core role is to promote the long-term success of the
Bank for the benefit of its shareholders. This requires us to:
CEO
Executive
committees
– Determine and review risk appetite.
– Monitor management performance in delivering our strategy.
– Ensure that risk management measures and internal controls
are appropriate and effective.
– Oversee and monitor the embedding of and adherence to the
Bank’s business values.
– Ensure that the Bank’s financial structure, resources, talent
and culture will support long-term growth. In discharging
this role, the Board must also have regard to and engage with
the interests of a wide range of stakeholders, including
colleagues, customers, suppliers and broader communities,
in order to build mutual trust and support the long-term
sustainability of the business.
Risk Oversight
Committee
Nomination
Committee
Remuneration
Committee
Audit
Committee
Disclosure
Committee
Board Leadership and Company Purpose
The role of the Board
The Board is responsible to our shareholders and sets our
strategy for achieving long-term success. It is also ultimately
responsible for the management, governance, controls,
risk management, direction and performance of the Bank.
The importance we place on the interests of our wider
stakeholders, and having the customer at the heart
of everything we do, is always at the forefront of the
Board’s agenda.
The composition of the Board
As at the date of this report, the Board consists of the
independent Non-Executive Chair, the CEO, and eight
independent Non-Executive Directors. The Board has
formally documented the separate roles and responsibilities
of the Chair and CEO. More information on the composition
of the Board can be found on pages 94-95 and information
on the responsibilities of the Board can be found on
page 106.
Matters reserved for the Board
The Board is responsible for setting and managing our
strategic direction. The operation of the Board is
documented in a formal schedule of matters reserved for
its approval. These include matters relating to the decisions
concerning our strategic aims and long-term objectives,
the structure and capital of the Group, financial reporting
and controls, risk management and various statutory and
regulatory matters. The Board is also responsible for
effective communication with shareholders, any changes
to Board or Committee membership or structure, and has
authority to recommend the Directors’ Remuneration Policy
to shareholders. The Board delegates responsibility for
day-to-day management of the business to the CEO and
sets out the basis for delegation of authorities from the
Board to its Committees.
Board Committees
The Board has delegated specific responsibilities to each of
the Audit, Risk Oversight, Nomination, and Remuneration
Committees, and reports for each are set out on pages 110
to 147. Each Committee has a Terms of Reference setting
out its duties, authority and reporting responsibilities.
Copies of all the Committee Terms of Reference are
available on our website: metrobankonline.co.uk.
104
Metro Bank PLC Annual Report & Accounts 2021
Development
The Company Secretary ensures that all Directors are kept
abreast of changes in relevant legislation and regulations.
In 2021, the Board received internal training sessions on
climate related risk and directors’ duties. Non-Executive
Directors attend seminars and briefings in areas considered
to be appropriate for their own professional development,
including governance and issues relevant to the Committees
on which they sit.
Induction of new Directors
All of our new Directors undergo a formal, robust and
tailored induction programme upon appointment which
is agreed with the Chair and coordinated by the Company
Secretary. Non-Executive Directors meet the Chair and the
CEO as a minimum as part of the Nomination Committee’s
selection process and then again on appointment for a
thorough briefing on all relevant aspects of the Company.
They also meet the Company Secretary, senior
management and our advisers for briefings on their
responsibilities as Directors and on our business, finances,
risks, strategy, procedures and the markets where we
operate. Directors also receive an electronic induction
pack upon their appointment which includes relevant
Bank policies and corporate and financial information.
New Directors also received listed company director
responsibilities training from our legal advisers as part of
their induction.
External appointments
In appropriate circumstances, the Board may authorise
Executive Directors to take non-executive positions in other
companies and organisations. Such appointments should
broaden their experience, provided the time commitment
does not conflict with their fiduciary duties to the Company.
The appointment to such positions is subject to the prior
approval of the Board. During the year ended 31 December
2021, none of the Bank’s Executive Directors held
directorships in any other quoted company.
The Board also delegates the review of the Bank’s
disclosure obligations to a Disclosure Committee, formed
of the CEO, CFO, Company Secretary and General
Counsel. The Disclosure Committee has an approved
Terms of Reference.
We keep the Terms of Reference of each Committee under
regular review to ensure they remain appropriate and reflect
any changes in legislation, regulation or best practice.
They are also reviewed formally every year by the relevant
Committee, ultimately approved by the Board, along with a
self-assessment of how each Committee’s duties have been
addressed. The composition of each of the Committees can
be found at the beginning of each Committee’s individual
report. Any changes to the Committees are made by
recommendation of the Nomination Committee.
Effectiveness
A clear record of the time commitments of each Non-
Executive Director is maintained and reviewed annually by
the Nomination Committee and the Board is satisfied that
the Chair and each of the Non-Executive Directors are able
to devote sufficient time to the Company’s business. Each
Director has committed to dedicate as much time as is
necessary to the Company and the Non-Executive
Directors’ letters of appointment set out that they should
be prepared to dedicate at least 20 days per year to the
Company. Directors are expected to attend all meetings of
the Board, and the Committees on which they sit, and to
devote sufficient time to the Company’s affairs to enable
them to fulfil their duties. If Directors are unable to attend
a meeting, their comments on papers being considered at
the meeting will be discussed in advance with the Chair
or Company Secretary so that their contribution can be
included in the wider Board discussion.
Board skills
As part of how the Board plans for succession, it reviews
and maintains a clear record of the skillset that each
Director provides. The Directors’ skills and experience span
a wide range of sectors and specialisms. The experience
and knowledge of each of the Directors gives them the
ability to constructively challenge strategy and to scrutinise
performance.
Independence of Directors
The Board is satisfied that, as at 31 December 2021, all
Non-Executive Directors and the Chair of the Board
were independent.
Metro Bank PLC Annual Report & Accounts 2021
105
Strategic reportFinancial statementsGovernanceAdditional information Board roles and
responsibilities
ROLE
Chair
NAME
RESPONSIBILITIES
Robert Sharpe
The Chair leads the Board and is responsible for its effectiveness and governance.
He sets the tone for the Company, including overseeing the development of the Bank’s
business culture and standards in relation to the conduct of business and the behaviour
of colleagues. He is responsible for ensuring that there are strong links between the
Board and management and between the Board and shareholders. He sets the Board
agenda and ensures that sufficient time is allocated to important matters, in particular
those relating to our strategic direction. He reports to the Board and is responsible for
the leadership and overall effectiveness of the Board, including responsibility for
fostering a positive Board culture that reflects the values of the business.
The Chief Executive Officer (CEO) is responsible for the day-to-day management of our
operations, for recommending our strategic direction to the Board and for implementing
the strategic direction agreed by the Board. He is supported in decision-making by the
ExCo. The CEO reports to the Chair and to the Board directly and is responsible for all
executive management matters of the Bank.
CEO
Daniel Frumkin
CFO
The finance
function is
currently led by
Marc Jenkins,
Deputy CFO
The Chief Financial Officer (CFO) has responsibility for planning, implementing,
managing and controlling all financial-related activities of the Company, both day-to-
day and for the long-term. He is responsible for managing the Bank’s financial position
including allocation and maintenance of capital, funding and liquidity. The CFO also has
oversight of the Treasury, Legal, Company Secretarial and Investor Relations functions,
and is also responsible for producing and ensuring the integrity of the Bank’s financial
information and regulatory reporting.
Company
Secretary
Melissa Conway
The Company Secretary is responsible for advising and supporting the Chair and the
Board on good corporate governance and best boardroom practice. She leads the
Bank’s Company Secretarial function.
SID
Monique Melis
The Senior Independent Director’s (SID) role is to act as a sounding board for the Chair
and to serve as an intermediary for Directors when necessary.
DNED for
Colleague
Engagement
INEDs
The SID is also available to shareholders if they have concerns that have not been
resolved through the normal channels of Chair, CEO or CFO. The SID will attend
meetings with, and listen to the views of, major shareholders to help to develop a
balanced understanding of their issues and concerns, if contact with the Chair, CEO or
CFO is inappropriate. The SID also acts as the conduit, as required, for the views of other
Non-Executive Directors on the performance of the Chair and conducts the Chair’s
annual performance evaluation.
Sally Clark
The DNED is responsible for:
– bringing the views and experiences of colleagues into the boardroom;
– as required, working with the Board, as a whole, and particularly the Executive
Directors, to take reasonable steps to evaluate the impacts of Board proposals and
developments on colleagues;
– engaging with the Executive Directors regarding Colleague engagement and steps
taken to address Colleague concerns arising out of business-as-usual activities;
– providing feedback to colleagues on steps taken in response to their feedback; and
– reporting regularly to the Board on activities undertaken and feedback, as well as
presenting the annual update for the inclusion in the Annual Report and Accounts.
Catherine Brown
Sally Clark
Anne Grim
Ian Henderson
Paul Thandi
Michael Torpey
Nick Winsor
The role of the Independent Non-Executive Director (INED) is to constructively
challenge proposals on strategic direction. Each INED brings specific experience and
knowledge to the Board and its Committees. The INEDs as a whole have a broad and
complementary set of technical skills, educational and professional experience,
personalities, cultures and perspectives. A skills matrix for the Board can be found
on page 95. Their contributions provide independent views on matters of strategy,
performance, risk, conduct and culture. Each INED is appointed for an initial two-year
term but is re-elected on an annual basis.
The composition of the Committees can be found at the beginning of each of their individual reports.
106
Metro Bank PLC Annual Report & Accounts 2021
Board and Committee
Evaluation
2021 Internal Board and Committee Evaluation
Following the external effectiveness evaluation that the
Board carried out in 2020, this year Metro Bank conducted
an internal evaluation, facilitated by the Company Secretary
in consultation with the Board and Committee Chairs.
The feedback provided during the evaluation was consistent
with feedback received by the Company Secretary at
meetings with the Chairman, Non-Executive Directors, and
the Senior Independent Director.
debate on the key topics of importance, including strategy;
and Board members feel they are able to effectively
contribute to discussions at meetings.
The feedback from the evaluation reflects the progress
made in embedding the new Board since the external
evaluation in 2020 and the strong working rapport and
practices the Bank has established as a Board, despite the
challenges of working through the pandemic and
government restrictions.
Overall, the collective view is that the Board is working
productively; the Chair manages meetings effectively and
seeks the views of every Board member and there is good
The findings from the internal evaluation are also in
alignment with the overall feedback from the Governance
Review undertaken by the PRA in 2021.
A summary of the progress made on the key actions identified during the 2020 external board evaluation:
BOARD
Agreed actions
Progress
Review the Board agenda and identify
opportunities to reduce the length
Complete – the Company Secretary works closely with the Chair to ensure there
is sufficient time for discussion.
Schedule informal sessions to encourage
development of Director relationships
Complete – relationships continue to be developed and the Board met informally
throughout 2021 at Board dinners and NED only meetings.
Review arrangements for holding
meetings virtually
Complete – we have continued to hold remote meetings successfully and this has
assisted the Board in continuing to work effectively during the pandemic.
Separate the CFO and
Company Secretary roles
Complete – Melissa Conway was appointed as Company Secretary on 1 December
2020 following a thorough process conducted by the Chair and the Board. Please
see page 106 for information on the Board’s roles and responsibilities.
Agree schedule of strategy updates
Complete – the Board regularly receives updates on strategy and this year the
Board held its first strategy away day over two days in Manchester. Please see
page 97 for information on the strategy days held in September 2021.
Agree style and content of executive reports Complete – the schedule of presentations from the Executive was agreed with the
Chair and CEO.
Agree approach to ongoing monitoring
of culture
Complete – the Board considered culture and culture monitoring during 2021
through a number of updates from the CPO and her team. Please see page 100 for
information on colleague engagement.
AUDIT COMMITTEE
Review the membership of the
Audit Committee
RISK OVERSIGHT COMMITTEE
Consider reducing the size of
committee packs
Continue to refine agendas to ensure
sufficient data on the most important issues
Complete – The membership of the Audit Committee was reviewed by the
Nomination Committee and the Board. It was agreed to reduce the membership
by two members on 1 April 2021, with Anne Grim and Paul Thandi retiring from the
Committee and joining the Remuneration Committee and Nomination Committee
respectively. Please see page 110 for information on the Audit Committee
membership.
Complete – During the year the Company Secretarial team worked with Risk to
refine the Committee packs and Forward Plan. Please see page 118 for information
on the Risk Oversight Committee.
Metro Bank PLC Annual Report & Accounts 2021
107
Strategic reportFinancial statementsGovernanceAdditional information Board and Committee Evaluation continued
2021 Internal Evaluation Process:
Step 1:
– Questionnaires for the Board
and Committees were
developed by the Company
Secretary in consultation with
the Board and Committee
Chairs. Questions were set
whilst considering the
recommendations and actions
from the external Board
evaluation in the prior year and
also best practice and guidance
from the UK Corporate
Governance Code, as well as
areas of specific interest to the
work of each Committee.
Step 2:
– Questionnaires were issued to
all Board and Committee
members electronically.
– Responses were collated by the
Company Secretary and her
team and the findings analysed.
– Detailed feedback was
discussed with the Board Chair
and each Committee Chair.
Step 3:
– The Company Secretary and her
team presented the findings to
the Board and Committees in
early 2022.
– Actions agreed with the Board
and Committees as appropriate,
and full findings made available
to all Directors.
2021 Internal evaluation feedback and response/actions
FEEDBACK
RESPONSE/ACTIONS
Board and Committee packs to be
circulated earlier
Where possible, papers will be circulated to Directors earlier to allow longer time
for review.
Review frequency of Board and Risk
Oversight Committee (ROC) meetings
Training on specific areas as identified by
the Board and Committees to be provided
to Directors.
The 2022 forward plan has now been agreed. There are less ROC meetings than
in 2021, however the Committee will still meet 8 times per year. This balances the
workload of the Committee with ensuring there is effective oversight of risk
management. The frequency of meetings will be kept under continuous review
with the Chairman and Committee Chairs.
Training sessions on these topics have been added to 2022 forward plans for the
board and committees as appropriate.
Systems of internal control and risk management
The Board believes that effective risk management is
crucial to the Bank’s strategic objectives and long-term
success. The Board has overall responsibility for ensuring
risk is effectively managed.
Our approach to risk is further detailed on pages 52 to 91.
The ROC reviews the effectiveness of the risk management
process on the Board’s behalf, and its approach to this can
be found in the ROC report on pages 118 to 121. The Board
confirms that there is an ongoing process for identifying,
evaluating and managing the emerging and principal risks
faced by the Company.
The Board has delegated responsibility to the Audit
Committee for the review of the effectiveness of internal
control systems. More detail can be found in the Audit
Committee report on pages 110 to 117.
The Board is ultimately responsible for the Bank’s internal
control and risk management systems, and in discharging
this duty they regularly receive updates from the Chairs
of both Committees as well as updates from the CRO.
The Board also approves the Internal Audit plan on
recommendation from the Audit Committee. The Board
is satisfied that the internal control and risk management
systems are operating effectively and that they have been
in place for the year under review and up to the date of
approval of the Annual Report.
Conflicts of interest
At each meeting, the Board considers Directors’ conflicts
of interest. The Company’s Articles of Association provide
for the Board to authorise any actual or potential conflicts
of interest.
108
Metro Bank PLC Annual Report & Accounts 2021
Relations with investors
The Board continues to place great importance on
regular two-way engagement with investors. We welcome
engagement and dialogue throughout the year as part of
an ongoing process. We connect with our investors on an
ongoing basis through a variety of channels including
face-to-face meetings pre COVID-19, telephone calls,
presentations, webcasts and online content.
Investor meetings are undertaken by the Chair, CEO and
CFO, supported by the Director of Investor Relations.
During 2021 most communication was virtual in response
to the risks of COVID-19. Institutional investors have the
opportunity to meet with the Chair, SID and/or other NEDs
to discuss any areas of concern. In addition, the Committee
Chairs seek engagement with shareholders on significant
matters related to the areas of their responsibility.
The Investor Relations function reports to the Board
on a regular basis on matters including share price
performance, changes in the shareholder register, analyst
and investor feedback and significant market updates, with
the assistance of the Bank’s corporate brokers. The Investor
Relations team is responsible for ongoing communication
with shareholders, analysts and investors. All financial and
regulatory announcements, as well as other important
business announcements, are published in the Investor
Relations section of our website and stakeholders can
subscribe to receive news updates by email by registering
online on the website: metrobankonline.co.uk/investor-
relations/. Contact details for the Investor Relations and
Company Secretary are available on the website for any
shareholders, analysts or investors who wish to ask
a question.
Independent professional advice
Directors have access to independent professional advice
at the Company’s expense. In addition, they have access
to the advice and services of the Company Secretary and
her team, who are responsible for advice on corporate
governance matters to the Board.
Directors’ indemnities and insurance
We provide Directors and Officers of the Bank with
appropriate insurance during the course of their
appointment, which is reviewed annually. In addition,
Directors of the Bank have received an indemnity from the
Bank against: (a) any liability incurred by or attaching to the
Director in connection with any negligence, default, breach
of duty, or breach of trust by them in relation to the Bank or
any associated company; and (b) any other liability incurred
by or attaching to the Director in the actual or purported
execution and/or discharge of their duties and/or the
exercise or purported exercise of their powers and/or
otherwise in relation to/or in connection with their duties,
powers or office other than certain excluded liabilities,
including to the extent that such an indemnity is not
permitted by law.
Appointment and retirement of Directors
The Board may appoint Directors to the Board. Newly
appointed Directors must stand for election by shareholders
at the AGM following their appointment. In accordance with
the provisions of the Code, all continuing Directors of the
Company will offer themselves for annual re-election at the
2022 AGM. Under the Articles of Association, shareholders
may remove a Director before the end of their term by
passing an ordinary resolution at a general meeting.
Employee engagement
For further information on how the Directors have engaged
with colleagues, had regard to colleague interests, and
what the effect of this has been, including on the principal
decisions taken by the Company during the financial year,
see pages 98 to 103.
Other stakeholder engagement
For further information on how the Directors have had
regard to the need to foster the Company’s business
relationships with suppliers, customers and others, and
what the effect of this consideration has been, including
on the principal decisions taken by the Company during
the financial year, see pages 98 to 102.
Metro Bank PLC Annual Report & Accounts 2021
109
Strategic reportFinancial statementsGovernanceAdditional information Audit Committee report
Composition of the Audit Committee
– In addition to the Committee Chair, there are three members
of the Audit Committee: Sally Clark; Ian Henderson; and
Monique Melis. Each are independent Non-Executive
Directors with a range of relevant business experience.
Michael and Sally have recent and relevant financial experience
and the Committee as a whole has competence in the
banking sector. For further details of their skills and experience,
please refer to their biographies on pages 94 to 95.
– Regular attendees at the Audit Committee include the
CEO, CFO, CRO, Chief Internal Auditor, Deputy CFO, and
representatives from the external auditor. The Company
Secretary and her team act as Secretary to the Committee.
2021 Activities
– Oversight of the integration of RateSetter from a financial
reporting perspective.
– Oversight and review of key regulatory changes, including
CRR2/CRD5.
– Oversight of the improvements to the risk controls self-
assessment framework.
– Assessment of going concern and viability.
– Reviewed key accounting judgements in respect of legal and
regulatory matters, impairments of non-current assets and
the RateSetter back book purchase.
– Challenged management’s accounting judgements
particularly in respect of measurement of expected credit
losses.
– Reviewed the Modern Slavery action plan, statement and
policy, and recommended to the Board for approval.
– Reviewed the Annual Report on the systems and controls in
place for whistleblowing.
– Reviewed Internal Audit reports and attestations and all of
the Bank’s financial reporting.
2022 Priorities
– Oversight of the implementation of regulatory changes
including CRR2/CRD5.
– Continued focus on management’s approach to key
accounting estimates and judgements.
– Enhancements to the Group’s risk and control framework.
– Implementation of the new regulatory reporting system.
MICHAEL TORPEY
AUDIT COMMITTEE CHAIR
Committee attendance for 2021
Members
Meetings attended
Meetings held
during Director’s
tenure
Michael Torpey (Chair)
Ian Henderson
Monique Melis
Sally Clark
Former members
Anne Grim1
Paul Thandi2
8
8
8
8
4
3
8
8
8
8
4
4
1. Anne Grim was a member of the Committee until 31 March 2021.
2. Paul Thandi was a member of the Committee until 31 March 2021.
He was unable to attend one meeting for personal reasons but was
fully briefed on discussions at the meeting.
110
Metro Bank PLC Annual Report & Accounts 2021
the Capital Requirements Directive and Regulation
(CRR2/CRD5) and, if approved, the advanced internal
ratings based approach to calculating credit risk (AIRB)
for residential mortgages.
We continue to ensure that the Committee’s agenda
is kept abreast of relevant developments and the
Committee received a detailed briefing from the External
Auditor on the BEIS consultation on ‘restoring trust in
audit and corporate governance’. We will be keeping a
watching brief on this to ensure we are implementing any
necessary or desirable changes into our audit and
governance frameworks.
The Committee also received briefings during the year from
subject matter experts in the Bank on the new Risk Control
Self-Assessment platform and from the Internal Audit team
on the risk assessments that take place to determine the
Internal Audit plan. These were excellent opportunities to
meet more of our colleagues as well as expand our
understanding with deep dives on these topics.
The Committee is responsible for oversight of the adequacy
and effectiveness of the Bank’s Compliance function.
During the year, the Committee enhanced its oversight in
this area through the review of a self-assessment review
completed by the Compliance function. Going forward, this
self-assessment will be carried out each year and reported
up to the Committee. This process will be further reviewed
by Internal Audit every two years with any issues reported
to the Committee.
I was pleased to note a letter received from the Financial
Reporting Council (FRC) in relation to the review of our
Annual Report and Accounts for the year ended
31 December 2020 which set out that there were no
questions or queries to be raised with the Chair of the
Board. The suggested matters for review, where the FRC
believe that users of the accounts would benefit from
improvements to our disclosures, have been considered
and where appropriate we have enhanced disclosures made
across the report.
Michael Torpey
Audit Committee Chair
23 March 2022
Dear shareholders
I am pleased to present the Audit Committee (the
‘Committee’) report for the year ended 31 December 2021.
This report aims to provide a comprehensive picture of the
work we have undertaken as a Committee during the year.
Further to a review of all Board committee memberships
early in 2021, Anne Grim and Paul Thandi stepped down
from the Committee. I would like to thank them for their
valued contributions during their tenure.
During the year, the Committee’s core duty remained
unchanged; reviewing the integrity and quality of the
Group’s published financial information; supporting the
Bank’s governance framework; and maintaining focus
on evaluating the effectiveness of the Bank’s control
environment.
The Committee continued to challenge and scrutinise
financial reporting throughout the year, fulfilling our role
of assisting the Board in determining the appropriateness
of financial reporting. One of the Committee’s main
responsibilities is to inform the Board whether we believe
the Annual Report and Accounts are fair, balanced, and
understandable, and that they contain all of the information
essential for shareholders to evaluate the Group’s situation,
performance, business model, and strategy. The Committee
has been assisted in this assessment through the work
undertaken by the Financial and Regulatory Assurance
team which provided the Committee with details on the
process undertaken to ensure that the appropriate
disclosure has been included for both positive and negative
developments in the year. We make sure that management’s
disclosures reflect the supporting facts, or we urge them
to explain and justify their interpretation and, if required,
re-present the data. The External Auditor, PwC, assists this
process by examining the Group’s accounting records
against approved accounting practices, relevant laws and
regulations as part of the statutory audit. The audit report
by PwC can be read on pages 152 to 161.
During the year, the Committee also increased its oversight
of the areas of judgement and estimation in the Group’s
results. This included greater scrutiny of portfolio level
credit impairments to ensure they were adequate given the
ongoing effects of the pandemic. The Committee received
papers on this at half-year and full-year and will continue
to keep this under close review. In addition the Committee
reviewed the accounting for the purchase of the RateSetter
back book as well as the continued integration of RateSetter
into the business, including the transfer of activities from
RateSetter to Metro Bank.
In addition, the Committee has continued to provide close
oversight of the other areas of judgement and estimation
within the Groups’ reporting. Alongside this, the Committee
has continued to provide close oversight on key regulatory
reporting matters as the Group continues to prepare for the
implementation of its new regulatory reporting system,
Metro Bank PLC Annual Report & Accounts 2021
111
Strategic reportFinancial statementsGovernanceAdditional information Audit Committee report continued
Key areas discussed at Audit Committee meetings in 2021
AREA
Policy
Financial
reporting
Internal audit
External audit
Financial and
regulatory
assurance
Governance
KEY TOPICS
– Annual report on the systems and controls in place for whistleblowing as well as reports on
whistleblowing claims as required.
– Non-audit services policy.
– Review quarterly trading updates ahead of release to the market.
– 2021 half-year results, including an update of critical accounting judgements and estimates, going
concern and viability.
– 2020 full-year results, Annual Report and Accounts, including assessment of the critical accounting
judgements and estimates, going concern and viability report.
– Review of the IFRS 9 disclosure recommendations made by the Bank of England.
– Review of the FRC Update on Interim Reporting.
– Review of the PRA Dear CEO letter regarding the reliability of regulatory reporting.
– Tax strategy and Senior Accounting Officer Review.
– Review of significant accounting matters, including the acquisition of the RateSetter back book,
recognition of provisions in respect of regulatory matters and impairment and write-off assessment.
– Update on the Bank’s approach to climate related financial disclosures.
– Adequacy of full-year and half-year credit risk impairments.
– Review of the 2021 Chief Internal Auditor reports, and any remedial action plans.
– Review and recommendation to Board for approval of the 2022 Internal Audit Plan.
– Evaluation of the effectiveness of the Internal Audit function.
– 2021 External Audit Plan, engagement terms and fees.
– Terms of engagement for the half-year review.
– External Auditors’ half-year review findings.
– 2020 full-year External Auditors’ report and findings.
– Oversight of the preparation for the implementation of the new regulatory reporting system.
– Oversight of the preparation for the implementation of the Capital Requirements Directive and Regulation
(CRR2/CRD5).
– Monitored progression of the AIRB application for residential mortgages.
– Modern Slavery Statement and annual report on the operation and effectiveness of the systems and
controls in place for the Modern Slavery Policy, as well as regular updates from the General Counsel
including an action plan.
– Briefing from PwC on the reform of the corporate governance, reporting and audit system in the UK.
– Self-assessment of the Committee’s duties under its Terms of Reference.
– Supplier payment practice reporting.
– Committee performance evaluation.
– Annual self-assessment of the Compliance function.
112
Metro Bank PLC Annual Report & Accounts 2021
The Audit Committee in brief
The Audit Committee’s key role is to review the integrity
of the financial reporting for the Bank and to oversee the
effectiveness of the internal control systems and the work
of the Internal and External Auditors.
External audit
– Recommend the appointment, reappointment or removal
of the external auditors.
– Review independence and objectivity, as well as the
quality of the audit work performed.
– Approve audit remuneration.
– Review the supply of non-audit services in line with the
Bank’s policy and professional independence
requirements.
– Meet regularly without management present.
– Ensure the audit contract is tendered at least every
10 years.
Internal Audit
– Approve appointment or termination of the Chief Internal
Auditor.
– Monitor and review the effectiveness of the function.
– Review and approve the Internal Audit Charter biennially.
– Review and assess the Internal Audit Plan and ensure that
resources are adequate.
– Meet regularly with the Chief Internal Auditor and ensure
access to Board.
– Review all reports on the Bank from the Chief Internal
Auditor.
– Review management’s responsiveness to findings.
Financial and narrative reporting
– Monitor the integrity of the financial statements and
formal announcements relating to the Bank’s financial
performance.
– Review and report to the Board on significant financial
issues and material judgements.
– Review and challenge accounting policies, methods used
to account for significant and unusual transactions, clarity
and completeness of disclosure.
– Advise whether the Annual Report is fair, balanced and
understandable.
Internal controls and risk management
– Consider the level of assurance the Committee is getting
on the risk management and internal control systems,
including internal financial controls, and whether this is
enough to help the Board in satisfying itself that they are
operating effectively.
– In conjunction with the Risk Oversight Committee (ROC),
review and approve the statements in the Annual Report
concerning internal controls and risk management.
To create a cohesive governance structure and the right
level of oversight of the RateSetter business, our Chief
Internal Auditor was invited to the RateSetter Board Audit
Committee meetings as a guest, reporting back to the
Bank’s Audit Committee as appropriate. As part of the
transfer of activities from RateSetter to the Bank, all Internal
Audit activities of the consumer finance business have now
been integrated into the Internal Audit function.
The Chair of the Audit Committee holds regular meetings
with colleagues from the Bank, including the Chief Internal
Auditor, CRO, CFO and senior members of the Finance
team, and the Assistant Company Secretary who acts as
Secretary to the Committee. The Committee Chair also sits
on the ROC and works closely with Ian Henderson, its Chair.
Committee evaluation
Throughout the year the Committee has continually
evaluated its effectiveness and this included a full review of
the Terms of Reference and an in-depth self-assessment to
determine how it met its responsibilities during the year. The
Committee was satisfied that it had addressed all its duties
during 2021 and was well placed to deliver on the same in
2022. There is a continued close collaboration with ROC,
and both Terms of References were reviewed to ensure that
each Committee’s distinct responsibilities, and where the
Committees collaborate, is clearly articulated.
Metro Bank PLC Annual Report & Accounts 2021
113
Strategic reportFinancial statementsGovernanceAdditional information Audit Committee report continued
Committee Evaluation Actions
Key theme
Action/approach
Timing of
papers
Reports from
the first line of
defence
Training
The Company Secretarial team will continue to
work with colleagues to ensure the Committee is
provided the maximum time for review. This will
be balanced against ensuring the Committee is
provided with the most up-to-date information
available for consideration.
Audit Committee members will be invited to
attend first line of defence updates presented to
the Risk Oversight Committee. A specific update
on the effectiveness of financial controls,
including treasury reporting and regulatory
reporting controls from the first line of defence is
scheduled for the Audit Committee in 2022.
Additional training sessions on specific areas of
interest are to be organised in 2022.
Regulatory reporting framework
The Committee has continued to focus on ensuring that
a strong and effective regulatory reporting framework
remains embedded within the Group. This focused on
providing oversight of the new regulatory reporting system
which will go live in 2022; the preparedness for the
introduction of the new Capital Requirements Directive
and Regulation; as well as overseeing the Group’s AIRB
application for residential mortgages.
The Committee also considered a report from management
to assess the Group’s position in respect of the PRA’s
expectations, as outlined in their Dear CEO letter in
September, for firms to apply the same levels of governance
and control to regulatory reporting as they do to
financial reporting.
In addition the Committee continued to review the status
of the ongoing regulatory investigations during the year,
including the need for any provisions. Following the agreed
settlement with the PRA in 2021, the Committee continues
to monitor the status of the other ongoing investigations.
114
Metro Bank PLC Annual Report & Accounts 2021
Fair, balanced and understandable
In line with the Code, the Committee considered whether
the 2021 Annual Report is ‘fair, balanced and understandable
and should provide the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy’. The Committee is satisfied
that the 2021 Annual Report and Accounts meet this
requirement and, in particular, that appropriate disclosure
has been included for both positive and negative
developments in the year. The process supporting this
goal included:
– The compilation of the 2021 Annual Report and Accounts
which was undertaken on a cross-functional basis
including input from senior managers in Finance, Risk,
People, Legal, Investor Relations and business lines.
A review was undertaken by the Financial and Regulatory
Reporting Assurance Team and outcomes reported to
the Committee.
– Formal review and challenge by the Committee of the
draft 2021 Annual Report and Accounts, along with a
review of any issues raised in the External Auditor’s report,
in advance of final sign off.
– A final review, performed by the Board of Directors.
– The preparation of a going concern and viability statement
that highlighted the profitability, capital and liquidity
position of the Bank over the planning period to 2025.
Internal Audit
Internal Audit is a critical component of the Group’s
governance, risk management, and control functions,
offering independent assessment and questioning
governance, risk management, and controls. The
Committee approved the Internal Audit Plan and discussed
the findings of the Chief Internal Auditor’s reports. It also:
– Monitored the objectivity and competence of the Internal
Audit function, and the adequacy of Internal Audit
resources and skills.
– Assessed the effectiveness of the Internal Audit function.
– Monitored the delivery of the 2021 Internal Audit Plan.
– Recommended the 2022 Internal Audit Plan to the Board
for approval.
– Reviewed the outcome of the externally facilitated review
of the Internal Audit Function.
The Committee was satisfied that Internal Audit had
adequate resources available during the year.
We included those areas in the Internal Audit Plan for 2022
that provide the greatest risk to the Bank, those that are
most impacted by further growth, and regulatory emphasis
areas. We monitor the resources available to the Internal
Audit team to make sure they have enough to do their jobs.
Following debate at the Committee, the Board adopted the
2022 Internal Audit Plan in February 2022, as well as the
level of risk assurance contained within the Plan.
The Finance function adopts a continuous improvement
approach to internal controls. During the year, a project
was launched to undertake an end-to-end review of the
risk, control and processes universe within Finance. This
includes ensuring the Group is also prepared for any
changes resulting from the proposed BEIS reforms in
relation to corporate governance. There were a number of
deliverables and alongside the project, a cloud based portal
had been created as an efficient way to monitor the controls
environment during the year.
The Group initiated its new Moody’s system for regulatory
reporting with implementation being undertaken in
a phased approach. Initial reporting will be under the
standardised approach only, with AIRB data being reported
through Moody’s from the point of PRA approval.
Modern slavery
The Bank has a Modern Slavery Policy that is accessible to
all colleagues via the Bank’s intranet. The policy outlines
the Bank’s zero tolerance approach to modern slavery.
The Chair of the Committee is the Bank’s Modern Slavery
Champion and reports to the Board at least annually on the
effectiveness and integrity of the systems and controls in
place to ensure compliance with the Modern Slavery Policy.
In 2021, we continued to follow and progress our processes
to support our policy. We continue to publish our Modern
Slavery Statement yearly and the General Counsel provides
regular updates to the Committee on progress against our
statement and action plan.
Whistleblowing
The Committee is responsible for the review of the
adequacy and security of whistleblowing arrangements.
The Bank has a Whistleblowing Policy that is accessible to
all colleagues via the Bank’s intranet and there is regular
e-learning training for colleagues. The policy outlines the
Bank’s whistleblowing process which enables colleagues
of the Bank to raise concerns about possible improprieties
in financial reporting, other operational matters or
inappropriate personal behaviours in the workplace. The
Committee and the Board review whistleblowing reports
throughout the year and an annual report is presented to
the Board on the operation and effectiveness of the
systems and controls in place for whistleblowing.
Internal Audit Evaluation
In line with best practice and further to an external
quality assurance review in 2021, an internal review of the
effectiveness of Internal Audit function during 2021 will be
carried out in early 2022.
Systems of internal control and risk
management
Details of the Bank’s risk management framework are
provided on pages 52 to 91. In considering the effectiveness
of internal controls, the Committee received and discussed
reports from Internal Audit and the External Auditor. In
addition, executive management was invited to discuss the
more significant issues raised by Internal Audit. Management
action plans to resolve the issues raised are monitored by
the Committee. The Committee also challenges management
where appropriate on the timeframe of the delivery of
the actions.
Financial risk management processes and controls are in
place and there is assessment of the effectiveness of our
internal controls on an ongoing basis. The internal controls
framework encompasses all controls, including those
relating to: financial reporting processes; preparation
of consolidated Group accounts; and risk management
processes, including formulation of the Group’s strategic
plans, budgets and forecasts, and its accounting policies
and levels of delegated authority. The Committee is
satisfied that Finance operates a strong set of internal
controls and that these have been in place for the year
under review.
Assurance work within Finance is carried out by the
Financial and Regulatory Assurance team. This team
was created in March 2020 with a remit of ensuring that
processes are supported by robust systems and controls,
and to ensure high quality output with risks and issues
being identified, highlighted and rectified appropriately.
Since creation, the work of the function has been
continuously improving, with the remit evolving over 2020
and 2021 to ensure a strong focus on risk, control and
quality of reporting, and to drive accountability across the
Finance and Regulatory Reporting teams. In Q1 2021, the
remit of the team was widened, with the Finance Risk and
Control team moving under the umbrella of assurance. This
has enabled us to focus more deeply on tests of controls
and to provide a more fulsome assessment of risk, control
and assurance across Finance and Regulatory Reporting.
Assurance provided during 2021 has included business as
usual assurance, such as review of core deliverables and
external reporting, as well as performing deep dive reviews
into processes where risks or issues have been observed,
and focusing on providing an appropriate level of input
into key projects being undertaken within Finance and
Regulatory Reporting. The Assurance team has provided
regular written updates to the Audit Committee
throughout 2021.
Metro Bank PLC Annual Report & Accounts 2021
115
Strategic reportFinancial statementsGovernanceAdditional information Audit Committee report continued
External audit
The Committee reviews and makes recommendations to
the Board with regard to the appointment of the External
Auditor, their remuneration and terms of engagement.
The Committee is also responsible for the oversight of the
relationship with the External Auditor and the effectiveness
of the audit process. To satisfy ourselves of the
effectiveness of the External Audit, during the year we:
– reviewed the proposed Audit Plan in advance of the
annual audit;
– reviewed and approved the audit engagement terms and
proposed audit fee;
– considered the continued independence and objectivity
of the External Auditor; and
– reviewed and discussed the reports provided by the
External Auditor.
In our assessment of PwC’s performance effectiveness, we
considered the FRC’s Audit Quality Review team review of
PwC’s audit of the Bank’s 2019 financial statements as part
of its latest annual inspection of audit firms. The Committee
received a copy of the findings in March 2021 and discussed
them with PwC. While there were no significant findings, the
documentation of some aspects of PwC’s audit procedures
was identified as needing limited improvements only.
The Audit Committee are satisfied that the External
Auditors demonstrated appropriate professional scepticism
and challenged the key focus of the financial statements,
including material and judgemental areas. The External
Auditors have effectively contributed to the financial
assessment of the business throughout the year and their
contributions have been appropriately investigative and
valuable, and their expertise welcomed. We invite comment
from our audit partner throughout the Committee meetings
as well as regularly taking the opportunity to hold meetings
without management present to maintain integrity and
objectivity.
The Audit Committee confirms that PwC continues to be
effective.
The Bank confirms that for the purposes of compliance
with Article 7.1 of the Competition Markets Authority (CMA)
Order, it has complied with Articles 3, 4 and 5 of the CMA
Order for the financial year under review.
Independence
External Auditor independence is a key principle and
contributing factor to audit quality. Independence is
reviewed as part of the audit scope, as part of each of the
reports PwC presents to the Committee and is further
scrutinised prior to the accounts being approved and
signed by the Board.
PwC has been appointed as the Bank’s External Auditor
since 2009. The Bank is required under law to put its audit
out to tender at least every 10 years and to change its
auditor at least every 20 years. Our last formal competitive
tender exercise took place during 2018. In relation to the
audit for the year ended 31 December 2020, the Board
approved the Committee’s recommendation to put a
resolution to shareholders at the 2021 Annual General
Meeting to reappoint PwC, which shareholders
subsequently approved.
In line with the FRC’s Revised Ethical Standard 2019, the
lead audit partner for the Bank rotates every five years. In
line with this rotation, Darren Meek stood down after the
financial year ended 31 December 2020 and Jon Holloway
now leads the Bank’s audit. The Committee have been
building rapport with Jon and the PwC team throughout
2021 and will be recommending the reappointment of PwC
at the forthcoming AGM.
Requirements of the ethical standard:
An ethical standard for statutory audit is in place which sets
out a specific list of permitted non-audit services for UK
incorporated Public Interest Entities (PIEs). These services
are largely those required by law and regulation, loan
covenant reporting, other assurance services closely linked
to the audit or Annual Report and Accounts and reporting
accountant services. Examples of such services include:
– Reporting required to a competent authority or regulator
under UK law or regulation, such as reporting to a
regulator on client assets.
– Reporting on the iXBRL tagging of financial statements.
– Reports required by regulators where the regulator has
specified the auditor provide the service or has indicated
that the auditor would be an appropriate choice.
– Reviews of interim financial information, and providing
verification of interim profits.
– Additional assurance work or agreed upon procedures
performed on material included within or referenced from
the Annual Report and Accounts.
– Reporting on government grants.
– Reporting on covenant or loan agreements which require
independent verification.
– Certain non-audit services are prohibited including:
– services involving contingent fee arrangements;
– internal audit services which play any part in
management’s decision making;
– secondments/loan staff arrangements; and
– tax, consulting, valuation or corporate finance services
(other than reporting accountant engagements).
116
Metro Bank PLC Annual Report & Accounts 2021
Under the ethical standard, there is a 70% cap on non-audit
fees for services provided by the External Auditor. The cap
is based on comparing the average of three consecutive
years of statutory audit fees to the non-audit fees for
services in the fourth year. Therefore, non-audit fees for
2021 should be compared to the average of audit fees for
2018, 2019 and 2020. The cap does not apply to non-audit
fees for certain services required by law or regulation.
Application of the standard within Metro Bank
All non-audit services provided to the Bank by the External
Auditor must be approved in advance by the Committee
subject to the guidelines and thresholds detailed in the
policy. Approval must be performed by the Committee; it
cannot be delegated to a member of management. The
Committee must be provided with a detailed explanation of
each particular service to be provided to allow it to make an
appropriate assessment of the impact of the service on the
External Auditor’s independence.
The Committee carefully monitors the level of non-audit
services provided by PwC. During 2021, in instances where
PwC were engaged for non-audit services they were chosen
due to their unique position and knowledge of areas within
the Bank and the services were in respect of audit or
assurance-related matters consistent with the principles
of independent assurance provision. Details of services
provided and the fees paid to the External Auditor during
the year can be found in note 8 to the financial statements
on page 172.
The Committee concludes that the Bank’s policy on
Approval of Non-Audit Services by the External Auditor is
aligned to the Revised Ethical Standard concerning auditor
independence, and the Bank has complied with its policy
during 2021.
Significant financial reporting areas
considered by the Audit Committee
In respect of financial reporting, the Committee considered
a number of key areas which are set out below. In all
instances, following review and challenge to management,
the Committee is satisfied that the approach applied by
management is reasonable.
Measurement of the expected credit loss allowance
The Committee regularly reviewed management’s
assessment of the adequacy of the allowance for expected
credit losses. The review included governance arrangements
over provisioning and models, the use of post-model
adjustment and overlays, a benchmark of the Group’s
expected credit losses against its peers as well as reviewing
the components of the calculation (including significant
increase in credit risk, definition of default, macroeconomic
scenarios and scenario weightings).
The Committee agrees with management’s assessment that
the measurement of the expected credit loss allowance
remain both a critical accounting estimate and judgement.
Further details are set out on pages 198 to 212.
Recognition of provisions
The Group continues to be subject to regulatory
investigations and the Committee continued to assess
whether a provision for any of these matters should be
recognised in the accounts. As at 31 December 2021 the
Group made a provision in respect of the FCA investigation
into announcements relating to both RWAs and AIRB
accreditation. The Committee reviewed the basis of
management’s calculation and concluded it to be
reasonable. In addition, the Committee discussed and
reviewed the associated disclosures.
The Committee agrees with management’s assessment that
the recognition of provisions remain a critical accounting
judgement. Further details are set out on pages 192 to 193.
Impairment and write-off testing
During the year impairment indicators were identified in
relation to the Group’s property, plant, equipment and
intangible assets. Management ran an impairment
assessment as required by IAS 36 and the Committee
considered the results of this including associated
sensitivities. The Committee concurred with management’s
view that no impairment was necessary in relation to
these assets.
The Committee also reviewed the impairments recognised
in relation to RateSetter (an impairment of the peer-to-peer
element of the lending platform) and to Metro Bank’s
investment in subsidiaries. The Committee found the
impairment recognised to be appropriate and reasonable.
Alternative performance measures
The Group continues to use alternative performance
measures as it believes this provides readers with a greater
understanding of underlying trends in the business.
The Committee reviewed whether management’s basis
for underlying results remained appropriate, including
reviewing assets classified as non-underlying.
Details on the Group’s alternative performance measures
can be found on pages 224 to 226.
Going concern and viability
The Committee considered management’s approach
to assessing and concluding on both going concern and
viability. The assessment undertaken by management
focused on operational risks, liquidity and capital, with
a particular emphasis on the latter.
The Committee also considered the Group’s strategy
and Long Term Plan with a review of potential downside
scenarios to management’s central view and any mitigating
actions that could be taken.
After consideration, the Committee supported the
approach adopted by management, which is set out in the
viability statement on pages 90 and 91.
Metro Bank PLC Annual Report & Accounts 2021
117
Strategic reportFinancial statementsGovernanceAdditional information Risk Oversight
Committee report
2021 Activities
– Oversight of the Bank’s Enterprise Risk Management
Framework.
– Oversight of the Bank’s risk appetite.
– Reviewed and approved the Bank’s Pillar 3 disclosure.
– Reviewed and approved or recommended policies to the
Board for approval.
– Oversight of the Bank’s capital and funding positions.
– Provided oversight of the preparation of the Bank’s Internal
Capital Adequacy Assessment Process (ICAAP), Internal
Liquidity Adequacy Assessment Process (ILAAP) and
Recovery Plan.
– Held ‘Deep Dive’ review sessions on operational resilience,
data protection, commercial banking, financial crime,
information security and IT resilience, suppliers, fraud,
people and culture, regulatory reporting, arrears
management, climate risk and vulnerable customers.
IAN HENDERSON
RISK OVERSIGHT COMMITTEE CHAIR
Committee attendance for 2021
Members
Meetings attended
Meetings held
during Director’s
tenure
– Reviewed the Bank’s risk profile and ongoing response to the
COVID-19 pandemic.
Ian Henderson (Chair)
Catherine Brown
Michael Torpey
Nicholas Winsor
10
10
10
10
10
10
10
10
– Oversight of the financial crime control framework.
– Oversight of the RateSetter integration.
– Reviewed and approved the Risk sections of the 2020
Annual Report and Accounts.
The Committee also had additional shorter meetings
and briefing sessions to discuss topics such as the
ongoing application for AIRB accreditation, the ILAAP,
ICAAP and Recovery Plan.
Composition of the Risk Oversight Committee
In addition to the Committee Chair, Ian Henderson,
there are three members of the Risk Oversight
Committee (ROC): Catherine Brown, Michael Torpey
and Nicholas Winsor. Non-Executive Directors who
are not ROC members may attend meetings. The CEO,
CFO and CRO have standing invitations to attend as
guests, unless the Chair of the Committee asks them
to excuse themselves from a particular meeting
or discussion.
Other Directors and colleagues attend as guests
by invitation of the Chair to present and report on
relevant topics.
The Company Secretary and her team act as Secretary
to the Committee.
– Oversight of the embedding and enhancement of the Bank’s
Enterprise Risk Management Framework.
– Oversight alongside the Board of the submissions made in
relation to the Bank’s AIRB application.
– Reviewed the Risk Acceptances held by the Bank.
– Oversight of operational risk and regular updates from the
first line of defence.
2022 Priorities
– Capital and ongoing work toward AIRB accreditation
– Financial crime
– Liquidity
– Cyber
– Customer Outcomes
– Climate Risk
118
Metro Bank PLC Annual Report & Accounts 2021
This year ROC was presented with the Bank’s proposed
approach to the management of climate-related risk. As the
Bank continued the activity of embedding climate risk into
the Risk Management Framework, the Committee received
updates and has overseen the work to understand how to
define, monitor, manage and report the impact of climate
change on the Bank’s strategy. The risks associated with
climate change will continue to be a focus in 2022 with
tailored training planned for the second half of the year.
The Committee had oversight of the final improvements
made to the reporting processes and controls following the
identification of RWA reporting errors in 2019. Embedding
and enhancing of the Bank’s Enterprise Risk Management
Framework has been a focus for the Committee in 2021 and
the Committee was pleased to approve the updated
Enterprise Risk Management Framework.
Following a scheduled external evaluation in 2020, the
Committee conducted an internal evaluation in 2021. The
results of the evaluation showed that the Committee was
working well. In 2022 there will continue to be a focus on
reducing the size of the Committee’s packs, having tailored
updates from the first line of defence on emerging risks,
and extra training sessions on relevant topics.
Outlook for 2022
As we continue to recover from the COVID-19 pandemic,
the Committee will continue to focus on the areas within its
remit to ensure we can support our FANS and communities
in a safe and sustainable way. The Committee will also
continue to focus on supporting the Bank to achieve its
strategic objectives through ongoing support with the
AIRB application, oversight of capital management, forward
looking planning for climate change risk and, as always,
a focus on our customers and ensuring the Bank delivers
fair outcomes and the best banking experience possible.
The following sections explain the role and activities of the
ROC, and how it has discharged these responsibilities, as
well as setting out several key areas of activity during 2021.
Ian Henderson
Risk Oversight Committee Chair
23 March 2022
Dear shareholders
Overview
My first full year as Chair of ROC has been a busy one for
the Bank but I am pleased with what we have achieved as
a Committee and a Bank in that time. The Committee had
oversight of a number of significant projects throughout
the year and received a number of deep dive sessions in
important areas. The Committee value this insight from
the three lines of defence and will continue to have tailored
sessions in line with the Bank’s priorities and key risks
in 2022.
Last year the Bank supported customers with a
number of measures throughout the pandemic, including
government-backed loan schemes, and this year ROC
has had oversight of the management of these measures.
As ever, we will continue to support our communities as
the pandemic evolves.
A focus for the ROC this year, alongside the Board, has
been the oversight of the Bank’s AIRB application.
Preparation for submissions has included a number of
deep-dive sessions and the Committee was satisfied
with the quality of the progress made to date.
Above and beyond our monthly oversight of financial
crime, ROC also had a number of deep dive sessions from
colleagues in the first line of defence. ROC also reviewed
the Money Laundering Reporting Officer’s report and
continued to have oversight of the key milestones of the
Financial Crime Improvements Programme. We continued
our review of our sanctions compliance framework with the
support of external advisers, following our notifications to
regulators on the sanctions matters discovered in 2017
and 2019. Metro Bank continues to fully cooperate with
its regulators in relation to any enquiries in this regard.
This year ROC has also focused on change and execution
risk relating to our strategy and transformation agendas.
Our customers have benefited from several new products
launched this year as well as ongoing enhancements to the
services we provide. ROC has also had oversight of the
changes to the risk profile as a result of cost control in line
with the Bank’s strategic priorities. ROC will continue to
have oversight of this as the Bank continues to deliver on
its strategic priorities in 2022.
ROC continues to focus on capital and liquidity and during
the year took part in tailored deep-dive sessions before
endorsing the ICAAP, ILAAP and Recovery Plan to the
Board for approval. As in previous years, regulatory capital
management has been a constraint for the Bank and this
has been kept under close review.
Metro Bank PLC Annual Report & Accounts 2021
119
Strategic reportFinancial statementsGovernanceAdditional information Risk Oversight Committee report continued
Risk Oversight Committee in brief
The ROC provides oversight of risk and advises the
Board, as appropriate, on the risks posed to the
Bank from its continuing business activities and future
risk strategy.
Accountable to the Board, the ROC provides leadership,
oversight and direction regarding the Bank’s risk governance
and management. It is charged with helping the Board to
create an appropriate risk culture across the Bank, which
emphasises and demonstrates the benefits of a risk-based
approach to risk management and internal controls.
The ROC is responsible for reviewing, challenging and
recommending to the Board the Bank’s risk appetite, ICAAP
document, ILAAP document, Recovery Plan and major risk
policies. The ROC oversees risk management procedures
and reviews risk reports on key business areas.
The ROC is a sub-committee of the Board. Its specific
responsibilities are set out in its Terms of Reference which
are reviewed annually and available on the Bank’s website.
As a key part of the Bank’s governance framework, the
ROC ensures that the CRO has unfettered access to the
Committee and its Chair.
Standing items at each ROC meeting
The ROC receives regular management information and
reports concerning the Bank’s performance against risk
appetite and the measures set by it and by the Board.
Regular updates are received on regulatory developments,
and consideration is given to how these will affect plans,
processes, systems and controls.
Over the past year, further enhancements have been
made to the Risk Management Framework, reporting of
performance against risk appetite and policy setting. This
has further embedded the principles, tools and techniques
of the Risk Management Framework.
The key areas of risk considered by the Committee include:
– credit risk;
– treasury (including capital and liquidity risk) and
prudential risk;
– operational risk;
– compliance and conduct risk (including regulatory risk);
– financial crime risk; and
– model risk.
BANK RISK REPORT
TREASURY AND PRUDENTIAL RISK
This includes a summary from the CRO setting out items
of note and assessing the Bank’s performance against its
risk appetite and risk metrics. The report also includes a
summary of top risks, summary of issues under management,
performance against risk appetite, regulatory engagement
update, operational incidents overview and credit
portfolio insights.
During the year there was a noticeable focus on capital
metrics given this continues to be the largest constraint the
Bank faces.
The Treasurer’s commentary is tabled at each ROC meeting
and the Treasurer provides a summary of relevant Treasury
matters, including balance sheet performance and each of the
principal treasury risks i.e. liquidity and funding, capital and
market risks. In addition, the status of the Recovery Plan and
indicators therein are discussed. The Treasurer also tables
relevant Treasury policies for approval and notes the minutes
of the Assets and Liability Committee, which is the primary
venue for in-depth discussion on Treasury matters. The report
to the Committee includes high-level MI on liquidity, funding,
capital and market risks. In addition, the Treasurer’s report
includes updates on relevant regulatory matters.
The Committee also receives a regular update from the
Director of Prudential Risk on treasury risk, treasury risk
appetite performance and model risk.
During the year, ROC also reviewed and recommended to the
Board for approval the ICAAP, ILAAP, Recovery Plan and
relevant policies.
120
Metro Bank PLC Annual Report & Accounts 2021
CREDIT RISK
OPERATIONAL RISK
Execution of strategy requires prudent and controlled
management of credit risk. To support this, one of the roles
of ROC is to oversee credit underwriting and ensure that the
Bank has effective processes and controls to monitor and
manage credit risk, including where the risk position associated
with a particular customer or loan has deteriorated. This
ensures that lending remains within risk appetite and policy
exceptions are monitored. The Committee regularly reviewed
the performance of the loan portfolio including assessing
immediate and ongoing COVID-19 impacts across all products.
The Committee also oversaw the performance of the suite of
government financial support measures.
The Committee receives reports concerning risk appetite and
risk assessment for a number of key operational risks including:
information security and systems availability, operational
resilience, and the execution risk of change. Incidents and root
cause analysis as a result of any material incidents were
presented in 2021 to demonstrate how the Bank captures
learnings and takes action to prevent or mitigate any potential
recurrences. The view of the Committee is that the
management of these incidents and the actions taken in
response were proportionate and appropriate to the size
and scale of the incidents.
During 2021 the Committee has also received reports from
management on emerging non-financial risks and how these
risks are mitigated.
COMPLIANCE AND CONDUCT RISK
FINANCIAL CRIME RISK
The Committee is updated regularly on regulatory
developments and changes that could impact the Bank. The
Committee receives updates on compliance and conduct risk
in the areas of culture and governance, product governance,
customer treatment and feedback from ‘Voice of the
Customer’ surveys. The Committee is also updated on how the
Bank manages expressions of dissatisfaction, and on the
ongoing compliance assurance work performed by the second
line of defence.
Given the level of risk posed by financial crime to all banks, the
Committee reviews management information and performance
against the Bank’s financial crime key risk indicators.
DEEP DIVES AND IN-DEPTH REVIEWS
EXECUTIVE COMMITTEE MINUTES
The Committee receives in-depth reviews on areas of
emerging risk and regulatory interest throughout the year and
the areas looked at in 2021 are noted above.
The Committee reviews and formally notes the minutes
of the Executive Risk Committee and the Asset and Liability
Committee.
Key policies considered by the Risk
Oversight Committee in 2021
Policy
Policies approved by the ROC:
– Market Risk Policy
– Dealing Policy
– Permanent Partial Use Policy
– Data Policy
– Recruitment and Selection Policy
– Pillar 3 Disclosure Policy
– Arrears Management
– Retail Unsecured
– Operational Risk Framework
– Enterprise Risk Management Framework
Policies reviewed and recommended to the Board:
– Capital Management Policy
– Liquidity Policy
– Sanctions Policy
– Anti-Money Laundering and Combating Terrorist
Financing Policy
Metro Bank PLC Annual Report & Accounts 2021
121
Strategic reportFinancial statementsGovernanceAdditional information Nomination
Committee report
2021 Activities
– The Committee reviewed the appointment of Monique Melis
as our new Senior Independent Director and recommended
this appointment to the Board.
– Changes to Committee memberships were reviewed and
recommended to the Board following the 2020 external
Board evaluation.
– Non-executive succession planning was discussed to ensure
the Board has the appropriate mix of skills, experience,
independence and diversity.
– Consideration of Senior Managers and Certification Regime
and how the Committee should work with the Remuneration
Committee on senior manager appointments.
– Oversight of talent management and inclusion throughout
the Bank.
– The Committee reviewed plans on executive succession and
considered the development plans of individuals.
– Reviewed the progress against the Board Diversity Policy
and assessed the objectives against the market to ensure
they remain appropriate.
2022 Priorities
– The Committee will continue to review the long-term
succession planning for the Board, noting that no
appointments are expected in the short to medium term.
ROBERT SHARPE
NOMINATION COMMITTEE CHAIR
Committee attendance for 2021
Members
Meetings attended
Meetings held
during Director’s
tenure
Robert Sharpe (Chair)
Catherine Brown
Monique Melis
Sir Michael Snyder
Paul Thandi*
3
3
3
3
2
3
3
3
3
2
* Paul Thandi was appointed to the Committee on 1 April 2021
– The Committee will oversee the search for short-medium and
a longer term replacement for the CFO.
– The Committee will continue to monitor the PRA/FCA
consultation paper on Diversity within the Financial Services
Sector, and will assess the impact on the Bank.
– The Committee will review the skills matrix to assess the way
the Committee evaluates skills of Board members.
Composition of the Committee
In addition to the Committee Chair, Robert Sharpe, the
Committee consists of three other members, Catherine
Brown, Monique Melis and Paul Thandi. The CEO and
the Chief People Officer (CPO) attend meetings by
invitation. The CPO provides support to the Committee
Chair and Committee as needed and the Company
Secretary acts as Secretary to the Committee.
Following each meeting the Chair provides a verbal
update to the Board. The Committee minutes are also
included in future Board papers, as well as papers that
are to be considered by the Board such as the Board
Diversity Policy and succession plans.
122
Metro Bank PLC Annual Report & Accounts 2021
The Nomination Committee in brief
The Nomination Committee leads the process for
identifying and making recommendations to the Board for
new Board appointments and Committee memberships.
Its duties include:
– regularly reviewing the structure, size and composition
(including skills, knowledge, experience, independence
and diversity) of the Board as a whole and making
recommendations to the Board as required;
– considering succession planning for members of the
Board and Executive Directors, including the length of
service of members and the need to regularly refresh
Board membership, taking into account the Bank’s
strategic priorities and the main trends and factors
affecting the long-term success and future viability of the
Bank and the skills and expertise needed on the Board in
the future;
– reviewing and assessing the Skills Matrix against the skills
required by the Bank as part of its strategy;
– taking responsibility for identifying and nominating
candidates to fill Board vacancies as and when they arise,
for the approval of the Board;
– evaluating the balance of skills, knowledge and
experience, diversity and length of service on the Board,
and the range of critical skills of value to the Board
relevant to the challenges and opportunities facing
the Bank;
– reviewing the Board Diversity Policy and recommending
any changes to the Board;
– considering Board candidates on merit and against
objective criteria and with due regard for the benefits of
diversity, taking care that appointees have time available
to devote to the position; and
– reviewing the results of the Board performance evaluation
process relating to Board composition.
The Nomination Committee Terms of Reference can be
found on our website: metrobankonline.co.uk.
Dear shareholders
I am pleased to present the Nomination Committee report,
my first as Chair of the Committee. This has been a year
of continued evolution for the Bank, and for further
embedding our Board following the appointments made
in 2020. In light of the departure of Sir Michael Snyder in
October 2021, following six years of service, Monique Melis
was appointed as Senior Independent Director effective
31 October 2021, subject to regulatory approval. Monique
previously held this role on an interim basis whilst Sir
Michael acted as interim Chairman, she was therefore well
placed to take on the role on a permanent basis and I am
very confident that she will be effective in this role.
In line with the ever evolving landscape in which we
operate, the Committee has continued to focus on
diversity at all levels of the Bank as well on our Board and
committees. We are keeping a watching brief on the PRA/
FCA consultation on Diversity in Financial Services and
will consider how this impacts our organisation and any
changes to our Board Diversity Policy we may need to make
as a result. Following the results of our external Board
Evaluation in 2020, the Committee further reviewed the
membership and composition of our Committees to ensure
they have the right mix of skills and experience. As a
result, we made changes to the membership of the Audit
Committee to continue to ensure we have the right balance
of skills across our committees. Paul Thandi and Anne Grim
therefore stepped down from the Audit Committee and
were appointed to the Nomination Committee and
Remuneration Committee respectively. Following her
appointment as SID, the Committee reviewed the
Chairmanship of the Committee and it was agreed that
I would take over to ensure Monique has sufficient time
to dedicate to her role as SID and as a member of the
Audit Committee.
The Committee has discussed long term succession
planning during the year. We have agreed that there will
be no new NED appointments in the short to medium term,
which reflects the strong and effective working relationship
on the Board since we appointed a number of NEDs in
2020. As a Board our main priority is overseeing the Bank’s
return to profitability. The Committee and I consider the
current makeup of the Board is well balanced and has
the appropriate skills and experience to do this. We will
continue to keep this under review as part of our long term
succession planning, noting the importance of diversity in
effective decision making.
Another important discussion we had during 2021 was
on executive succession. The Committee enhanced its
review of executive succession planning by looking in
further detail at the pipeline for senior roles within the
organisation assessing the development plans of these
individuals. This was important for the Committee to
understand how our talented colleagues are developing
in their careers and where the Committee would need to
look externally for any recruitment needs that the business
may require in the future. As announced on 15 February
2022, David Arden, Chief Financial Officer, agreed with the
Metro Bank PLC Annual Report & Accounts 2021
123
Strategic reportFinancial statementsGovernanceAdditional information Nomination Committee report continued
The process for appointments to the Board is contained
within the Committee’s Terms of Reference. The Committee
recognises the importance of conducting a transparent and
fair process for interviewing, assessing and appointing
candidates to the Board. There is also a requirement for
the list of candidates to be diverse and the Committee is
fully committed to improving the diversity of the Board
and its committees over the long term. The details of search
firms used to assist the Committee in compiling a list of
candidates will be disclosed in the Committee’s report
in the Annual Report and Accounts, as required. The
Committee did not engage any search firms during 2021.
Diversity
The Committee understands and recognises the importance
of diversity in assisting decision-making and avoiding
groupthink within our Board and its committees. These
aspects are considered whenever the Committee discusses
diversity. The Committee is also dedicated to using search
firms that are committed to sourcing a diverse long list of
candidates for consideration for the Bank’s Board.
The gender balance on our Board, and of those in senior
leadership and their direct reports, can be found on
page 34.
Board Diversity Policy
During 2021 we reviewed our Board Diversity Policy to
ensure this was in line with best practice recommendations,
meets the expectations of our stakeholders and to review
progress against the objectives that were set in 2020.
The objectives were benchmarked against our financial
services peers to make sure we continue to meet the
market standard.
Following the review, the Committee confirmed that
the objectives that were set in 2020 remained the right
objectives for the Company, and would continue to monitor
progress against the same objectives.
A summary of the objectives of the Board Diversity Policy
and the progress made against these is listed on page 125.
Board to step down from the Board with immediate effect
and leave the business on 1st April 2022. On behalf of the
Board, I would like to thank David for the important work
that he has done to strengthen Metro Bank’s financial
controls over the past two years. He has played an
instrumental role in helping to deliver the Bank’s strategic
priorities and turnaround plan and leaves with our best
wishes for the future. The Nomination Committee will
oversee the search for a short-medium and longer term
replacement for the role.
I look forward to overseeing the work of the Committee
in 2022 and in particular ensuring this supports the next
steps of the Bank’s turnaround plan.
Robert Sharpe
Nomination Committee Chair
23 March 2022
Committee Performance Evaluation
The Committee conducted an internal evaluation this year,
following the externally facilitated evaluation in 2020. The
Committee members considered that the Committee is
working effectively and the members understand the skills
required of Board members to oversee the delivery of the
Bank’s strategic objectives.
Board Composition
The Nomination Committee’s role in the Bank’s strategy
is to ensure that the Directors appointed have the skills
required by the Bank, to provide effective challenge and
oversight of the delivery of the strategic objectives and to
ensure there is a strong pipeline for Executive and Senior
Management positions. The Committee assessed the
composition of the Board in 2021 and concluded that the
Board has the skills, leadership and time to provide the
necessary oversight and proper challenge to the Executive
team. The Committee is aware of the skills that it may
need to be strengthened as the Bank progresses, as well
as keeping the tenure of Directors under review, to ensure
orderly succession. The Chairman also conducts individual
appraisals with each Non-Executive Director on an
annual basis.
The changes that were made to the committee memberships
in 2021 were made to improve the effectiveness of our
committees. The evaluations of each committee show that
our committees are working effectively in carrying out their
duties and a summary of each committee evaluation is
included in each of the committees’ reports. The Committee
will continually review the memberships of our committees
to ensure that the members appointed have the skills and
experience required.
124
Metro Bank PLC Annual Report & Accounts 2021
OBJECTIVE
STATUS
Considering candidates for appointment as Non-Executive
Directors from a wide and diverse pool, which include a
combination of skills, experience, ethnicity, age, gender, social,
educational and professional background and other relevant
personal attributes such as cognitive and personal strengths
to provide the range of perspectives.
Ensuring the female representation on the Board meets
and remains at a minimum of 33% as per the Hampton-
Alexander objective.
Ensuring the Board’s ethnic diversity meets and maintains
a minimum of one Director of colour by 2024.
The Board did not make any appointments during 2021,
however the Board is fully committed to ensuring we consider
diverse long lists for any possible Board appointments.
As at the date of publication of this report, there were four
female directors appointed to the Board, which correlates to
40% of the total Board membership. We are therefore meeting
this objective.
As at the date of publication of this report, we have one
director from an ethnic minority background appointed to the
Board. We are therefore meeting this objective.
Only engaging executive search firms who are committed
to sourcing diverse candidates and who have signed up to
the voluntary Code of Conduct on gender diversity and
best practice.
We have not engaged any executive search firms in 2021, but
we would require any firm we engage with to source a diverse
long list of candidates and would seek to ensure they have
signed up to the voluntary Code of Conduct where possible.
Reporting annually against our objectives and other initiatives
taking place within the Bank which promote diversity.
More information on Diversity initiatives can be found on pages
34–36 in the ESG report.
Reporting annually on the outcome of the Board evaluation
including the composition, structure and diversity of the Board.
We have included a disclosure on our internal evaluation that
the Board carried out in 2021 on pages 107-109.
Metro Bank PLC Annual Report & Accounts 2021
125
Strategic reportFinancial statementsGovernanceAdditional information Remuneration
Committee report
2021 Activities
– The Committee approved the new Remuneration Policy and
this was also approved by our shareholders at the 2021 AGM.
– We engaged with our shareholders to gauge their views
ahead of putting our new Remuneration Policy to a vote at the
2021 AGM.
– At the beginning of 2021, the Committee approved the new
Bank-wide balanced scorecard measures to be used for
variable reward outcomes across the colleague population.
– Changes to share plans were approved in 2021, which
included introducing a new LTIP and moving to nominal value
share awards instead of market value so that the share plans
present a more motivating tool for the participants.
– We reviewed the remuneration outcomes for senior
executives and Material Risk Takers (MRTs) and considered
risk adjustments.
CATHERINE BROWN
REMUNERATION COMMITTEE CHAIR
Remuneration Committee attendance for 2021
Members
Meetings attended
Meetings held
during Director’s
tenure
– Ex post and ex ante risks were taken into account when
reviewing grants of awards and vesting of awards.
Catherine Brown (Chair)
Sally Clark
Paul Thandi
Anne Grim1
7
7
7
2
7
7
7
3
1. Anne Grim was appointed to the Committee on 1 April 2021 and did
not attend the 25 May 2021 meeting due to a prior engagement
made before being appointed to the Committee.
Composition of the Committee:
In addition to the Committee Chair, Catherine Brown,
the Committee consists of three other members, Sally
Clark, Anne Grim and Paul Thandi. The Chairman, CEO,
the Chief People Officer and the Director of Reward &
Performance attend meetings by invitation. The Chief
People Officer provides support to the Committee
Chair and Committee as needed and the Company
Secretary acts as Secretary to the Committee.
Following each meeting the Chair provides a verbal
update to the Board. The Committee minutes are also
included in future Board papers.
Advisors to the Remuneration Committee
Following a comprehensive tendering process, the
Remuneration Committee appointed Aon McLagan
(Aon) to be its independent advisors on executive
remuneration. The Committee requests Aon to attend
meetings during the year and is satisfied that the advice
it has received has been objective and independent.
Aon provided support early in 2021 in relation to our
review of remuneration structures. The fees paid for
services provided to the Remuneration Committee in
2021 were £81,673 and were determined on a time and
expenses basis. Aon also provided pay data for the
Executive Committee. The Committee is satisfied that
these additional services did not prejudice Aon’s
position as the Committee‘s independent advisor.
– The appointment of remuneration consultants was made in
September 2021.
– The Gender Pay Gap and other colleague demographic
analyses were reviewed by the Committee and the plans
presented by Executives to address issues were discussed
and challenged.
– The Committee reviewed and considered the operation of the
Remuneration Policy in order to ensure compliance with
relevant regulatory guidance, alignment with the Bank’s risk
principles and consistency with the Bank’s strategy.
– We challenged and approved an amended list of MRTs and
Certified Persons within the organisation.
– The Committee was presented with changes that had been
proposed to the Bank’s approach to performance management.
– We monitored progress against the Bank-wide balanced
scorecard.
– We reviewed and considered remuneration outcomes across
the colleague population, including internal relativities and
proportion of spend.
– We reviewed and approved our approach to salary increases
across the workforce, taking into account living wage and
market positioning.
2022 Priorities
– The Committee will keep the effectiveness of the
Remuneration Policy under review as the Bank delivers
against its transformation plan, ensuring that it continues to
allow us to attract and retain talent.
– Continue to improve the collaboration between the
Committee and the Risk Oversight Committee.
– Review our market positioning and other factors to ensure
we continue to retain our talented colleagues.
126
Metro Bank PLC Annual Report & Accounts 2021
A year of strong performance against
our strategic priorities
Dear shareholders
On behalf of the Board, I am pleased to present the
Remuneration Committee report and the Directors’
Remuneration report (the report) for 2021. This report will
detail the work of the Committee this year and how we have
applied the new Remuneration Policy that was approved by
shareholders at the 2021 AGM.
I should start by thanking our shareholders, colleagues and
advisors for their assistance in formulating the new
Remuneration Policy that was very well supported at the
2021 AGM. As we stated in last year’s report, the new
Remuneration Policy was important to align more
effectively Executive reward with the interests of our
shareholders and the Bank’s strategic objectives. The
Remuneration Policy also aligns with market practice,
including the introduction of a Long Term Incentive Plan
(LTIP) and greater use of deferral in awards of variable
remuneration. I am pleased with how the new Policy is
working, and further details are provided in this report.
I am pleased with the progress we have made as a
Committee this year in providing effective oversight of
performance against the balanced scorecard and further
strengthening our assessment of remuneration outcomes
for colleagues holding Senior Managers and Certification
Regime (SMCR) responsibilities. In this regard, we have
made good progress this year in ensuring risk outcomes are
considered fully and reflected fairly in remuneration
outcomes. The Chief People Officer and Chief Risk Officer
have worked together to comprehensively embed SMCR
across the business and the Committee is benefiting from
updated governance processes with the Risk Oversight
Committee that have improved the information flow
between the committees.
We have continued to monitor our performance measures
throughout the year to ensure the Executive Directors are
properly incentivised to produce results that align with our
strategic objectives and reduce risk for the Bank. As a
Committee we have set challenging and stretching
scorecard targets for the Executive Directors and executive
team, while ensuring that our decisions are fair in the
context of the strategy set by the Board and the external
environment that the Bank finds itself in. At year end we
applied downward discretion to the Bank-wide balanced
scorecard outcome, recognising the hard work of
colleagues during the year and the significant progress that
had been made towards delivering the strategic plan,
balanced against our loss-making position. We have taken
the decision not to pay cash bonuses to the Executive
Directors for a second year in a row.
During the year we have continued to ensure that the
Bank’s unique culture remains at the forefront of
remuneration considerations. The Committee recognises
that our colleagues and culture underpin the performance
of the business, and considering the contribution they make
has been integral to remuneration decisions.
We have appointed Aon as our independent remuneration
advisors on a formal basis this year. Having previously
advised us on the formation of our Remuneration Policy,
they are now providing us with independent remuneration
advice including market trends and regulatory considerations.
The external perspective that Aon provides is well received
by the Committee and provides valuable additional context
when the Committee is making decisions. We conducted a
tender process ahead of Aon’s appointment. Aon does not
have any other connection with the Bank so the advice that
they provide to the Committee is fully independent.
Committee Performance Evaluation
The Committee conducted an internal evaluation this year,
following the externally facilitated evaluation in 2020.
The feedback from Committee members was very positive
and reflects the effective way that the Committee has
functioned throughout the year. Based on feedback
provided by Committee members, during 2022 the
Committee will expand its training programme, which will
be reflected in the forward plan, and extend consideration
given to Internal Audit findings in remuneration decisions,
to complement the enhanced information now being
provided for risk outcomes.
I am looking forward to working with my Committee
colleagues and the Executive team in 2022 as we continue
to strengthen the alignment of remuneration, culture,
financial performance and risk across the business.
Our approach to Executive Directors’ and Executive
Committee members’ remuneration
Our new Remuneration Policy was approved at the 2021
AGM. The changes address the Committee’s preference to
bring greater alignment between longer term performance
and incentives, acknowledging external feedback received
in 2020. The changes reflect best practice and ensure the
Bank’s remuneration structure is compliant with the
regulatory requirements we are required to observe as a
CRD V proportionality level 2 firm.
Some aspects of the Remuneration Policy were adopted for
members of the Executive Committee, including the annual
bonus and LTIP arrangements, to align their pay for
performance with Executive Directors.
Full details of our Remuneration Policy can be found on our
website at https://www.metrobankonline.co.uk/
globalassets/documents/investor_documents/
remuneration-policy.pdf.
Our approach to Remuneration across the Bank
We believe oversight of the remuneration and benefits
across the Bank for all colleagues, not just executives is
an important part of our role.
Executive Committee (including Executive Directors)
remuneration will comprise a salary, reasonable benefits
and pension provisions and variable reward which is
delivered through an annual bonus with deferral and LTIP.
Metro Bank PLC Annual Report & Accounts 2021
127
Strategic reportFinancial statementsGovernanceAdditional information Remuneration Committee report continued
For the wider colleague population, the Committee aims
to have a remuneration structure that is simple, delivers
variable reward that is valued by colleagues, and is aligned
to market practice. Colleagues’ remuneration below the
Executive Committee comprises a salary, benefits, pension
provisions and variable reward award that is delivered in
cash. Due to the nature of their roles and alignment with
risk, colleagues who are deemed to be Material Risk Takers
(MRTs) will have their variable remuneration delivered in line
with regulatory requirements.
Colleagues across the Bank can participate in our ShareBuy
scheme: a share incentive plan (SIP) that is recognised by
HMRC and allows colleagues to buy Metro Bank shares in
a simple, tax efficient way. During 2022, we plan to
extend our ShareBuy offering which will encourage share
ownership in the Bank. This aligns all colleagues with both
investors and other stakeholders in line with our customer-
focused model and long term vision.
All variable awards are subject to malus and clawback of at
least three years, extending up to ten years where required.
Looking back on 2021
2021 has been another challenging year for colleagues and
the Bank and once again our colleagues have shown us why
Metro Bank is such a special place to work, coming together
to support each other, our customers and our communities.
We have not used the government furlough scheme, and
have ensured continuity of service to our customers
throughout the pandemic and I am very proud to be part
of a business where all of our colleagues have risen to the
challenge in a variety of ways. Store-based colleagues have
remained focused on creating FANS; their dedication to
excellent customer service has enabled us to keep stores
open throughout the pandemic. Similarly, our AMAZE
Direct colleagues have been on the end of the phone
throughout the pandemic, supporting those customers
who were not able to get to a store. Management has
also led by example, making sound decisions to support
colleagues and ensuring the business has remained resilient
whilst delivering against our strategic plan.
Like many organisations, the Committee has been required
to apply its discretion in deciding the remuneration
outcomes for the year. Not only has the Committee had to
consider the impact of COVID-19 on business performance
and shareholders, it has been conscious of all the challenges
our extraordinary colleagues have faced during the year.
Notwithstanding these challenges, the Committee
recognises that substantial progress has been made in
delivering the Bank’s ambitious strategic transformation
programme, which remains on time and on budget.
With this in mind and considering the exceptional
circumstances we find ourselves in, I believe that the
decisions relating to remuneration for the year are
appropriate, ensuring we retain and incentivise our
colleagues appropriately whilst recognising the significant
impact of COVID-19 on business performance.
128
Metro Bank PLC Annual Report & Accounts 2021
Variable reward
Executive Directors’ variable reward outcomes
are based on key financial, risk, customer and colleague
objectives, balanced with personal behaviours and delivery
of the individual. This approach is consistent with the
standards we apply to every colleague.
in January 2019 we announced that we had adjusted the
risk-weighting of certain commercial loans secured on
commercial property and certain specialist buy-to-let
loans that had the combined effect of increasing our
risk-weighted assets by £900 million. The Committee
decided to freeze vesting of share options and awards for
Executive Directors and the Executive Committee, including
share options granted for 2019 performance, pending
further internal analysis and any external investigations into
the RWA adjustment. The PRA concluded their
investigation in December 2021 which resulted in a fine of
£5.4 million. In the time since the RWA errors were
identified, we have made significant improvements to, and
substantial investment in, our regulatory reporting
processes and controls. We have also strengthened our
broader risk management and governance and remain
absolutely committed to accurate regulatory reporting.
Awards for 2018 and 2019 will remain frozen until the FCA
investigation has also completed; this approach has been
applied to any colleague deemed to be proximate to the
issue. The Committee formally reviews all outstanding
frozen awards every year.
To meet our plans to return the business to profitability we
set stretching targets for 2021. Despite facing significant
headwinds, underlying business performance has been
strong against all scorecard measures (financial, risk,
customer and colleague), which resulted in a formulaic
balanced scorecard outcome of 102.10%. The balanced
scorecard outcome can range from 0% to 120% with 100%
being target performance and anything below threshold
performance resulting in a zero outcome. The Committee
considered the outcome and exercised its discretion to
reduce the scorecard outcome down to 85% after taking
into consideration the impact of COVID-19 on the macro
business environment, and also the shareholder experience
during the last 12 months.
Daniel Frumkin was awarded a bonus outcome of 85%
of salary, taking into account individual and bank-wide
performance. The Committee used its discretion to reduce
the individual performance adjustment factor to reflect the
overall performance of the Bank.
David Arden stepped down as CFO on 15 February 2022
and will leave the business on 1 April 2022. In relation to the
2021 performance year, and in light of his pending
departure, the Committee awarded variable remuneration
to David but based on a 25 percent reduction in his
potential entitlement and on the basis that no 2022 LTIP
award will be made.
Daniel volunteered to forgo any cash bonus for 2021
performance and David’s annual variable reward will be
treated in the same way. Their annual variable awards will
be delivered in retained shares and deferred shares under
the Deferred Variable Reward Plan. The retained shares will
vest immediately and be subject to a one year retention
period and the deferred share awards vest between years
three to seven subject to ongoing service. Each vest is
subject to a mandatory one year retention period.
A LTIP award of 100% of salary will be awarded to Daniel
in March 2022. This award will have a 3 year performance
period and an additional vesting and retention period.
The Committee considers that both Daniel’s and David’s
share awards reflect their performance during the year
including the development and implementation of the
strategic plan.
Pages 138 to 141 detail the scorecard measures, targets
and outcomes relating to 2021 as well as any share-based
awards made to Executive Directors.
Looking forward to 2022
Resignation of the CFO, David Arden
David Arden stepped down as CFO on 15 February 2022
and will leave the business on 1 April 2022. In relation
to the 2021 performance year, and in light of his pending
departure, the Committee awarded variable remuneration
to David but based on a 25 percent reduction in his
potential entitlement and on the basis that no LTIP award
will be made. This will be delivered as retained shares and
deferred shares under the Deferred Variable Reward Plan.
The share awards granted to David in 2018, 2019 and 2020
will lapse in full. The award granted to David in 2021
under the LTIP will also lapse in full. The Committee has
determined that David will be treated as a good leaver for
the purposes of the deferred share award granted to him in
2021 and any deferred share award granted to him in 2022.
Salaries from 1 April 2022
The increase in our budget for salaries this year has been
used to continue our fair pay approach across the Bank.
We have committed to pay the London Living Wage and
UK Living Wage to our cashiers, customer service
representatives and AMAZE Direct representatives.
The average pay rise across our colleague population is
5.0%, compared to 2.5% last year.
We are proposing to increase the CEO’s salary by 4.0%
which is below the average salary increase across our
workforce. This would result in the Daniel Frumkin’s salary
increasing from £740,000 to £769,600. Progress against
our strategic priorities, growth in role, and the criticality of
the CEO to deliver our strategic plan have provided the
Committee with strong rationale to give a salary increase
to Daniel this year.
Chair and Non-Executive Director fees
Robert Sharpe was appointed Chair on 1 November 2020
with a fee of £350,000 per annum. The annual fee for the
Chair will remain unchanged. Board member fees for our
Non-Executive Directors will change to £65,000 and will
take effect from 1 April 2022.
Variable reward for 2022
The Committee has agreed an appropriate bank-wide
balanced scorecard to inform the Company variable
reward adjustment factor for 2022, based on financial, risk,
customer and people objectives. We will disclose targets
and measures in the Directors’ Remuneration Report of
next year’s Annual Report.
Variable reward for Executive Directors will be awarded
through annual bonus (consisting of cash bonus, retained
shares and deferred shares under the Deferred Variable
Reward Plan) and the LTIP.
Our simplified approach to variable reward, applied across
the organisation, focuses all colleagues on growth and the
long-term, sustainable success of the business.
Appropriateness of Executive Remuneration
We believe that the approach to variable reward set out
above is appropriate and aligns with our ambitious strategy.
The Remuneration Policy reflects best practice and investor
expectations, brings greater alignment between longer
term performance and incentives and ensures continued
compliance with the regulatory requirements the Bank is
required to observe as a CRDV proportionality level 2 firm.
In addition, the interests of the Executive Directors, broader
Executive Committee and shareholders are closely
aligned. The Remuneration Policy operated as intended
during the year.
The Remuneration Committee has complete discretion to
challenge the formulaic variable reward outcome where it
believes it is not appropriate.
We engage with relevant organisations concerning our
approach to remuneration and welcome feedback from
investors and stakeholders.
I very much hope that you will support the resolutions to
approve the Remuneration Report at the forthcoming AGM.
On behalf of the Committee, thank you for your support.
Catherine Brown
Remuneration Committee Chair
23 March 2022
Metro Bank PLC Annual Report & Accounts 2021
129
Strategic reportFinancial statementsGovernanceAdditional information Remuneration at a glance
EXECUTIVE DIRECTOR PAY AT METRO BANK
The remuneration of Executive Directors at Metro Bank consists of the following elements.
Fixed
Salary
+ Benefits
+ Pension
+ Annual bonus
+ LTIP
Variable
Reflects the value of
the individual’s skills,
expertise and
experience and
ability to grow with
the role and
organisation.
Supports the health,
wellbeing and
security of our
Executive Directors.
Offering is aligned
with all colleagues.
Supports Executive
Directors in building
long term savings
for their retirement.
Offering is aligned
with all colleagues.
Motivates key
individuals and
rewards the creation
of long term
shareholder value
thereby creating
shareholder
alignment.
Incentivises the
delivery of the
annual financial and
strategic objectives
which contribute
towards the delivery
of longer term
strategy. Aligns
interests with
shareholders by
delivering a portion
in shares.
= Total
remuneration
Sum of the fixed and
variable elements of
remuneration.
2021 REMUNERATION OUTCOMES FOR EXECUTIVE DIRECTORS
Daniel Frumkin Chief Executive Officer
(£’000)
2021
£0.0m
£801,076
£547,600
£81,400
£0.5m
£1.0m
£1.5m
£2.0m
David Arden Chief Financial Officer
(£’000)
2021
£0.0m
£103,275
£446,687
£154,913
£0.5m
£1.0m
£1.5m
£2.0m
Total fixed remuneration
Retained Share Award
Deferred Share Award
No cash bonuses were awarded for performance year 2021. There were no vestings under the LTIP.
PAY FOR PERFORMANCE AT A GLANCE
The following table shows the outcomes of the 2021 balanced scorecard which is used to determine annual variable
reward outcomes.
Financial
Underlying loss before tax (£’million)
Statutory cost: income ratio (%)
Loan to Deposit Ratio (%)
Risk &
Regulatory
Key measures relating to Internal Audit, credit
quality – arrears and compliance training
Customer
Net Promoter Scores, and expressions
of dissatisfaction
People
Diversity and being a ‘good place to work’
Actual performance
Range from threshold to maximum
130
Metro Bank PLC Annual Report & Accounts 2021
THRESHOLD
TARGET
MAXIMUM
2021 WEIGHTED
PERFORMANCE
OUTCOME
60%
0%
0%
20%
11.50%
10.60%
Remuneration
Committee governance
The Directors’ Remuneration Policy
The following table summarises how the Remuneration Policy fulfils the factors set out in provision 40 of the 2018 UK
Corporate Governance Code. Minor amendments were made to the policy during 2021 to ensure it is gender neutral and
to explicitly confirm that we do not operate any discretionary pension benefits.
Clarity
Remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce.
Simplicity
Remuneration structures should avoid complexity
and their rationale and operation should be easy to
understand.
Risk
Remuneration arrangements should ensure
reputational and other risks from excessive
rewards, and behavioural risks that can arise from
target-based incentive plans, are identified
and mitigated.
Predictability
The range of possible values of rewards to
individual directors and any other limits or
discretions should be identified and explained
at the time of approving the policy.
The Committee is committed to providing open and transparent disclosures
to shareholders and colleagues with regard to Executive Director
remuneration arrangements.
Colleagues are able to express their views on pay through regular surveys
and feedback, as well as through our Designated Non-Executive Director
for Colleague Engagement.
Our approach to remuneration for Executive Directors is simple and
transparent. It is consistent with structures used widely across the financial
services industry.
In line with regulatory requirements, our remuneration practices promote
sound and effective risk management whilst supporting our business
objectives.
For 2022, 20% of our balanced scorecard which informs variable reward
will be based on risk and regulatory measures, and variable reward is also
subject to a risk adjustment process and input from the Chief Risk Officer
and the Chief People Officer.
The deferred portion of any bonus awards granted to Executive Directors
vest between years three and seven, during which our malus policy can
be applied.
Awards made under the separate LTIP also vest over a seven year period,
assuming performance conditions (of which one is a risk-based measure)
have been met. Our malus policy can be applied to the LTIP throughout
the vesting.
All variable pay awards that have vested are subject to our clawback policy
for a period of up to seven years from the award date (extending to 10 years
where an investigation is ongoing).
Variable reward is delivered primarily through share based awards. The
value of awards are therefore closely aligned to share price movements and
the shareholder experience.
The potential value and composition of the Executive Directors’
remuneration packages at below threshold, target and maximum scenarios
are provided later in the report.
Proportionality
The link between individual awards, the delivery
of strategy and the long term performance of the
company should be clear. Outcomes should not
reward poor performance.
Variable reward payments require robust performance against challenging
measures and targets. Performance conditions have been designed to drive
the delivery of our business strategy and consist of a number of financial
and non-financial metrics, as well as individual performance based on the
individual’s AMAZEING review.
Alignment to culture
Incentive schemes should drive behaviours
consistent with company purpose, values
and strategy.
The Committee has discretion to override formulaic scorecard outcomes to
ensure that they are appropriate and reflective of overall performance.
The primary objective of our remuneration framework is to support growth
and our long term success while reinforcing our unique culture.
The variable reward pool for any year is based on the overall performance
of the Bank in terms of culture and delivery in line with the balanced
scorecard.
All colleagues are able to participate in our HMRC approved SIP scheme,
which supports our ethos of colleague buy-in and ownership.
Metro Bank PLC Annual Report & Accounts 2021
131
Strategic reportFinancial statementsGovernanceAdditional information Remuneration Committee governance continued
The Directors’ Remuneration Policy – summary
This section of the report summarises the remuneration policy for the Company’s Directors, how it was implemented in
2021 and how it is intended to operate in 2022. The policy was approved by shareholders at the AGM on 18 May 2021 and
took effect from that date, in accordance with section 439A of the Companies Act 2006. It is intended that approval of the
Remuneration Policy will be sought at three-year intervals, unless amendments to the policy are required, in which case
further shareholder approval will be sought; no changes are proposed for 2022. The approved Remuneration Policy can be
found in the Governance section on the company’s website a https://www.metrobankonline.co.uk/globalassets/
documents/investor_documents/remuneration-policy.pdf.
Key elements of
remuneration
Salary
Key features of the Policy
Implementation for 2021
Planned for 2022
– Reviewed annually and increases will normally be
in line with increases awarded to other colleagues
– There may be instances where a higher amount
is agreed at the discretion of the Remuneration
Committee, for example where the size and
scope of a particular role is increasing as the
organisation grows
– Daniel Frumkin (CEO):
– 4.0% salary increase for the
£740,000
– David Arden (CFO):
£405,000
CEO which is below the
average salary increase for
the wider workforce
– N/A for the CFO
Benefits
Core benefits include:
– Life assurance of 4x salary
– Private medical insurance for the Executive Director,
their partner and children
– Additional benefits may be provided in certain
circumstances such as on relocation
– Benefits are provided in line
– Core benefits will be
with the approved Policy
unchanged from previous
year
Pension
– Executive Directors are automatically enrolled into our
Group Personal Pension Plan when they join the Bank.
If they have exceeded the lifetime allowance or the
annual pension tax-free contribution limit, they may
elect to take cash in lieu of pension for all or some of
the benefit
– We do not operate any discretionary pensions
Company contributions:
– Daniel Frumkin (CEO): 8%
of salary
– David Arden (CFO): 10% of
salary
– Unchanged for the CEO
– N/A for the CFO
– The median employer
pension contribution rate
available to the wider
workforce is 8%
Annual Bonus
– Variable reward will be limited to 200% of salary for a
financial year. Within this overall limit, annual bonus to
be limited to 100% of salary for a financial year
– Scorecard had a CET1
gateway requirement
– 60% Financial (PBT,
– Deferral of all variable reward (annual bonus and LTIP)
will be in line with regulatory requirements.
– Subject to malus and clawback.
– Executive Directors must undertake not to use
personal hedging strategies or take out contracts of
insurance to undermine the risk alignment embedded
in their remuneration
Cost: Income ratio, Loan
to Deposit ratio)
– 20% Risk & Regulatory
– 10% Customer (net
promoter score,
expressions of
dissatisfaction)
– 10% Colleague
(Engagement, Diversity)
Balanced scorecard outcome
of 102.1% with discretion
applied by the Remuneration
Committee to reduce the
outcome to 85%
– Bank-wide balanced
scorecard will be similar to
the previous year, except that
the Loan to Deposit ratio will
change to a capital measure
– Performance ranges will be
disclosed in next year’s
Annual Report
132
Metro Bank PLC Annual Report & Accounts 2021
Key elements of
remuneration
Long Term
Incentive
Plan (LTIP)
All employee
Share
Incentive
Plan
Shareholding
guidelines
Key features of the Policy
Implementation for 2021
Planned for 2022
– Variable remuneration will be limited to 200% of
– The first grant of LTIP in
– LTIP grant for the CEO of
salary for a financial year. Within this overall limit LTIP
to be limited to 100% of salary for a financial year
– Performance to be measured ordinarily over a
three-year period, with vesting between years 3 to 7.
LTIP shares will be subject to a post-vesting retention
period
– The performance conditions have been aligned to the
Strategic Plan and the performance range for these
measures will be set to be stretching
– Subject to malus and clawback
– Executive Directors must not undertake to use
personal hedging strategies or take out contracts of
insurance to undermine the risk alignment embedded
in their remuneration
2021 had a four year
performance period
2021-2024 to align with the
strategic plan
100% salary and 0% salary
for the CFO
– Future LTIP grants will have a
3 year performance period.
– Daniel Frumkin (CEO):
– Different performance
100% of salary
– David Arden (CFO): 100%
of salary
– See table on page 146 for
details of the performance
conditions
measures and weighting may
be set for future awards to
ensure that the LTIP remains
aligned to the Company’s
strategy
– Tax-efficient all employee plan to encourage broader
employee share ownership
– Executive Directors are eligible to participate in the
all-employee Share Incentive Plan
– The lower of £1,800 or 10%
of salary per tax-year can
be used to purchase Metro
Bank shares
– All-employee SIP to be
extended to include
Matching Shares
– Executive Directors are subject to a minimum
– Daniel Frumkin (CEO):
– The CEO has met his
shareholding requirement equivalent to 200% of
salary.
– Executive Directors are expected to retain all shares
vesting under the Deferred Plan and the LTIP (net of
tax) until such time as this shareholding requirement
has been met. Build up is expected over a period of
five years commencing with the later of this policy
commencement date or the date the Executive
Director joins the Company.
– Executive Directors are expected to maintain the
shareholding requirement (or their actual
shareholding at date of leaving, if lower) for at least
two years post-employment. For awards granted from
the commencement of this policy, the Company will
enforce this by way of a contractual requirement
current shareholding of
2,350,000 shares
(£2,258,350 based on share
price on 31 December 2021
of 96.10p)
– David Arden (CFO): current
shareholding of 18,400
shares (£17,682 based on
share price on 31 December
2021 of 96.10p)
shareholding requirement
– The CFO will continue to hold
his shareholding for two
years post-employment and
will be required to retain any
shares exercised on a
net-of-tax basis for two years
until he has reached the
minimum requirement
Non-
Executive
Directors
– All Non-Executive Directors receive a basic annual
– Our Non-Executive
fee for fulfilling their duties as a Board member
– Additional fees are paid for added responsibilities
such as chairship and membership of Committees,
or acting as the Senior Independent Director
– The basic and additional fees are reviewed
periodically, drawing on external market information
for comparable financial services groups and
companies
Directors are paid in line
with the approved Policy
– The basic annual fee paid to
all Non-Executive Directors
remained unchanged at
£52,500
– The annual fee for the Chair
remained unchanged at
£350,000
– The basic annual fee paid to
all Non-Executive Directors
will change to £65,000, with
a reduction in fees for
additional responsibilities
– The annual fee for the Chair
remains unchanged at
£350,000
Remuneration for colleagues below Board level
Metro Bank is committed to ensuring our workforce has the diversity of talent and expertise that it needs for the business
to continue to grow and innovate. Our people are critical to us achieving our strategy and the Remuneration Committee
is committed to ensuring our people are rewarded fairly and competitively for their contribution to our success. Our
approach to remuneration for colleagues below Board and Executive Committee level is similar for all colleagues. Whilst
remuneration for the Executive Committee is structured differently to that of the wider colleague population, it is
consistent across this small cadre of colleagues. The focus is on simplicity, rewarding the right behaviours and outcomes
for customers and the business whilst discouraging unnecessary risk taking.
Metro Bank PLC Annual Report & Accounts 2021
133
Strategic reportFinancial statementsGovernanceAdditional information Remuneration Committee governance continued
Summary of the Remuneration Structure for colleagues below board level
Salary
Benefits
Pension
Variable remuneration
– We have a salary increase
– All colleagues are eligible
– All colleagues can participate
– We apply the same Company
for private medical insurance
funded at different rates
of cover depending on
their level
– All colleagues, including the
Executive Committee,
receive Life Assurance cover
of four times their base
annual salary
in our Group Personal
Pension Plan when they join
the Bank. If they have
exceeded the lifetime
allowance or the annual
pension tax-free contribution
limit, they may elect to take
cash in lieu of pension for all
or some of the benefit
– Employer pension
contributions payable by
Metro Bank is dependent on
the colleague’s level and
ranges from 6% – 10%.
performance adjustment
factor to all colleagues
– For all colleagues whose
personal behaviours and
delivery are as expected or
better, we apply an adjustment
factor up to a maximum
of 200%
– Where appropriate and
required by regulations,
variable remuneration is
deferred and delivered
in shares.
budget usually in the range
of 2.5% of salary cost. For
this year only, to recognise
the internal and external
environment in which we
operate, the average salary
increase for colleagues
was 5.0%
– The quantum of salary
increases are primarily driven
by individual behaviours and
capability
– We also review salaries for
roles that we deem are
growing rapidly in scale and/
or complexity and are critical
to the business and for those
colleagues which market
data suggests are falling
behind the market rates for
their roles
Consideration of employment conditions elsewhere in the Bank
We offer a simple approach to reward for all colleagues which supports our unique culture and strategy as well as being
aligned to shareholder needs. Our approach to remuneration is consistent for all colleagues including our Executive
Directors. The focus is on simplicity, rewarding the right behaviours and outcomes for customers and the business,
focusing on long term growth and discouraging unnecessary risk-taking.
During the year, the Remuneration Committee received updates on overall pay and conditions for colleagues across the
Bank and this was taken into account when setting pay for Directors. In particular, the base salary for Executive Directors
is limited by reference to colleague pay, and ahead of our annual reward review process, the Remuneration Committee
opines on the quantum to be made available for salary increases, annual bonus awards, awards under the Deferred Variable
Reward Plan and the Long Term Incentive Plan.
Colleagues are able to express their views on pay through regular surveys and feedback, as well as through our Designated
Non-Executive Director for Colleague Engagement.
Workforce engagement
Metro Bank runs annual employee engagement surveys, as well as more regular ‘pulse’ surveys which enables colleagues
the opportunity to give feedback and express their views on a variety of topics including their own remuneration, working
environment and workforce policies and practices. Any comments relating to Executive Directors’ remuneration are
fed back to the Remuneration Committee. Sally Clark was appointed as the Designated Non-Executive Director to
lead colleague engagement on behalf of the Board on 19 May 2020 and throughout the year has met with a range of
colleagues across all levels and regions to hear their views on the Company, culture and working environment. A number
of Non-Executive Directors also met with employees around the UK to broaden the reach of colleague engagement
activities. As part of this engagement, Sally has taken the opportunity to explain to colleagues the role of the Board and
its delegated Committees, including the role of the Remuneration Committee in setting executive pay.
Approach to recruitment remuneration
The Remuneration Committee’s overarching principle for recruitment remuneration is to pay reasonably to attract an
Executive Director of the calibre required to shape and deliver the business strategy, from a diverse talent pool. The
Committee will seek to align any remuneration package with our remuneration policy as laid out above but retains the
discretion to offer a remuneration package which is necessary to meet the individual circumstances of the recruited
Executive Director and to enable the hiring of an individual with the necessary skills and expertise. People diversity in
all its forms is a core element of our talent strategy and succession planning.
134
Metro Bank PLC Annual Report & Accounts 2021
Loss of office policy
For each component of pay, the amount paid to an Executive Director on termination will be determined as follows:
Component of pay
Determination
Salary/fees
and benefits
Variable
remuneration
Pension
The Executive Director is entitled to be given notice of termination of the relevant length and receive
their normal base salary and benefits in that time. The Bank has discretion to make a payment in lieu of
base salary in respect of any unexpired notice period and may decide to pay this in instalments,
subject to reduction if the Executive Director finds alternative employment. Benefits will continue until
the last day of contractual employment and the accrued but unused holiday will be paid out.
Appropriate outplacement and legal support will be provided where required.
Variable remuneration may accrue during a notice period, however (unless decided otherwise by the
Remuneration Committee at its discretion) the Executive Director usually has to be employed at the
date that any variable remuneration is awarded in order to be eligible to receive it. No variable
remuneration is payable after termination and previous unvested variable reward deferred into share
awards will usually lapse.
However, if the Executive Director leaves for the reasons detailed in the Deferred Variable Reward Plan
and Long Term Incentive Plan Rules (e.g. ill health, retirement with the agreement of the employer,
sale of the employing company out of the group, redundancy or death) or in other circumstances at
the discretion of the Remuneration Committee, their award under that plan will usually continue on the
same terms (subject to reduction and clawback as described in the policy) and usually vest at the
normal time provided any performance conditions are met with a time pro rata reduction of LTIP awards.
The Committee may, at its discretion, determine that awards may vest, subject to performance, before
the normal vesting date. If a participant dies, awards will ordinarily vest, subject to performance, on
the date of death unless the Committee decides they should vest on the normal vesting date.
Pension contributions continue to be made during the notice period. No further payment in lieu of
pension or pension contributions can be made after termination. Any benefits will become payable in
the normal course in accordance with the rules of the scheme. There is no right to early payment of
pension benefits unless this can be done without additional contribution from the Bank.
Post-cessation
shareholding
requirements
Executive Directors will be required to maintain the lower of the in-employment shareholding
requirement of 200% of salary or the level achieved at the cessation date for a period of two years
post-cessation.
The Bank’s policy is that Executive Directors’ contracts can be terminated by either party on giving no more than
12 months’ notice.
Additional payments can be made by way of damages for breach of any legal obligation or by way of settlement or
compromise of any claim raised by the Executive Director.
The Executive Directors’ service contracts and letters of appointment are available for inspection on request at the
Company’s registered office.
Metro Bank PLC Annual Report & Accounts 2021
135
Strategic reportFinancial statementsGovernanceAdditional information Remuneration Committee governance continued
Projected total remuneration scenarios¹
The graphs below illustrate scenarios for the projected total remuneration of Executive Directors at four different
levels of performance: minimum, target, maximum, and maximum including assumed share price appreciation of 50%
(in accordance with the Corporate Governance Code). The impact of potential share price movements is excluded from
the other three scenarios. These charts reflect projected remuneration for the financial year ending 31 December 2022.
£447,000
£853,000
£1,257,000
£1,460,000
Daniel Frumkin Chief Executive Officer
(£’000)
David Arden Chief Financial Officer²
(£’000)
Minimum
Target
Maximum
833
£833,000
Minimum
447
Target
833
385
385
£1,603,000
447
203
203
833
770
770
£2,373,000
447
405
405
Maximum
Maximum +50% growth
833
£0m
£0.5m
£1.0m
770
£1.5m
1,154
£2,757,000
447
405
608
Maximum +50% growth
£2.0m
£2.5m
£3.0m
£0m
£0.5m
£1.0m
£1.5m
£2.0m
£2.5m
£3.0m
Fixed pay
Annual bonus
Long-term incentives
Note
1. These illustrations are based on salaries as at 1 April 2022 and consider the cash amount of annual variable remuneration before conversion into share
awards. No account is taken of the effect of share price changes or dividends on the value received from share awards or shares received under them
2. David Arden’s projected remuneration has been shown for illustration purposes.
136
Metro Bank PLC Annual Report & Accounts 2021
Annual report on remuneration
Annual report on remuneration
This section sets out how the Remuneration Policy for our Executive and Non-Executive Directors was implemented
during the financial year ending 31 December 2021. This section will, together with the annual statement by the Chair
of the Remuneration Committee on pages 126–129, be put to shareholders for an advisory vote at the 2022 AGM.
Single total figure of Remuneration – Executive Directors (audited)
Annual remuneration (£)
The following sets out the remuneration for the individuals who served as Executive Directors in the year.
Audited
Salary 1
Taxable benefits 2
Pension benefits 1, 3
Other 4
Total fixed remuneration
Annual variable pay awarded in retained shares 5
Annual variable pay awarded in deferred shares 6
Total variable remuneration 7,8
Total remuneration
Daniel Frumkin
David Arden
2021
2020
2021
2020
£740,000
£714,833
405,000
£394,875
£1,001
£59,200
£875
£801,076
£547,600
£81,400
£629,000
£1,001
£57,253
£875
£400
£400
£40,500
£39,488
£787
£768
£773,962
£446,687
£435,531
£0
£523,214
£523,214
£103,275
£154,913
£258,188
£0
£288,968
£288,968
£724,499
1,430,076
£1,297,176
£704,875
Notes:
1. Both Daniel Frumkin and David Arden volunteered salary reductions in May, June and July 2020 in light of the COVID-19 pandemic. This also impacted
their pension contributions. Salaries were reduced by 10% with a further 10% deferment for a period of three months. In respect of Daniel Frumkin, his
salary also reflects his time as Interim CEO between 1 January and 18 February 2020.
2. Taxable benefits include private medical insurance.
3. Pension contributions for the Executive Directors may be paid into the Group Personal Pension Plan or paid as a cash in lieu of pension allowance. Daniel
Frumkin personally contributes to the pension scheme up to legislative limits and receives a cash allowance of 8% of salary in lieu of company pension
contributions. David Arden has opted out of the pension scheme as he has reached the lifetime allowance and receives a cash allowance of 10% of salary.
4. This is made up of non-taxable benefits provided to the Executive Directors and includes life assurance, Group income protection and an annual
health check.
5. Delivered in retained shares that vest immediately and are subject to a 12 month retention period.
6. Delivered in line with the Deferred Variable Reward Plan (DVRP) as deferred shares, subject to continued service.
7. No cash bonus has been awarded for performance year 2021. Daniel and David’s 2020 awards have been calculated using their annual salaries as opposed
to adjusted salaries in respect of COVID-19. The voluntary waiver was made in respect of salary payments; the base salary used for calculating variable
reward was unchanged by this voluntary waiver.
8. David Arden’s total variable reward has been reduced by 25% in line with his termination agreement on resignation.
Details of the single figure salary (audited)
Daniel Frumkin
David Arden
Salary as at
1 January 2021
Salary as at
1 April 2021
Total salary
paid in 2021
£740,000
£740,000
£740,000
£405,000
£405,000
£405,000
2021 variable reward outcomes (audited)
Variable reward outcomes across all colleagues is determined as follows:
Salary
x
On target variable
remuneration
x
Bank-wide balanced
scorecard outcome
“Company performance
adjustment factor”
(0%–120%)
x
Individual AMAZEING
Review rating multiplier
“Individual adjustment
factor” (0%–200%)
=
Proposed variable
remuneration
All colleagues’, including Executive Directors’, annual bonus in relation to performance during 2021 was based on a
balanced scorecard of performance measures and objectives, weighted between financial (60%), risk & regulatory (20%),
customer (10%) and people (10%). The on target variable remuneration for Executive Directors is 100% of salary.
At the January 2022 Remuneration Committee meeting, the Committee approved a balanced scorecard outcome of 85%
versus an actual outcome of 102.1%. The Committee decided to use its discretion to lower the outcome, taking into account
following considerations:
– Shareholder experience – we are disciplined in our approach to remuneration, and this is particularly true until there
is sustained improvement to the share price.
– Underlying performance of the Bank and progress against strategic priorities – we are delivering ahead of our
turnaround plan.
– Hard work and dedication of our colleagues – colleagues and the management team have continued to work incredibly
hard during the pandemic. We are mindful of the need to maintain the wellbeing and motivation of our colleagues.
– Affordability and our current loss-making position.
Metro Bank PLC Annual Report & Accounts 2021
137
Strategic reportFinancial statementsGovernanceAdditional information Annual report on remuneration continued
The Committee wanted to strike the right balance between the interests of our shareholders, and rewarding our colleagues
for the progress made while encouraging them to maintain the momentum in the results. A result of 85% was felt to be the
right compromise between these interests.
The Committee felt it appropriate to offer variable reward to colleagues. However, there will be no cash bonus awards
made to the Executive Directors for 2021.
The tables below illustrate performance against each of the balanced scorecard measures. This approach and adjustment
factor are consistent with that applied for all colleagues across the Bank. The Company performance adjustment factor can
range from 0% to 120%.
Amounts shown reflect the total annual bonus paid in 2022, based on performance in the financial year ending 31 December
2021, including the value of any retained shares and deferred shares under the Deferred Variable Reward Plan (DVRP).
Financial Performance
Performance measure
Weighting
Underlying loss before tax (£’million)1
Loan to Deposit Ratio (%)2
Statutory cost: income ratio (%)
Total for financial measures
50%
5%
5%
60%
Threshold
performance
Target
performance
Maximum
performance
Actual
performance
outcome
Weighted
performance
outcome
238,040
96.36%
149.38%
216,400
87.60%
135.80%
194,760
78.84%
122.22%
171,300
75.75%
153.0%
60%
0%
0%
60%
1. For underlying loss before tax and statutory cost: income ratio, 80% of weighting is applied for threshold performance with a step progression of 5% in the
adjustment factor of the weighted performance outcome from 80% to 120% (maximum performance).
2. For the Loan to Deposit Ratio, 80% of weighting is applied for threshold and maximum performance. With the maximum of 120% adjustment factor applied
for target performance. 0% is payable where performance is above maximum.
Non-Financial Performance
Objectives
Key achievements in 2021
Key measures relating
to Internal Audit,
credit quality – arrears
and compliance
training
Risk has remained stable during 2021 with risk impairment showing a
favourable variance to budget throughout the year. The relationship with
the regulators has been collaborative throughout the year and progress
was made in addressing regulatory concerns including: governance, risk
management capability and assurance/oversight.
Weighted
performance
outcome
Weighting
20%
20%
– Account openings received high performing scores consistently
10%
11.5%
throughout the whole year.
– Relationships had higher performance scores in the first half of 2021 than
the second half.
– Expressions of Dissatisfaction were within target range and declined
throughout the year.
– Colleague engagement scores were well above threshold with notable
10%
10.6%
achievements compared to the global benchmarks and in the number of
colleague comments.
– On diversity, the Bank ended the year above target for female
representation in the senior leadership population. The Bank also showed
progress on the number of Black, Asian and Minority Ethnic individuals in
the senior leadership population, with increased representation from the
start of the year.
Risk &
Regulatory
Customer
Key measures
relating to Net
Promoter Scores,
and expressions of
dissatisfaction
People
Key measures relating
to diversity and being
a ‘good place to work’
Note: 80% of weighting is applied for threshold performance with a step progression of 5% in the adjustment factor of the weighted performance outcome
from 80% to 120% (maximum performance).
Overall Balanced Scorecard Outcome prior to the exercise of Committee discretion
A Financial
B Risk & Regulatory
C Customer
D People
Total
Weighting
60%
20%
10%
10%
100%
Weighted
performance
outcome
60%
20%
11.5%
10.6%
102.1%
Based on the assessment of performance against the balanced scorecard outcomes outlined above, and a number of other factors, the Committee applied
downward discretion resulting in a 85% company performance adjustment factor for performance year 2021.
138
Metro Bank PLC Annual Report & Accounts 2021
Individual Behaviours and Performance Adjustment Factor
A discretionary adjustment factor was applied to variable reward for all eligible colleagues, by reference to each colleague’s
individual behaviours and performance for the year. Below we set out details of the individual adjustment factor in respect
of our Executive Directors for 2021 which was determined by the Remuneration Committee.
Individual
behaviours and
performance
adjustment factor
150%
Daniel Frumkin
Key objectives in 2021 Key achievements in 2021
– Financial
– Customer
– People
– Risk &
Regulatory
Daniel has continued to perform strongly during 2021. Under his leadership the Bank has delivered
demonstrable progress against its strategic objectives, moving closer towards a return to profitability.
Despite a difficult 12 months for the economy and SME’s, the Bank has maintained its unrelenting
focus on customers as demonstrated by the most recent CMA results, reduced expected credit loss
expense significantly, produced strong results across our new unsecured lending proposition, and
maintained excellent levels of colleague engagement. Daniel has demonstrated his leadership skills
to motivate and drive performance across all areas of he Bank. A summary of his performance is set
out below:
Financial
– Underlying loss before tax was £41m favourable to budget and £97m better than last year. The shift
in lending mix lays the foundation for the path back to profitability.
– Demonstrably improved focus on cost efficiency and discipline.
Customer
– Maintained our number one ranking for customer service in the recent CMA results, which provides
evidence the Bank’s customer focused culture has remained strong.
– Successful integration of RateSetter and the launch of Metro Bank’s Consumer Finance division,
driving strong financial performance.
– Management of the Bank’s continued response to COVID-19 ensuring customers were fully
supported by keeping our stores and Amaze Direct sites open.
– Improved operational resilience, improved lending processes in stores, enhanced digital offering,
new online journeys for business account opening introduced.
– Maintained a positive relationship with our equity and debt holders.
People
– Strong colleague engagement scores from the Voice of the Colleague survey which are aligned with
the external global benchmark. While there is work to do to address the feedback identified, the
strong scores during a pandemic are a testament to the pervasive culture at the Bank.
– Successfully introduced hybrid working.
Risk & regulatory
– Continued improvement in the Bank’s risk and control environment creating a stronger foundation
to build upon. Whilst there is still more to do, tangible progress has been made over the last
12 months.
– Enhanced the rigour, challenge and oversight of a number of key issues including conduct,
collections, complaints and vulnerable customers.
– Delivered operational improvements across financial crime and regulatory reporting.
– Increased investment in cyber crime, fraud tooling and an enhanced IT infrastructure.
– Relationships with our Regulators remained strong; including submission of high quality AIRB
submissions.
David Arden
– Financial
– Customer
– People
– Risk &
Regulatory
2021 has been a strong year for David and he continued to make progress against the turnaround
plan. A summary of his performance is set out below:
100%
Financial
– Driven financial forecasts to enable various corporate transaction discussions to occur.
Customer
– Collectively engaged in 120 investor meetings during the year.
People
– Continued to build capability and capacity in his team and to further enhance the control
environment.
Risk & Regulatory
– Worked hard with the regulator to build credibility around capital contingency plans and with the
Treasury team/Bankers to make sure the Bank is positioned to proceed if necessary.
– Played a meaningful role in ensuring that the AIRB modules were submitted to a high standard
Metro Bank PLC Annual Report & Accounts 2021
139
Strategic reportFinancial statementsGovernanceAdditional information Annual report on remuneration continued
Calculation of Variable Pay for the Executive Directors
Executive Director
Salary for
variable reward
Company
performance
adjustment
factor1
Individual
behaviours and
performance
adjustment
factor
Company
and individual
performance
adjustment
outcome
Remuneration
Committee
discretionary
adjustment
(Company)
Remuneration
Committee
discretionary
adjustment
(Individual)
Company
and individual
performance
adjustment
outcome after
discretion
Maximum
opportunity
(as %
of salary)
Annual variable
reward
Daniel Frumkin
£740,000
David Arden2
£405,000
102.1%
102.1%
150%
100%
153.15%
102.10%
85%
85%
100%
75%
85.00%
63.75%
100%
100%
£629,000
£258,188
1. The corporate adjustment factor of 102.1% was adjusted to 85% after the Remuneration Committee applied discretion and took into account 2021 financial
performance, the external environment and the impact of COVID-19.
2. David Arden resigned effective 1 April, his termination agreement included a total annual variable reward of £258,188.
In recognition of the corporate balanced scorecard outcome and a holistic review of personal performance and
contribution for 2021, the Remuneration Committee agreed an annual bonus outcome for the CEO of 85% of salary.
In addition, as a result of 2021 performance, an LTIP award of 100% of salary has been granted to the CEO.
The award of the 2022 LTIP was made in March 2022 at a time following share price depreciation. The market share
price was down on the prior year grant due to various external factors, which we believe were mostly not specific to
Metro Bank. Under the LTIP, the Committee has full discretion to ensure that the final outcomes are warranted based
on the performance of the Bank in light of all relevant factors and that there have not been any windfall gains. The factors
considered in making this assessment will be described at the time of vesting.
David Arden stepped down as CFO on 15 February 2022 and will leave the business on 1 April 2022. In relation to the 2021
performance year, and in light of his pending departure, the Committee awarded variable remuneration to David but based
on a 25 percent reduction in his potential entitlement and on the basis that no 2022 LTIP award will be made.
These awards contribute to the Executive Directors building up their Shareholding Requirement. All share awards are
subject to malus and clawback provisions.
How Variable Reward is paid
Executive Director
Total 2021
variable reward
Element of
variable reward
Daniel Frumkin
£1,369,000
Cash
Value
£0
Method of delivery
– Paid immediately in cash
Retained
share award
Deferred
share award
£547,600 (40%
of total variable
reward)
£81,400 (6% of
total variable
reward)
LTI award
£740,000 (54%
of total variable
reward)
– Shares that are granted immediately and subject to a mandatory
12 month retention period
– Shares that vest over a 7 year period, pro-rata
– No vesting is permitted before the third anniversary with pro-rata
vesting from year 3 to year 7. Vesting is subject to continued service.
– Each vest is subject to a mandatory 12 month retention period
– No performance conditions attached
– The sum of the Deferred share award and the LTI award equals 60%
to satisfy regulatory requirements
– Shares that are subject to the satisfaction of performance conditions
over a 3 year performance period
– Pro-rata vesting from year 3 to year 7
– Each vest is subject to a mandatory 12 month retention period
– The sum of the Deferred share award and the LTI award equals 60%
to satisfy regulatory requirements
David Arden
£258,188
Cash
£0
– Paid immediately in cash
Retained
share award
Deferred
share award
£103,275 (40%
of total variable
reward)
£154,913 (60%
of total variable
reward)
– Shares that are granted immediately and subject to a mandatory
12 month retention period
– Shares that vest over a 7 year period, pro-rata
– No vesting is permitted before the third anniversary with pro-rata
vesting from year 3 to year 7. Vesting is subject to continued service.
– Each vest is subject to a mandatory 12 month retention period
– No performance conditions attached
LTI award
£0
– Shares that are subject to the satisfaction of performance conditions
over a 3 year performance period
– Pro-rata vesting from year 3 to year 7
– Each vest is subject to a mandatory 12 month retention period
140
Metro Bank PLC Annual Report & Accounts 2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
Retained shares
(Immediately vesting)
Deferred shares
(pro-rata vesting between
years 3 to 7)
LTI awards
(pro-rata vesting between
years 3 to 7)
Tranche 1 (20%)
Tranche 2 (20%)
Tranche 3 (20%)
Tranche 4 (20%)
Tranche 5 (20%)
Tranche 1 (20%)
Tranche 2 (20%)
Tranche 3 (20%)
Tranche 4 (20%)
Tranche 5 (20%)
Vesting period
1 year mandatory retention period after each vest
Change in Directors’ remuneration compared with colleagues
The table below sets out the percentage change in salary and variable reward between 2020 & 2021 and 2019 & 2020 for
Directors compared with the wider colleague population.
Executive Committee (excluding Executive Directors) salaries increased at a lower rate than the wider colleague population
year on year.
Annual percentage change in remuneration
All colleagues
CEO¹
CFO²
Executive Committee
Robert Sharpe³
Catherine Brown
Sally Clark
Anne Grim
Ian Henderson
Monique Melis⁴
Sir Michael Snyder⁵
Paul Thandi
Michael Torpey
Nicholas Winsor
Average change between 2020 and 2021
Average change between 2019 and 2020
Salary/Fees
Taxable benefits
Variable reward
Salary/Fees
Taxable benefits
Variable reward
5.6%
3.5%
2.6%
3.8%
500.0%
7.9%
16.9%
104.6%
65.2%
(20.7%)
(68.3%)
0.0%
3.0%
56.3%
4.4%
0.0%
0.0%
(11.5%)
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
23.8%
20.2%
(10.7%)
33.8%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
4.7%
(4.7%)
(2.2%)
3.0%
n/a
13.8%
n/a
n/a
n/a
40.6%
75.8%
6.6%
246.6%
n/a
23.9%
12.5%
12.5%
8.5%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
41.1%
100.0%
150.4%
266.5%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1. Daniel Frumkin volunteered salary reductions in May, June and July 2020 in light of the COVID-19 pandemic. Daniel’s percentage change in salary also
reflects his time as Interim CEO between 1 January and 18 February 2020. Executive Directors did not receive a salary increase in 2021.
2. David Arden volunteered salary reductions in May, June and July 2020 in light of the COVID-19 pandemic. David’s termination agreement included a total
annual variable reward of £258,188. Executive Directors did not receive a salary increase in 2021.
3. Robert Sharpe became Chair of the Board on 1 November 2020.
4. Monique Melis was interim Senior Independent Director in 2020.
5. Sir Michael Snyder undertook the role of interim Chair from 23 October 2019 to 31 October 2020. He stepped down from his role on 31 October 2021.
Metro Bank PLC Annual Report & Accounts 2021
141
Strategic reportFinancial statementsGovernanceAdditional information Annual report on remuneration continued
CEO to colleague pay ratio disclosure
Calculation
methodology
25th
percentile
pay ratio
Median
pay ratio
75th
percentile
pay ratio
CEO
salary
25th
percentile
salary
Median
salary
75th
percentile
salary
CEO total
pay
25th
percentile
total pay
Median
total pay
75th
percentile
total pay
A
A
A
55:1
55:1
36:1
40:1
40:1
27:1
22:1 £740,000 £22,700 £30,100 £62,200 £1,430,100 £26,000 £36,000 £64,700
23:1 £714,800
£21,100 £27,400 £47,000 £1,297,000 £23,800 £32,200 £57,000
16:1 £750,000 £20,700 £26,700 £43,400 £828,600 £22,900 £30,300 £51,200
Year
2021
2020
2019
Note:
Salary and total pay figures have been rounded to the nearest £100.
We have not diverged from the single total figure methodology when calculating employee pay and benefits.
Payroll data from 1 January to 31 December 2021 was used to calculate the lower, median and upper-quartile colleagues.
We used the ‘single figure’ approach (Option A) to calculating total remuneration for all colleagues employed on
31 December 2021. This methodology was chosen as it is the most straightforward approach.
Three colleagues were identified whose full-time equivalent total remuneration places them at the 25th, 50th and 75th
percentiles. Colleague total remuneration includes salary, allowances, employer pension contributions, Company-funded
health and risk benefits, referral bonuses as well as total variable reward awarded in 2022 in respect of the 2021
performance year. All elements were calculated on a full-time equivalent basis. We are confident that the colleagues
identified at the lower, median and upper quartiles are remunerated in line with the Company’s wider policies on colleague
pay, reward and progression.
Relative importance of spend on pay
The table below shows total remuneration of all colleagues for 2021 compared to 2020. This data is taken from the people
costs in our financial statements and excludes social security and pension costs.
Employee costs
2021
£’million
201.2
2020
£’million
166.9
%
change
20.6
Employee costs have increased as a result of the average salary figure increasing across the Bank between 2020 and 2021.
Colleague headcount has increased across the Bank, with the sharpest rise in specialist professional roles, supporting the
delivery of strategic projects and strengthening regulatory controls.
We did not make any distributions by way of dividend or share buy-back during the year, or any other significant
distributions. We therefore consider that at this time there is no information or data which would assist shareholders in
understanding the relative importance of spend on pay.
Total Shareholder Return
The chart shows our total shareholder return (TSR) relative to the FTSE 250 and the FTSE 350 banks (which is the
capitalisation-weighted index of all bank stocks in the FTSE 100 and FTSE 250) since our listing on the London Stock
Exchange in March 2016. These indices have been chosen as they represent a cross-section of UK companies and banks.
)
%
(
n
r
u
t
e
r
l
r
e
d
o
h
e
r
a
h
s
l
a
t
o
T
250
200
150
100
50
0
Mar 2016
Dec 2016
Dec 2017
Dec 2018
Dec 2019
Dec 2020
Dec 2021
Metro Bank
FTSE 250
FTSE Banks
142
Metro Bank PLC Annual Report & Accounts 2021
CEO historic remuneration
CEO historic remuneration
2021
2020
2019
2018
2017
2016
2015
Daniel Frumkin
Daniel Frumkin
Craig Donaldson
Total remuneration (including
any Listing awards)
Variable reward outcome as a
percentage of the maximum that
could have been paid
£1,430,076
£1,297,176
£828,565
£800,944
£1,518,893
£1,304,919
£2,661,474
85%
35.7%
0%
0%
62%
52%
n/a
1. Daniel Frumkin took up the position of Interim CEO on 1 January 2020 and became permanent CEO on 19 February 2020.
2. Daniel Frumkin volunteered to forgo any cash bonus for 2020 and 2021 performance. Variable pay for 2020 was delivered in shares in the Deferred
Variable Reward Plan with vesting pro rata between years three and seven subject to continued service. Variable pay for 2021 was delivered in retained
shares which vest immediately subject to a one year retention period and deferred shares under the Deferred Variable Reward Plan with vesting pro rata
between years three and seven subject to continued service.
3. The figure for 2019 takes into account zero variable reward for Craig Donaldson in light of the Committee agreeing that Craig will not be awarded variable
remuneration in respect of the 2019 performance year.
4. As disclosed in the Prospectus and 2016 Annual Report, Craig Donaldson received a higher variable reward for 2015 in the form of share awards, granted in
March 2016, in recognition of his significant contribution to the successful private placement and admission of Metro Bank to the London Stock Exchange,
as well as his performance in 2015. No other variable reward for the 2015 performance year was awarded. The Listing Share Award is subject to continued
employment and no further performance conditions apply to vesting. The vesting of these share awards will be frozen pending further internal analysis and
any external investigations into the RWA adjustment.
5. Under the current Remuneration Policy, approved by shareholders at the 2021 AGM, total variable reward is capped at 200% of salary.
Non-Executive Directors’ Remuneration
Chair’s fees
The fees for the Chair remain unchanged at £350,000.
Non-Executive Directors’ fees
The Non-Executive Directors are paid a basic fee, with further fees payable to reflect Board Committee memberships and
chairships and/or additional responsibilities such as Senior Independent Director. Fees are reviewed annually. The fees are
benchmarked against financial services and FTSE 250 companies.
The basic fee for Non-Executive Directors, which was last increased in April 2018, will be increased to £65,000 with effect
from 1 April 2022. Additional fees were reduced following the increase in the basic fee. The 2021 fees are shown below:
Role
Non-Executive Director – basic fee
Senior Independent Director or Deputy Chair
Chair of Audit or Risk Committee or Designated NED for Colleague Engagement
Chair of Nomination or Remuneration Committee
Member of Audit, Risk or Remuneration Committee
Member of Nomination Committee
Annual fee (£’000)
52.5
30.0
20.0
10.0
10.0
5.0
Non-Executive Directors’ fees and taxable benefits (audited)
The table below shows the actual fees paid to our Chair and Non-Executive Directors in 2021 and 2020.
Robert Sharpe (Chair)
Catherine Brown
Sally Clark
Anne Grim
Ian Henderson
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Fees¹
Taxable benefits4
Total
£350,000 £58,333
£87,500
£81,118
£92,500
£79,106 £82,500 £49,293 £92,500 £55,998
£0
£0
£0
£0
£0
£0
£0
£0
£0
£0
£350,000 £58,333
£87,500
£81,118
£92,500 £79,106 £82,500 £49,293 £92,500 £55,998
Anna (Monique) Melis²
Sir Michael Snyder3
Paul Thandi
Michael Torpey
Nicholas Winsor
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Fees¹
£80,833 £101,947
£72,916 £230,000
£68,750 £68,875 £92,500 £89,542 £62,500 £39,982
Taxable benefits4
£0
£0
£0
£0
£0
£0
£0
£1,673
£0
£0
Total
£80,833 £101,947
£72,916 £230,000
£68,750 £68,875 £92,500 £91,215 £62,500 £39,982
1. These figures include all fees paid to the Senior Independent Director and to Non-Executive Directors for Board Committee memberships and Committee
chairmanships.
2. Interim Senior Independent Director in 2021
3. Undertook the role of interim Chair from 23 October 2019 to 31 October 2020.
4. Taxable benefit figures for our UK Non-Executive Directors reflect grossed-up expenses claimed. The 2020 figures reflect expenses claimed in the 2019-20
tax year.
Metro Bank PLC Annual Report & Accounts 2021
143
Strategic reportFinancial statementsGovernanceAdditional information Annual report on remuneration continued
Service Contracts and Letters of Appointment
Both Executive Directors have service contracts. Our Non-Executive Directors do not have service contracts but are bound
by letters of appointment which are available for inspection on request at the Company’s registered office.
Non-Executive Directors are appointed for fixed terms not exceeding two years, which may be renewed subject to their
re-election by shareholders at AGMs.
The effective dates of the current Directors’ appointments disclosed in their service contracts are shown in the table below.
Executive Director
Daniel Frumkin
David Arden
Payments to past Directors (audited)
There were no payments made to past Directors in 2021.
Payments for Loss Of Office (audited)
No loss of office payments were made during 2021.
Notice period
Date of service contract
12 months
12 months
18 February 2020
19 March 2018
Dilution Limits
The rules of the Metro Bank DVRP and LTIP contain limits on the dilution of capital. These limits are monitored to ensure
that we do not exceed 5% or 10% (where applicable) of the issued share capital in any rolling 10-year period. For awards
made after the 2021 AGM under the new policy, we will ensure the discretionary awards under the DVRP and the LTIP will
not exceed 5% of the issued share capital in any rolling 10-year period, in line with guidance.
Statement of Voting at the AGM
The table below shows the voting outcomes on the annual report on remuneration and the Directors’ Remuneration Policy
at the last AGM held on 18 May 2021.
Item
2021 Remuneration Policy
2020 Remuneration Report
For no.
62,150,543
54,244,029
For %
95.11
83.00
Against no.
Against %
Votes withheld
3,193,940
11,107,871
4.89
17.00
22,200
14,783
At the 2021 AGM, all resolutions were passed by a significant majority of shareholders.
Shareholder engagement
The Committee greatly values the continued dialogue with our shareholders and regularly engages with shareholders
and representative bodies to take their views into account when setting and implementing our remuneration policies.
The Directors have regular open discussions with investors and are available for feedback on reward matters.
Since the AGM, we have engaged with shareholders on a range of matters including writing to shareholders setting out our
approach to reward for performance year 2021.
144
Metro Bank PLC Annual Report & Accounts 2021
Shareholding (audited)
These are the total shareholdings as at 31 December 2021 for each of the Non-Executive Directors and Executive Directors
and any related connected persons. Outstanding share awards, including share options, are summarised below.
Director
Robert Sharpe
Daniel Frumkin
David Arden
Catherine Brown
Sally Clark
Anne Grim
Ian Henderson
Monique Melis
Paul Thandi
Michael Torpey
Nicholas Winsor
Sir Michael Snyder
No. of shares
46,000
2,350,000
18,400
100
0
22,500
15,000
1,690
30,000
0
50,000
145,000
Percentage of
share capital
0.03
1.36
0.01
0.00
0.00
0.01
0.01
0.00
0.02
0.00
0.03
0.08
Sir Michael Snyder retired from the Board on 31 October 2021
This table includes vested shares where the Director has beneficial ownership, shares independently acquired in the market
and those held by a spouse or civil partner or dependant child under the age of 18 years.
Nick Winsor purchased 50,000 shares on 28 February 2022, his total holding is now 100,000 shares representing 0.06%
of the Company’s issued share capital. Other than this, since the year end and up to 7 March 2022, no transactions in shares
by Directors and their connected persons have taken place.
Directors’ Shareholdings (audited)
Shareholding guidelines
Executive Directors are required to build up a holding of shares equivalent to 200% of their annual salary. With the DVRP
and introduction of an LTIP, a five year timeframe was formalised as part of the new Remuneration Policy for the build-up
of the Executive Director Shareholding Requirement. Until this level is achieved, there is a requirement to retain 50% of net
shares in the Deferred Variable Reward Plan and those which vest under the LTIP.
Daniel Frumkin has purchased 2,350,000 shares. David Arden has purchased 18,400; he became a Director of the
Company on 19 March 2018 and we allowed him time to build up his shareholding.
Executive Directors are required to retain 100% of their shareholding requirement (or actual shareholding if lower) for two
years post-cessation of employment.
Daniel Frumkin
David Arden
Base Salary
£740,000
£405,000
Requirement as a % of
base salary
Wholly owned shares
Value1
Shareholding requirement
met?
200%
200%
2,350,000
18,400
£2,258,350
£17,682
Yes
No
1. Values are based on 31 December 2021 closing price of 96.10 pence.
2. The above table reflects the position as at 31 December 2021.
Outstanding Share Awards (audited)
Options have an exercise price that is equal to market value at the date of grant; share options awarded under the
Company Share Option Plan (CSOP) from CSOP 2016 onwards are based on the Volume Weighted Average Share Price for
Metro Bank on a date determined by the Remuneration Committee.
We have not awarded share options to Non-Executive Directors since 2015 (relating to the 2014 performance year).
No dividends or dividend equivalents are payable on any share options or on any unvested share awards held.
The tables below show, for each Executive Director and Non-Executive Director as at 31 December 2021:
– the total number of share awards, shares granted or interests in shares granted and the award price;
– the total number of outstanding share awards; and
– the total number of share awards frozen, subject to the ongoing RWA investigation.
Metro Bank PLC Annual Report & Accounts 2021
145
Strategic reportFinancial statementsGovernanceAdditional information Annual report on remuneration continued
Daniel Frumkin
Share
Plan Name
DVRP 2021 –
deferred shares 1, 3
Shares
and share
options
granted
Award date
Exercise
price
Face
Value of
award
First vesting
date
Last vesting
date
Share
options
vested
Share
options
vested
(frozen)
Share
options still
subject to
conditions
Exercised
in year
477,821
01/06/2021 £0.00 £523,214 01/06/2024 01/06/2028
LTIP 2021 2, 3
675,799
01/06/2021 £0.00 £740,000 01/06/2025 01/06/2028
CSOP 2020 –
Hiring Agreement¹
100,000 31/03/2020 £0.93
£93,000 30/04/2023 30/04/2027
Total
1,253,620
1. Subject to continued employment.
2. 100% of salary was awarded under the LTIP as nominal cost options that are subject to performance conditions.
3. The number of shares was determined using the closing price of 109.5p on the day before the grant date.
–
–
–
–
–
477,821
675,799
–
100,000
1,253,620
–
–
–
David Arden
Share
Plan Name
DVRP 2021 –
deferred shares 1, 3
LTIP 2021 2, 3
CSOP 2020 1
CSOP 2019 Deferred
Cash 1 Year 1
CSOP 2019 1
CSOP 2018 1
Total
Shares
and share
options
granted
Award date
Exercise
price
Face
Value of
award
First vesting
date
Last vesting
date
Share
options
vested
Share
options
vested
(frozen)
Share
options still
subject to
conditions
Exercised
in year
263,897
01/06/2021
£0.00
£288,968 01/06/2024 01/06/2028
369,863
01/06/2021
£0.00
£405,000 01/06/2025 01/06/2028
76,947
31/03/2020
£0.93
£71,561 30/04/2023 30/04/2027
9,600 02/04/2019
19,200 02/04/2019
£7.94
£7.94
£76,224 30/04/2020 30/04/2020
£152,448 30/04/2020 30/04/2024
30,000
31/03/2018 £35.36
£1,060,800 30/04/2019 30/04/2023
769,507
–
–
–
–
–
–
-
-
–
263,897
369,863
76,947
9,600
–
3,840
15,360
11,999
18,001
– 25,439 744,068
–
–
–
–
–
–
–
The table above shows the position as at 31 December 2021, the awards granted in 2018, 2019 and 2020 and the 2021 LTIP
lapsed with effect from 15 February 2022
1. Subject to continued employment
2. 100% of salary was awarded under the LTIP as nominal cost options that are subject to performance conditions.
3. The number of shares was determined using the closing price of 109.5p on the day before the grant date.
Performance conditions and targets in relation to the 2021 LTIP awards
Performance conditions and targets together with corresponding weightings for LTIP awards granted on 1 June 2021 in
respect of the performance period 2021-2024 are as follows:
Total shareholder return (TSR) relative to the
FTSE 250 (excluding investment trusts)
Statutory ROTE 1
Risk and regulatory2
40%
40%
20%
Median against peers
Upper quartile or above
See notes below
See notes below
Weighting
Threshold3
Maximum3
1. The Return on Tangible Equity (ROTE) performance measure will be disclosed in the Annual Report immediately following the Bank resuming
provision of medium term guidance to the market. Since the Bank is not currently providing medium term guidance to the market, this is deemed
commercially sensitive.
2. The Committee shall determine the extent to which 20% of the award may vest by reference to a discretionary assessment of risk management over the
performance period based on qualitative and quantitative inputs against a number of risk factors.
3. The threshold for LTIP vesting is set at 25% of the award with maximum vesting at 100% of the award and straight-line vesting between threshold
and maximum.
146
Metro Bank PLC Annual Report & Accounts 2021
Executive Director proposed Share-Based Awards
The following share-based awards are proposed to be made in respect of the 2021 performance year and are already
included in the single figure table for 2021.
2022 LTIP awards have also been included in the table below.
Daniel Frumkin
Share Option Plan Name 1
DVRP 2022 – Retained Shares
DVRP 2022 – Deferred Shares
LTIP 2022 2
TOTAL
David Arden
Share Option Plan Name 1
DVRP – Retained Shares 2022
DVRP – Deferred Shares 2022
TOTAL
Award date
Exercise price
Face
Value of
award
First vesting
date
Last vesting
date
31/03/2022
31/03/2022
31/03/2022
£0.00
£0.00
£0.00
£547,600
31/03/2022
31/03/2022
£81,400
31/03/2025
31/03/2029
£740,000
31/03/2025
31/03/2029
£1,369,000
Award date
Exercise price
31/03/2022
31/03/2022
£0.00
£0.00
Face
Value of
award
First vesting
date
Last vesting
date
£103,275
31/03/2022
31/03/2022
£154,913
31/03/2025
31/03/2029
£258,188
Notes:
1. All awards are subject to a 12-month retention period.
2. Awards under the Long Term Incentive Plan (“LTIP”) are subject to performance conditions specified at grant including Return on Tangible Equity, Relative
Total Shareholder Return and Risk and regulatory.
3. The number of shares will be determined using the closing price on 30 March 2022 which is the date before the grant date.
Metro Bank PLC Annual Report & Accounts 2021
147
Strategic reportFinancial statementsGovernanceAdditional information Directors’ report
The Directors have the pleasure of presenting their Annual
Report for the year ended 31 December 2021. As set out
fully in the Summary of significant accounting policies
within note 1 to the financial statements, this report for the
consolidated Group has been prepared in accordance
with International Financial Reporting Standards and
includes the Corporate Governance Report set out on
pages 92 to 147.
The Directors consider the Annual Report for the year
ended 31 December 2021, taken as a whole, is fair, balanced
and understandable, and provides the information
necessary for shareholders to assess the Group’s position
and performance, business model and strategy.
Principal activities
Our principal activities during 2021 were the provision of
banking and related services. We are a deposit-taking and
lending institution with a focus on retail and small and
medium-size commercial customers, offering consistent fair
pricing and excellent customer service. We are authorised
to accept deposits under the Financial Services and Markets
Act 2000, have a Consumer Credit Act licence and are
members of the Financial Services Compensation Scheme.
Articles of Association
The Articles of Association can be found on our website:
metrobankonline.co.uk.
Share Capital
As at 31 December 2021, our issued share capital was
£172.42 comprising 172,420,458 ordinary shares of 0.0001p
each. Further details of our called-up share capital, together
with details of shares allotted during the year, is shown in
note 26 to the financial statements on page 194.
There are no restrictions on the transfer of our share capital
and there are no shares or stock which carry specific rights
with regards to control of the Group.
The Directors seek annual authority from shareholders
to allot new ordinary shares and to disapply pre-emption
rights of existing shareholders in accordance with the
Investment Association Share Capital Management
Guidelines.
Holders of ordinary shares are entitled to receive dividends
when declared, to receive the Group’s Annual Report, to
attend and speak at general meetings of the Company, to
appoint proxies and to exercise voting rights.
Results and dividend
The results for the year are set out in the consolidated
statement of comprehensive income on page 162.
No dividend was declared or paid during 2021 (2020: £nil).
The Directors do not anticipate declaring a dividend in the
near future.
Significant Events
In February 2021, we announced the acquisition of a
portfolio of loans from peer-to-peer investors who invested
through the Retail Money Market Ltd platform for a cash
consideration of up to £384 million. The transaction
completed in April 2021 and the Portfolio had an aggregate
book value of £337 million at completion.
In June 2021, we completed the disposal of the RateSetter
car dealer finance loan portfolio to LE Capital UK (Asset 1)
Limited. The Portfolio had an aggregate book value of
£15 million and formed a non-core part of the RateSetter
back book acquired by us in April 2021.
On 4 November 2021 we confirmed that we received an
approach from funds affiliated with The Carlyle Group
(Carlyle) regarding a possible offer to acquire our entire
issued share capital. On 18 November 2021, we agreed with
Carlyle to terminate discussions regarding the possible offer
for the Bank.
Annual General Meeting
Subject to Government restrictions, we hope to hold an
in person Annual General Meeting in May 2022. More
information will be published in the Notice of Meeting.
Directors
Details of the Directors who served during the year and
continue to serve at the date of approval of the Directors’
Report are set out on pages 94 and 95. Sir Michael Snyder
stepped down as Senior Independent Director and Non-
Executive Director, effective 31 October 2021. Monique
Melis became the Senior Independent Director effective
31 October 2021 (subject to regulatory approval). David
Arden resigned as a director, effective 15 February 2022.
Directors are appointed and replaced in accordance with
the Company’s Articles, the Companies Act 2006 and the
UK Corporate Governance Code. The powers of the
Directors are set out in the Company’s Articles and the
Companies Act 2006.
148
Metro Bank PLC Annual Report & Accounts 2021
Directors who served on the Board during the year
ended 31 December 2021
Appointment Date
Resignation Date
Robert Sharpe
(independent Chair)
1 November 2020
Daniel Frumkin (CEO)
1 January 2020
–
–
David Arden (CFO)
29 March 2018 15 February 2022
Catherine Brown (iNED)
Sally Clark (iNED)
Anne Grim (iNED)
Ian Henderson (iNED)
1 October 2018
1 January 2020
20 April 2020
20 April 2020
Anna (Monique) Melis (SID)*
20 June 2017
–
–
–
–
–
22 September 2015
31 October 2021
Sir Michael Snyder
(former SID)
Paul Thandi (iNED)
1 January 2019
Michael Torpey (iNED)
1 September 2019
Nick Winsor (iNED)
20 April 2020
* Subject to regulatory approval
Directors’ interests
Details of the Directors’ beneficial interests are set out in the
Annual Report on Remuneration on page 145.
Directors’ indemnities and Directors’ and Officers’
liability insurance
Details regarding deeds of indemnity and Directors’ and
Officers’ liability insurance are set out in the Corporate
Governance Report on page 109.
The Company’s existing share plans contain provisions
relating to a change of control. Outstanding options and
awards may vest and become exercisable on a change
of control subject to the Committee’s discretion. As at
31 December 2021, save in respect of provisions of the
Company’s share plans, there are no other agreements
between the Company and its Directors or colleagues
providing for compensation for loss of office or
employment that occur following a takeover. Certain
of the Company’s third party supplier agreements
may become terminable upon a change of control
of the Company.
Major interests in shares
Information provided to the Group by substantial
shareholders pursuant to the Disclosure Guidance and
Transparency Rules (DTR) is published via a Regulatory
Information Service.
As at 16 March 2022, being the last practical date before
publication of this report, the Group has been notified under
DTR 5 of the interests in its issued share capital, and these
are set out in the table below. All such shareholders have
the right to vote in all circumstances at general meetings.
Shareholder
Ordinary
shares held
% of total
ordinary
shares
Spaldy Investments Limited
15,549,496
Spruce House Partnership
15,500,000
Davis Selected Advisers
683 Capital Management
9,191,516
8,977,587
Ruane, Cunniff and Goldfarb
5,020,755
9.02%
8.99%
5.33%
5.21%
5.15%
Direct/
indirect
interest
Direct
Direct
Indirect
Indirect
Direct
–
–
–
Greenhouse gas emissions
Our energy consumption and associated greenhouse gas
emissions during 2021 are set out in the Strategic Report
on page 50.
Employee involvement
We encourage employee involvement in the Bank.
Increasing Colleague awareness of the financial and
economic factors that affect us plays a major role in
maintaining our customer focus. More information on our
colleagues and how we engaged with them can be found
on pages 98–100 of the Corporate Governance Report.
Engagement with stakeholders
The Board recognises that the long-term success of the
Bank will depend upon the interests of all our stakeholders
and this view is intrinsic in our decision making. More
information on our stakeholders, how we engaged with
them and how the Board took them into consideration
when making decisions are set out in the Corporate
Governance Report.
Diversity
Our Diversity and Inclusion policy outlines our commitment
to employment policies which follow best practice, based
on equal opportunities for all colleagues. We aim for our
workforce to reflect the diverse communities in which we
operate and recognise that diversity is not only a key part of
a responsible business strategy, but also supports a strong
customer experience. We give full and fair consideration to
all applications for employment.
Our Board Diversity Policy, which sets out our commitment
to diversity and inclusion for the Board can be found on our
website www.metrobankonline.co.uk/investor-relations.
At Metro Bank we believe that a diverse Board, appointed
on merit, with a broad range of skills, backgrounds,
knowledge and experience, will be a more effective and
responsible Board.
Metro Bank PLC Annual Report & Accounts 2021
149
Strategic reportFinancial statementsGovernanceAdditional information Directors’ report continued
More information on our performance against our
objectives within the policy can be found in the Nomination
Committee Report on page 125.
Disabled employees
For all colleagues and candidates we always look to make
reasonable adjustments to ensure equity. In the event of
colleagues identifying as disabled, we make every effort
to ensure that their employment continues and to provide
appropriate training and support. Our policy is that the
training, career development and promotion of disabled
persons should, as far as possible, be identical to that of
other colleagues.
Modern Slavery
We are committed to supporting the communities in which
we operate in order to enable them to develop both socially
and economically. Our policy is to conduct all business in
an appropriate manner and we have zero tolerance for
modern slavery. We continue to be committed to acting
professionally and fairly in all our business dealings and
relationships wherever we operate, including enforcing
appropriate systems and controls to ensure, on a risk basis,
that modern slavery is not taking place in our business or
supply chains.
The initiatives and how we have developed them through
during 2021 can be found on page 39. We have also
appointed a member of the Board as our Modern Slavery
Champion who with the CEO will monitor ongoing
compliance with the Modern Slavery Policy.
Our Modern Slavery Statement is available at
metrobankonline.co.uk.
Internal Control and Risk Management Systems
The Directors confirm that they have undertaken a robust
assessment of the emerging and principal risks facing the
Group. We seek to manage all risks that arise from our
activities. Details of risk management systems, and details
of risk management objectives and policies, are shown
in the Risk Report on pages 52 to 91. Details around the
processes in place in relation to financial reporting can
be found in the Audit Committee report on pages 110
to 117. As a result of normal business activities, we are
exposed to a variety of risks. The principal risks and
uncertainties that we face are shown in the Risk Report.
150
Metro Bank PLC Annual Report & Accounts 2021
Going concern
The financial statements are prepared on a going concern
basis, as the Directors are satisfied that the Group and
Parent Company have the resources to continue in business
for a period of at least 15 months from the financial
statements authorisation date.
Viability Statement
Our Viability Statement is set out on pages 90 to 91.
Auditors
Our Auditors, PricewaterhouseCoopers LLP, have indicated
their willingness to continue in office and a resolution
seeking to reappoint them will be proposed at the Annual
General Meeting.
Political donations
We made no political donations in the year ending
31 December 2021 (2020: £nil).
Research and development
We continue to invest in our digital offering. During the
year, we spent £39 million on intangible assets and a further
£54 million on research and development costs which were
not capitalised.
Post balance sheet events
A summary of the key post balance sheet events is set out
in note 38 to the financial statements on page 218.
Future developments
Our business and future plans are reviewed in the
Strategic Report.
Financial instruments and financial risk management
Information relating to financial instruments and financial
risk management can be found on pages 52 to 91 and in
note 10 to the financial statements.
Listing Rules disclosures
For the purposes of LR 9.8.4R, the information required to
be disclosed by LR 9.8.4R can be found in the following
sections of the Report:
Item
Location, where applicable
Detail of long-term
incentive schemes
Contracts of significance
Annual Report on Remuneration and in
note 29 to the financial statements
Any contracts of significance or related
party transactions can be found in note
36 to the financial statements
Waived emoluments
Annual Report on Remuneration
Corporate Governance Statement
The Corporate Governance Report on pages 92 to 151 in
accordance with Rule 7.2 of the Disclosure Guidance and
Transparency Rules and Rule 9.8.6 (5) and (6) of the
Listing Rules forms part of this Directors’ Report.
– the Group and Company financial statements, which
have been prepared in accordance with UK-adopted
international accounting standards, give a true and fair
view of the assets, liabilities and financial position of the
Group and Company, and of the loss of the Group and
Company; and
– the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that
it faces.
In the case of each Director in office at the date the
Directors’ report is approved:
– so far as the Director is aware, there is no relevant audit
information of which the Group’s and Company’s auditors
are unaware; and
– they have taken all the steps that they ought to have taken
as a Director in order to make themselves aware of any
relevant audit information and to establish that the
Group’s and Company’s auditors are aware of that
information.
The confirmation is given and should be interpreted in
accordance with the provisions of section 418 of the
Companies Act 2006.
The Directors’ Report comprising pages 148 to 151 has been
approved by the Board of Directors.
By Order of the Board
Melissa Conway
Company Secretary
23 March 2022
Statement of Directors’ responsibilities in respect
of the financial statements
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the group and the company
financial statements in accordance with UK-adopted
international accounting standards.
Under company law, Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the profit or loss of the Group for that
period. In preparing the financial statements, the Directors
are required to:
– select suitable accounting policies and then apply them
consistently;
– state whether applicable UK-adopted international
accounting standards have been followed, subject to any
material departures disclosed and explained in the
financial statements;
– make judgements and accounting estimates that are
reasonable and prudent; and
– prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible for safeguarding the assets
of the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy at any time the financial position of
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Companies Act 2006.
The Directors are responsible for the maintenance and
integrity of the Company’s financial statements published
on the ultimate parent company’s website. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and
Accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group’s and Company’s
position and performance, business model and strategy.
Each of the Directors, whose names and functions are listed
in the Board of Directors section within the Governance
Report, confirm that, to the best of their knowledge:
Metro Bank PLC Annual Report & Accounts 2021
151
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report
to the members of Metro Bank PLC
Report on the audit of the financial statements
Opinion
In our opinion, Metro Bank PLC’s group financial statements and company financial statements (the “financial statements”):
– give a true and fair view of the state of the group’s and of the company’s affairs as at 31 December 2021 and of the group’s
loss and the group’s and company’s cash flows for the year then ended;
– have been properly prepared in accordance with UK-adopted international accounting standards; and
– have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report & Accounts 2021 (the “Annual Report”),
which comprise: the Consolidated and Company balance sheets as at 31 December 2021; the Consolidated statement of
comprehensive income; the Consolidated and Company cash flow statements; the Consolidated and Company statements
of changes in equity for the year then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided.
Other than those disclosed in note 8, we have provided no non-audit services to the company or its controlled
undertakings in the period under audit.
Our audit approach
Overview
Audit scope
– The scope of our audit and the nature, timing and extent of audit procedures performed were determined by our risk
assessment, the financial significance of reporting units and other qualitative factors (including history of misstatement
through fraud or error).
– We performed audit procedures over components considered financially significant in the context of the group (full
scope audit) or in the context of individual primary statement account balances (audit of specific account balances).
The company is the only financially significant component. We performed other procedures including testing information
technology general controls, analytical procedures and tests of detail of loans and advances to mitigate the risk of
material misstatement in the non-financially significant components.
Key audit matters
– Determination of allowance for Expected Credit Losses (ECL) on loans and advances to customers (group and company)
– Carrying values of non-financial assets (excluding goodwill) (group and company)
– Impact of the COVID-19 pandemic (group and company)
152
Metro Bank PLC Annual Report & Accounts 2021
Materiality
– Overall group materiality: £11.3m (2020: £5.2m) based on 5% of the average consolidated profit or loss before tax of the
last 3 years.
– Overall company materiality: £10.7m (2020: £5.1m) based on 5% of the average consolidated profit or loss before tax of
the last 3 years.
– Performance materiality: £8.5m (2020: £3.9m) (group) and £8.0m (2020: £3.8m) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example in
respect of significant accounting estimates that involved making assumptions and considering future events that are
inherently uncertain.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
This is not a complete list of all risks identified by our audit.
The recognition of revenue on loans and advances and the acquisition of RateSetter, which were key audit matters last year,
are no longer included because of the reduced level of work and related impact on the financial statements. The quantum
of interest income to be spread over the behavioural life of loans is now lower than our performance materiality and so the
risk of material misstatement is normal. The acquisition of RateSetter occurred in 2020 and is no longer a relevant audit risk
in 2021. Otherwise, the key audit matters are consistent with last year.
Metro Bank PLC Annual Report & Accounts 2021
153
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report continued
to the members of Metro Bank PLC
Key audit matter
How our audit addressed the key audit matter
Determination of allowance for Expected
Credit Losses (ECL) on loans and advances
to customers (group and company)
Refer to page 117 (Audit Committee report),
page 177 (Note 12: Loans and advances to
customers) and page 198 (Note 30: Expected
credit losses).
The calculation of the allowance for ECL
requires management to make a number of
significant judgements, assumptions and
estimates. The continuing uncertainty in the
economic environment caused by COVID-19
has required a greater use of judgement. A
number of overlays continue to be required to
address specific considerations, such as the
impact of lifting COVID-19 support measures
and the uncertainty caused by the
developments in the pandemic which may not
be fully reflected in economic forecasts. These
overlays are applied with consideration for the
specific geographical and industry
concentrations of the portfolio. In addition,
model adjustments have been applied to
reflect known model limitations.
We consider there to be a significant audit risk
in determining ECL for the following portfolios:
Retail Mortgages, Consumer (specifically for
RateSetter unsecured loans) and Commercial
(excluding the small asset finance and invoice
finance portfolios, and government backed
loans). This significant risk is identified in
relation to the following key assumptions
and judgements:
– Judgement exercised in determining the
probability of default (‘PD’) – new models
(e.g. RateSetter), significant changes to
existing models and models where previous
issues have been identified (e.g. Commercial
PD model);
– Judgements exercised by management in
determining whether a significant increase in
credit risk (‘SICR’) should be recognised;
– The selection of forward-looking economic
assumptions used in the models;
– The judgements involved in addressing
underlying economic uncertainty through
the use of post model overlays and the
application of these adjustments; and
– The measurement of ECL on individually
assessed stage 3 loans, including
management’s estimation of future expected
cash flows (for example the timing and value
of collateral realisation).
We evaluated the design and implementation of key controls. Where we planned
to rely on them, we tested their operating effectiveness and concluded that we
could place reliance on the controls for the purposes of our audit. This involved
testing of controls over:
– the recording of collateral into lending system for Retail loans;
– governing the watchlist process and the identification of credit impaired loans;
– the performance of periodic credit reviews for Commercial lending ; and
– the review and approval of provisions applied to individually impaired loans.
We engaged the support of our credit modelling specialists and performed the
following substantive audit procedures in order to assess the performance of the
ECL models and the appropriateness of management’s key judgements and
assumptions in the context of the current economic environment and our wider
industry experience.
Probability of default (PD)
We critically assessed the methodology applied in the impairment models to
evaluate whether the methodology was compliant with IFRS 9 requirements, and
tested key assumptions and judgements. These included those made by
management in determining PDs used in the calculation of provisions. As part of
this assessment we considered whether increases in probability of default due to
the impact of COVID-19 on economic conditions were adequately captured within
models, or whether a post model overlay was included to address the latent risk.
Our credit modelling specialists independently rebuilt a commercial loans ECL
model, representing 48% of the overall modelled ECL balance. This was performed
using management’s methodology and comparing the output to management’s
modelled ECL output. We identified no material differences.
Significant increase in credit risk (SICR)
To test whether judgements exercised in determining whether SICR events have
occurred, we performed substantive procedures. These included assessing the
SICR definitions against IFRS requirements, selecting samples of loans across
the Commercial stage 1 and 2 populations and independently assessing the
stage allocation against SICR criteria.
Forward looking information and multiple economic scenarios
We used our economic analysis software, utilising data from the Bank of England,
HM Treasury, and Consensus Economics, to assess the reasonableness of
management’s economic scenarios and associated weightings, giving specific
consideration to the economic uncertainty caused by COVID-19.
Post model overlays
We critically assessed and tested the expert judgements applied by
management to address the credit risk in the portfolio that was not reflected in
modelled outputs, evaluating and challenging the methodology, completeness
and application. This included management’s assessment of climate change risk,
which resulted in the recognition of a post model overlay.
Individually assessed stage 3 loans
For a sample of stage 3 credit impaired loans, we:
– Critically evaluated the basis on which the allowance was determined, and the
evidence supporting the analysis performed by management; and
– Independently challenged whether the key assumptions used, such as the
recovery strategies, expected cash flows, collateral rights and valuations, and
ranges of potential outcomes, were appropriate, given the borrowers’
circumstances.
Based on the evidence obtained, we found the methodologies, modelled
assumptions, management judgements and collective and individually assessed
ECL to be appropriate and materially compliant with the requirements of IFRS 9.
154
Metro Bank PLC Annual Report & Accounts 2021
Key audit matter
How our audit addressed the key audit matter
To address the risk of impairment of the non-financial assets, we performed a
number of audit procedures over the assessment performed by management.
We challenged and tested the reasonableness of management’s methodology
and key assumptions. This resulted in a number of changes and a reduction in
the headroom. Our work included the following substantive tests:
– Tested the mathematical integrity of the impairment model and agreed the
cash flows to the Board approved 5 year Long Term Plan;
– Performed a comparison of the performance of the group in 2021 to the
budget to assess the reliability of the budgeting and forecasting process;
– Evaluated management’s accounting policy and impairment methodology
with reference to IFRS requirements, including management’s determination
of the relevant CGU and the carrying amount, using our accounting specialists;
– Reviewed the forecasts in the Long Term Plan and evaluated these for
reasonableness. We made inquiries of management and the Board, inspected
business plans and critically assessed management’s growth assumptions.
We also performed sensitivity analyses to test the impact of changing various
assumptions; and
– Engaged our valuation specialists in assessing the reasonableness of the
discount rate and terminal growth rate.
Based on the procedures performed, we found the judgements used in
determining the carrying value of the retail bank CGU to be reasonable
and supportable.
We assessed the disclosures made in the financial statements. We are satisfied
that these disclosures are appropriate and in compliance with the accounting
requirements.
Carrying values of non-financial assets
(excluding goodwill) (group and company)
Refer to page 117 (Audit Committee
report), page 180 (Note 14: Property, Plant
and Equipment) and page 182 (Note 15:
Intangible assets).
The group’s tangible fixed assets amounted
to £765m at 31 December 2021 and mainly
comprised leasehold improvements and Right
of Use assets. The group has also capitalised
as intangible assets certain expenditure in the
development of software to support its
business strategy. The intangible asset balance
was £243m at 31 December 2021. The ‘change
the bank costs’ of implementing the group’s
business strategy and the continuing losses
incurred in 2021, together with the capital
constraints under which the group is
operating, are potential indicators of
impairment.
The Directors have evaluated the above
non-financial assets for impairment, and
where relevant estimated the recoverable
amounts of those assets. Where the assets
do not generate largely independent cash
inflows, they have been incorporated into a
relevant cash generating unit (CGU) and the
recoverable amount of that CGU has been
determined. The CGU relevant to the vast
majority of assets is the ‘retail bank CGU’
within the company.
The determination of the recoverable amount
requires management to estimate the higher
of value in use and fair value less costs to sell
of the retail bank CGU. This assessment is
complex and involves subjective judgements.
The recoverable amount is estimated using
the Board’s 5 year Long Term Plan, a
decreasing growth rate from year 6 to 10,
a terminal growth rate and a discount rate.
The application of IAS 36 ‘Impairment of
assets’ is also complex as there are
methodology judgements required in
determining a value in use. Management
concluded that no impairment existed as
at 31 December 2021.
The value in use methodology adopted by
management, the forecast cash flows and the
discount and long term growth rates are key
judgements. Due to the magnitude of the
balance and these judgements in respect of
the retail bank CGU, the impairment
assessment represents a key audit matter.
Metro Bank PLC Annual Report & Accounts 2021
155
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report continued
to the members of Metro Bank PLC
Key audit matter
How our audit addressed the key audit matter
Our procedures and conclusions in respect of going concern are set out
below in the ‘Conclusions relating to going concern’ section on page 158. Our
procedures in respect of the impairment assessment of non-financial assets and
the determination of expected credit losses relating to loans and advances held
by the group and company are set out in the key audit matters above.
Impact of the COVID-19 pandemic (group
and company)
Refer to page 117 (Audit Committee report),
page 166 (note 1: Basis of preparation and
significant accounting policies) and page 90
(Viability statement)
In 2020, the group launched its new strategic
priorities and a plan to return to sustainable
profitability. Shortly after the launch, the
COVID-19 pandemic struck and the UK
entered a period of business and economic
uncertainty which continued throughout 2021.
The pandemic led to lower levels of certain
customer activity, net interest margin and a
significant increase to credit provisions in
2020. In 2021, the bank focused on higher
yielding loans, reducing the cost of deposits
and transforming the cost base. However,
continued operating losses, impacted by
the COVID-19 pandemic and the cost of
transforming the business, have continued
to reduce capital in 2021. Management has
calculated that the bank’s MREL capital ratio
is currently below the sum of the bank’s MREL
requirement and buffers, but above the
minimum requirement.
The Directors have concluded that the group
will have sufficient resources (including capital
and liquidity) for a period of at least 15 months
from the date of these financial statements. In
assisting the Directors reach their conclusion,
management has modelled both a base case
and severe but plausible downside scenarios
to assess whether the group has sufficient
capital and liquidity.
Management’s assessment of the carrying
value of the group’s and company’s non-
financial assets has also been impacted by the
operating performance which has been
exacerbated by COVID-19. Similarly, the
continuing impact of the pandemic has been
considered in arriving at the allowance for
expected credit losses.
The assessment of going concern and the
impairment of non-financial assets is
dependent on management’s future profit
forecasts and regulatory capital projections.
There is judgement involved in determining
these and, in relation to going concern,
concluding that there is not a material
uncertainty. Due to the importance of these
matters to the Board’s assessment of the
viability of the group and the company, we
discussed the judgements with the Audit
Committee throughout the audit and hence
this constitutes a Key Audit Matter.
156
Metro Bank PLC Annual Report & Accounts 2021
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial
statements as a whole, taking into account the structure of the group and the company, the accounting processes and
controls, and the industry in which they operate.
We performed a risk assessment, giving consideration to relevant external and internal factors, including COVID-19, climate
change, economic risks, relevant accounting and regulatory developments, as well as the group’s strategy. We also
considered our knowledge and experience obtained in prior year audits. As part of considering the impact of climate
change in our risk assessment, we evaluated management’s assessment of the impact of climate risk, which is set out on
page 43, including their conclusion that there is no material impact on the financial statements. In particular, we considered
management’s assessment of the impact on ECL on loans and advances to customers, the financial statement line item we
determined to be most likely to be impacted by climate risk. Management’s assessment gave consideration to a number of
matters, including the climate stress testing performed in 2021.
Using our risk assessment, we tailored the scope of our audit to ensure that we performed enough work to be able to give
an opinion on the financial statements as a whole, taking into account the structure of the group and the company and the
accounting processes and controls. We continually assessed risks and changed the scope of our audit where necessary.
The group comprises five components. Any components which were considered individually financially significant in the
context of the group’s consolidated financial statements (defined as components that represent more than or equal to 15%
of the loss before tax of the consolidated group) were considered full scope components. We considered the individual
financial significance of other components in relation to primary statement account balances and the presence of any
significant audit risks and other qualitative factors (including history of misstatements through fraud or error). For our
group audit, we identified one financially significant component, which is the company. All significant risks relate to the
company and the group.
We then considered the components in the group that had either financially significant or unusual account balances which
were required to be brought into scope. In relation to SME Asset Finance Limited, we performed audit procedures over
loans and advances. The remaining balances and components, in our judgement, did not present a reasonable possibility
of a risk of material misstatement either individually or in aggregate and were eliminated from further consideration for
specific audit procedures. We performed other procedures such as tests of information technology controls and group
level analytical review procedures.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for
materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature,
timing and extent of our audit procedures on the individual financial statement line items and disclosures and in evaluating
the effect of misstatements, both individually and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial statements – group
Financial statements – company
Overall materiality
£11.3m (2020: £5.2m).
£10.7m (2020: £5.1m).
How we
determined it
5% of the average consolidated profit or loss before
tax of the last 3 years
5% of the average consolidated profit or loss before
tax of the last 3 years
Rationale for
benchmark applied
Based on the benchmarks used in the Annual
Report, profit or loss before tax is a key measure
used by the shareholders in assessing the
performance of the group, and is a generally
accepted auditing benchmark. In 2021, we have
changed the measurement basis of this benchmark
to one of a 3 year average (2020: 5 year average).
This is because we do not believe that the results of
2017 and 2018 are of relevance given the
transformation plan and the impact of COVID-19.
Based on the benchmarks used in the Annual Report,
profit or loss before tax is a key measure used by the
shareholders in assessing the performance of the
group, and is a generally accepted auditing
benchmark. In 2021, we have changed the
measurement basis of this benchmark to one of a 3
year average (2020: 5 year average). This is because
we do not believe that the results of 2017 and 2018
are of relevance given the transformation plan and
the impact of COVID-19.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group
materiality. The range of materiality allocated across components was between £4.7m and £10.7m. Certain components
were audited to a local statutory audit materiality that was also less than our overall group materiality.
Metro Bank PLC Annual Report & Accounts 2021
157
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report continued
to the members of Metro Bank PLC
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected
and undetected misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the
scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for
example in determining sample sizes. Our performance materiality was 75% (2020: 75%) of overall materiality, amounting
to £8.5m (2020: £3.9m) for the group financial statements and £8.0m (2020: £3.8m) for the company financial statements.
In determining the performance materiality, we considered a number of factors – the history of misstatements, risk
assessment and aggregation risk and the effectiveness of controls – and concluded that an amount at the upper end of our
normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
£0.6m (group audit) (2020: £0.3m) and £0.5m (company audit) (2020: £0.2m) as well as misstatements below those
amounts that, in our view, warranted reporting for qualitative reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going
concern basis of accounting included:
– Evaluation of management’s financial and regulatory capital forecasts. We also performed a comparison of the 2021
budget and the actual results to assess the accuracy of the budgeting process;
– Reviewing the severity and assumptions behind management’s severe but plausible downside scenarios and, using our
knowledge from the audit, calculating our own sensitivities. We evaluated the impact on the group’s compliance with
minimum regulatory capital requirements;
– Gaining an understanding of the status of the company’s application to the PRA for advanced IRB model approval,
including inquiries of management, a review of correspondence and discussions with the PRA;
– Considering the potential mitigating actions that management may have available to it, including portfolio asset sales, and
assessing whether these were in the control of management and possible in the going concern period of assessment and
evaluating the impact on regulatory capital;
– Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of past stress events.
We also substantiated the liquid resources held, and liquidity facilities available to the group, for example, with the
Bank of England; and
– Assessing the adequacy of disclosures in the Going Concern statement in note 1 of the Consolidated and Company
Financial Statements and within the section ‘Assessment of viability and going concern’ within the Viability statement on
page 91 and found these appropriately reflect the key areas of uncertainty identified.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s and the company’s ability to continue as a going
concern for a period of at least twelve months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in
the preparation of the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s
and the company’s ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing
material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the
directors considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
158
Metro Bank PLC Annual Report & Accounts 2021
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information, which includes reporting based on the
Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent
otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to
report based on these responsibilities.
With respect to the Strategic report and Directors’ Report, we also considered whether the disclosures required by the UK
Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain
opinions and matters as described below.
Strategic report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and
Directors’ Report for the year ended 31 December 2021 is consistent with the financial statements and has been prepared
in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of
the audit, we did not identify any material misstatements in the Strategic report and Directors’ Report.
Directors’ Remuneration
In our opinion, the part of the Annual report on remuneration to be audited has been properly prepared in accordance with
the Companies Act 2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that
part of the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review. Our additional responsibilities with respect to the corporate governance
statement as other information are described in the Reporting on other information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the
corporate governance statement is materially consistent with the financial statements and our knowledge obtained during
the audit, and we have nothing material to add or draw attention to in relation to:
– The directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
– The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging
risks and an explanation of how these are being managed or mitigated;
– The directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern
basis of accounting in preparing them, and their identification of any material uncertainties to the group’s and company’s
ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
– The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment
covers and why the period is appropriate; and
– The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in
operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures
drawing attention to any necessary qualifications or assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than
an audit and only consisted of making inquiries and considering the directors’ process supporting their statement;
checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and
considering whether the statement is consistent with the financial statements and our knowledge and understanding of the
group and company and their environment obtained in the course of the audit.
Metro Bank PLC Annual Report & Accounts 2021
159
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report continued
to the members of Metro Bank PLC
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of
the corporate governance statement is materially consistent with the financial statements and our knowledge obtained
during the audit:
– The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable,
and provides the information necessary for the members to assess the group’s and company’s position, performance,
business model and strategy;
– The section of the Annual Report that describes the review of effectiveness of risk management and internal control
systems; and
– The section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the
company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code
specified under the Listing Rules for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the statement of Directors’ responsibilities in respect of the financial statements, the directors are
responsible for the preparation of the financial statements in accordance with the applicable framework and for being satisfied
that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic
alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will
always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered
material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users
taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to breaches of the rules of the Financial Conduct Authority (FCA), Prudential Regulatory Authority
(PRA) and the Consumer Credit Act 1974, and we considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial
statements such as UK tax legislation and the Companies Act 2006. We evaluated management’s incentives and
opportunities for fraudulent manipulation of the financial statements (including the risk of override of controls), and
determined that the principal risks were related to posting manual journal entries to manipulate financial performance and
management bias in accounting estimates. Audit procedures performed by the engagement team included:
– Enquiries of the Audit Committee, management, internal audit and the group’s legal counsel, including consideration of
known or suspected instances of non-compliance with laws and regulation and fraud;
– Evaluation of the design and implementation of controls designed to prevent and detect irregularities relevant to financial
reporting;
– Reviewing key correspondence with regulators, such as the FCA and the PRA in relation to the group’s compliance with
banking regulations;
– Incorporating unpredictability into the nature, timing and/or extent of our testing;
– Challenging assumptions and judgements made by management in their estimation of the allowance for ECL on loans
and advances to customers, the assessment of the carrying value of non-financial assets (excluding goodwill) and the
ability of the group to continue as a going concern (see related key audit matters and the Conclusions relating to going
concern section); and
160
Metro Bank PLC Annual Report & Accounts 2021
– Identifying and testing journal entries including those posted by infrequent or unexpected users, those posted to unusual
account combinations and those posted late in the financial reporting process.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial
statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one
resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data
auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing
complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In
other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is
selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance
with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept
or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
– we have not obtained all the information and explanations we require for our audit; or
– adequate accounting records have not been kept by the company, or returns adequate for our audit have not been
received from branches not visited by us; or
– certain disclosures of directors’ remuneration specified by law are not made; or
– the company financial statements and the part of the Annual report on remuneration to be audited are not in agreement
with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the directors on 29 July 2009 to audit the
financial statements for the year ended 31 December 2010 and subsequent financial periods. The period of total
uninterrupted engagement is 12 years, covering the years ended 31 December 2010 to 31 December 2021.
Other matter
As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these financial
statements form part of the ESEF-prepared annual financial report filed on the National Storage Mechanism of the
Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’
report provides no assurance over whether the annual financial report has been prepared using the single electronic format
specified in the ESEF RTS.
Jonathan Holloway (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 March 2022
Metro Bank PLC Annual Report & Accounts 2021
161
Strategic reportFinancial statementsGovernanceAdditional information Consolidated statement of comprehensive income
For the year ended 31 December 2021
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Net gains on sale of assets
Other income
Total income
General operating expenses
Depreciation and amortisation
Impairment and write-offs of property, plant, equipment and intangible assets
Total operating expenses
Expected credit loss expense
Loss before tax
Taxation
Loss for the year
Other comprehensive (expense)/income for the year
Items which will be reclassified subsequently to profit or loss:
Movement in respect of investment securities held at FVOCI (net of tax):
– changes in fair value
– fair value changes transferred to the income statement on disposal
Total other comprehensive (expense)/income
Total comprehensive loss for the year
Loss per share
Basic (pence)
Diluted (pence)
Years ended 31 December
2021
£’million
405.7
(110.4)
295.3
71.2
(1.6)
69.6
9.4
44.2
418.5
(536.1)
(80.2)
(24.9)
(641.2)
(22.4)
(245.1)
(3.1)
(248.2)
(8.1)
(0.3)
(8.4)
(256.6)
(144.0)
(144.0)
2020
£’million
426.3
(176.6)
249.7
61.1
(1.2)
59.9
73.3
49.7
432.6
(502.3)
(74.4)
(40.6)
(617.3)
(126.7)
(311.4)
9.7
(301.7)
5.6
(0.1)
5.5
(296.2)
(175.0)
(175.0)
Notes
2
2
3
3
4
5
6
14, 15
14, 15
30
9
28
28
36
36
The accounting policies, notes and information on pages 166 to 218 form part of these financial statements.
162
Metro Bank PLC Annual Report & Accounts 2021
Consolidated and company balance sheets
As at 31 December 2021
Assets
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities held at FVOCI
Investment securities held at amortised cost
Financial assets held at fair value through profit and loss
Property, plant and equipment
Investment in subsidiaries
Intangible assets
Prepayments and accrued income
Assets classified as held for sale
Other assets
Total assets
Liabilities
Deposits from customers
Deposits from central banks
Debt securities
Financial liabilities held at fair value through profit and loss
Repurchase agreements
Derivative financial liabilities
Lease liabilities
Deferred grants
Provisions
Deferred tax liability
Other liabilities
Total liabilities
Equity
Called-up share capital
Share premium
Retained losses¹
Other reserves
Total equity
Total equity and liabilities
Group
Company
Years ended 31 December
Years ended 31 December
Notes
2021
£’million
2020
£’million
2021
£’million
2020
£’million
11
12
13
13
14
37
15
16
17
18
19
20
10
21
22
23
24
9
25
26
26
27
28
3,568
12,290
798
4,776
3
765
–
243
68
–
76
22,587
16,448
3,800
588
–
169
10
269
19
15
12
222
21,552
–
1,964
(942)
13
1,035
22,587
2,993
12,090
773
2,640
30
806
–
254
77
295
2,621
22,579
16,072
3,808
600
30
196
8
327
28
11
12
198
21,290
–
1,964
(694)
19
1,289
22,579
3,547
11,976
798
4,776
3
765
31
231
64
–
392
22,583
16,448
3,800
588
–
169
10
269
19
15
12
217
21,547
–
1,964
(941)
13
1,036
22,583
2,974
11,821
773
2,640
–
803
59
209
73
295
2,880
22,527
16,072
3,808
600
–
196
8
325
28
8
8
180
21,233
–
1,964
(689)
19
1,294
22,527
1. The Company loss for the year was £252.2 million (2020: loss of £292.1 million)
The accounting policies, notes and information on pages 166 to 218 form part of these financial statements.
The financial statements on pages 162 to 218 were approved by the Board of Directors on 23 March 2022 and signed
on its behalf by:
Robert Sharpe
Chair
Daniel Frumkin
Chief Executive Officer
Metro Bank PLC Annual Report & Accounts 2021
163
Strategic reportFinancial statementsGovernanceAdditional information
Consolidated and company statements
of changes in equity
For the year ended 31 December 2021
Group
Company
Called-
up share
capital
£’million
Share
premium
£’million
Retained
losses
£’million
FVOCI
reserve
£’million
Share
option
reserve
£’million
Total
equity
£’million
Called-
up share
capital
£’million
Share
premium
£’million
Retained
losses
£’million
FVOCI
reserve
£’million
Share
option
reserve
£’million
Total
equity
£’million
– 1,964
–
–
(694)
(248)
3
–
16
–
1,289
(248)
– 1,964
–
–
(689)
(252)
3
–
16
–
1,294
(252)
–
–
–
–
–
–
–
(248)
–
– 1,964
1,964
–
–
–
(942)
(392)
(302)
–
–
–
–
–
–
–
(302)
–
– 1,964
26
26
(694)
27
(8)
(8)
–
(5)
(3)
–
6
6
–
3
28
–
–
2
(8)
(256)
2
18
1,035
14 1,583
(302)
–
–
–
–
–
–
–
–
(252)
–
– 1,964
1,964
–
–
–
(941)
(397)
(292)
–
–
2
6
(296)
2
–
–
–
–
–
–
–
(292)
–
1,289
16
28
– 1,964
26
26
(689)
27
(8)
(8)
–
(5)
(3)
–
6
6
–
3
28
–
–
2
(8)
(260)
2
18
1,036
14 1,578
(292)
–
–
–
2
6
(286)
2
1,294
16
28
Balance as at 1 January 2021
Loss for the year
Other comprehensive
expense (net of tax) relating
to investment securities
designated at FVOCI
Total comprehensive loss
Net share option movements
Balance as at
31 December 2021
Balance as at 1 January 2020
Loss for the year
Other comprehensive
income (net of tax) relating
to investment securities
designated at FVOCI
Total comprehensive loss
Net share option movements
Balance as at
31 December 2020
Notes
The accounting policies, notes and information on pages 166 to 218 form part of these financial statements.
164
Metro Bank PLC Annual Report & Accounts 2021
Consolidated and company cash flow statements
For the year ended 31 December 2021
Reconciliation of loss before tax to net cash flows from
operating activities:
Loss before tax
Adjustments for:
Impairment and write-offs of property, plant, equipment,
intangible assets and investment in subsidairies
Interest on lease liabilities
Depreciation and amortisation
Share option charge
Grant income recognised in the income statement
Amounts provided for (net of amounts released)
Gain on sale of assets and fair value gains on derivatives
Accrued interest on and amortisation of investment
securities
Changes in operating assets and liabilities
Changes in loans and advances to customers
Changes in deposits from customers
Changes in other operating assets
Changes in other operating liabilities
Net cash inflows/(outflows) from operating activities
Cash flows from investing activities
Sales of investment securities
Purchase of investment securities
Purchase of property, plant and equipment
Purchase and development of intangible assets
Acquisition of subsidiary¹
Capital injection into subsidiaries
Net cash (outflows)/inflows from investing activities
Cash flows from financing activities
Grant repaid
Repayment of capital element of leases
Net cash (outflows)/inflows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at start of year
Cash and cash equivalents at end of year
Loss before tax includes:
Interest received
Interest paid
1. Shown net of cash acquired in the Group cash flow statement
Group
Company
Years ended 31 December
Years ended 31 December
Notes
2021
£’million
2020
£’million
2021
£’million
2020
£’million
(245)
(311)
(245)
(299)
22
14, 15
7
5
24
12
18
14
15
22
11
11
25
17
80
2
(11)
5
(9)
5
(200)
376
2,847
(38)
2,854
1,269
(3,438)
(42)
(39)
–
–
(2,250)
–
(29)
(29)
575
2,993
3,568
41
19
74
2
(24)
8
(73)
3
2,591
1,595
(2,820)
(64)
1,041
615
(1,460)
(29)
(81)
(1)
–
(956)
(50)
(31)
(81)
4
2,989
2,993
64
17
76
2
(11)
5
(9)
5
(155)
376
2,767
(18)
2,874
1,269
(3,438)
(41)
(64)
–
–
(2,274)
–
(27)
(27)
573
2,974
3,547
41
19
73
2
(24)
8
(73)
3
2,560
1,595
(2,820)
(23)
1,062
615
(1,460)
(29)
(81)
(3)
(33)
(991)
(50)
(30)
(80)
(9)
2,983
2,974
409
126
407
176
394
126
397
175
The accounting policies, notes and information on pages 166 to 218 form part of these financial statements.
Metro Bank PLC Annual Report & Accounts 2021
165
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements
1. Basis of preparation and significant accounting policies
This section sets out the Group’s (‘our’ or ‘we’) accounting policies which relate to the financial statements as a whole.
Where an accounting policy relates specifically to a note then the related accounting policy is set out within that note.
All policies have been consistently applied to all the years presented unless stated otherwise.
1.1 General information
Metro Bank plc (the ‘Company’) together with its subsidiaries (the ‘Group’) provides retail and commercial banking services
in the UK and is a public limited company limited by shares incorporated and domiciled in the United Kingdom under the
Companies Act 2006 (Company number 06419578). The registered office is One Southampton Row, London WC1B 5HA.
1.2 Basis of preparation
The consolidated financial statements of the Group and Company have been prepared in accordance with UK-adopted
International Accounting Standards (IAS) and the Companies Act 2006 applicable to companies reporting under
IFRS. Whilst the change from IFRS as adopted by EU to UK-adopted IAS constitutes a change in accounting framework,
there is no impact on recognition, measurement or disclosure from this transition.
The consolidated financial statements of the Group and Company were authorised by the Board for issue on
23 March 2022.
The financial information has been prepared under the historical cost convention, as modified by the revaluation of certain
financial assets and liabilities at fair value through profit or loss and other comprehensive income. Fair value is defined as
the price that would be received or paid in an orderly transaction between market participants at the measurement date.
Certain disclosures required under IFRS 7 ‘Financial instruments: disclosures’ and IAS 1 ‘Presentation of financial
statements’ have been included within the Risk Report on pages 52 to 91. Where information is marked as audited,
it is incorporated into these financial statements and it is covered by the Independent auditor’s report.
Going concern
The Directors consider that it is appropriate to continue to adopt the going concern basis of accounting in preparing the
financial statements. In reaching this assessment, the Directors have considered projections for the Group’s capital and
funding position as well as other principal risks. As part of this process the Directors have considered and approved the
Group’s most recent Long Term Plan including associated downside scenarios. Directors also considered the key
assumptions and uncertainties that feed into these plans alongside management actions and mitigants that would be
available if required. Under all scenarios considered, the Directors believe the Group to remain a going concern on the basis
that it maintains sufficient resources (including liquidity and capital) to be able to continue to operate for the foreseeable
future (considered to be 15 months from the date of these financial statements). The Directors did not deem there to be any
material uncertainties with regards to the assessment on going concern. Further details on the assessment undertaken by
the Directors is set out in the Viability statement on pages 90 to 91.
Basis of consolidation
Our consolidated financial statements include the results for all entities which we control (details of our subsidiaries can be
found in note 37). Controlled entities are all entities to which we are exposed, or have rights, to variable returns from our
involvement with the entity and have the ability to affect those returns through our power over it. An assessment of control
is performed on an ongoing basis.
Our controlled entities are consolidated from the date on which we establish control until the date that control
ceases. The acquisition method of accounting is used to account for business combinations other than those under
common control.
Post-acquisition, income and expenses are included in the consolidated income statement on a line-by-line basis in
accordance with the accounting policies set out herein, adjusting for any intra-group transactions which are eliminated in
full upon consolidation.
In publishing the Company financial statements here together with the Group financial statements, we have adopted the
exemption in section 408(3) of the Companies Act 2006 not to present a Company statement of comprehensive income
and related notes that form a part of these financial statements.
1.3 Functional and presentation currency
These financial statements are presented in pound sterling, which is our functional currency. All amounts have been
rounded to the nearest £1 million and £0.1 million for balance sheet and income statement line items respectively, except
where otherwise indicated.
166
Metro Bank PLC Annual Report & Accounts 2021
1.4 Cash flow statement
The cash flow statement shows the changes in cash and cash equivalents arising during the year from operating activities,
investing activities and financing activities.
The cash flows from operating activities are determined by using the indirect method. Under that method, loss before tax
is adjusted for non-cash items and changes in other assets and liabilities to determine net cash inflows or outflows from
operating activities. Cash flows from investing and financing activities are determined using the direct method which
directly reports the cash effects of the transactions.
1.5 Changes in accounting policy and disclosures
During the period we have adopted Interest Rate Benchmark Reform Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7,
IFRS 4 and IFRS 16 (the Phase 2 amendments).
The main impact on our financial statements is in relation to our hedging arrangements, which have transitioned from
being based on LIBOR to SONIA. The Phase 2 amendments have allowed us to amend the designation of our hedging
relationships and the associated hedge documentation to reflect these changes without discontinuing the hedging
relationships. Our accounting policies in respect of hedging remain unchanged and continue to be applied. The impact
of the changes does not have a significant impact on our consolidated financial statements.
In addition to the above, at year end we had £295 million of mortgages and £103 million of investment securities that are
either exposed, or will revert to synthetic LIBOR.
1.6 Future accounting developments
At the year-end there are no standards that were in issue but not yet effective, that would have a material impact on the
Group, including IFRS 17 ‘Insurance contracts’. We have not adopted any standards early within these financial statements.
1.7 Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports and components of the Group which
are regularly reviewed by the Chief Operating Decision Maker to allocate resources to segments and to assess their
performance. For this purpose, the Chief Operating Decision Maker of the Group is our Board of Directors.
The Board considers the results of the Group as a whole when assessing the performance of the Group and allocating
resources, owing to our simple structure. Accordingly, the Group has a single operating segment. We operate solely within
the UK and, as such, no geographical analysis is required. We are not reliant on any single customer.
1.8 Foreign currency translation
Transactions in a foreign currency are translated into the functional currency using the exchange rates prevailing at the
date of the transaction.
Monetary items denominated in a foreign currency are translated using the closing rate as at the reporting date.
Non-monetary items measured at historical cost denominated in a foreign currency are translated with the exchange
rate as at the date of initial recognition; non-monetary items in a foreign currency that are measured at fair value are
translated using the exchange rates at the date when the fair value was determined.
Foreign currency differences arising on translation are recognised in other income. Gains and losses arising from foreign
currency transactions offered to customers are also recognised in other income.
1.9 Critical accounting judgements and estimates
The preparation of financial statements in conformity with IFRS requires us to make both material judgements as well as
estimates which although based on our best assessment, by definition will seldom equal the actual results. Management
believes that the underlying assumptions applied at 31 December 2021 are appropriate and that these consolidated
financial statements therefore present the financial position and results of the Group and Company fairly. The areas
involving a higher degree of complexity, judgement or where estimates have a significant risk of resulting in a material
adjustment to the carrying amounts within the next financial year are:
Recognition of provisions
Measurement of
expected credit loss allowance
Significant increase in credit risk
Use of post model overlays and adjustments
Multiple forward-looking scenarios
Estimate/judgement
Note
Page
Judgement
Judgement
Judgement
Estimate
24
30
30
30
192
203
203
205
Further details can be found within the relevant notes.
Metro Bank PLC Annual Report & Accounts 2021
167
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
2. Net interest income
Accounting policy
We recognise interest income and expense for all interest–bearing financial instruments within
‘interest income’ and ‘interest expense’ in the income statement using the effective interest rate
method. The effective interest rate method is a method of calculating the amortised cost of a
financial asset or a financial liability and of allocating the interest income or interest expense over
the relevant period. The effective interest rate is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial instrument to the net carrying
amount of the financial asset or financial liability. When calculating the effective interest rate we
estimate cash flows considering all contractual terms of the financial instrument (for example,
prepayment options) but do not consider future credit losses except for purchased or originated
credit impaired assets. The calculation includes all fees paid or received between parties to the
contract that are an integral part of the effective interest rate, transaction costs and all other
premiums or discounts.
For loans that are credit impaired, interest income is calculated on the carrying amount of the loan
net of credit impairment.
Interest income
Group
Cash and balances held with the Bank of England
Loans and advances to customers
Investment securities held at amortised cost
Investment securities held at FVOCI
Total interest income
Interest expense
Group
Deposits from customers
Deposits from central banks
Debt securities
Lease liabilities
Repurchase agreements
Total interest expense
2021
£’million
4.4
378.1
20.6
2.6
405.7
2021
£’million
40.1
4.0
47.4
16.7
2.2
110.4
2020
£’million
6.1
393.3
24.8
2.1
426.3
2020
£’million
99.1
8.7
47.8
18.7
2.3
176.6
168
Metro Bank PLC Annual Report & Accounts 2021
3. Net fee and commission income
Accounting policy
Fee and commission income is earned from a wide range of services we provide to our customers.
We account for fees and commissions as follows:
Product or service
Service charges and
other fee income
Safe deposit box
Nature, timing and satisfaction of performance obligations and
payment terms
We levy a range of standard charges and fees for account maintenance or
specific account services. Where the fee is earned upon the execution of a
significant act at a point in time, for example CHAPs payment charges,
these are recognised as revenue when the act is completed for the
customer. Where the income is earned from the provision of services, for
example an account maintenance fee, this is recognised as revenue over
time when the service is delivered.
Revenue is recognised over the period the customer has access to the box
from the date possession is taken. Safe deposit box fees are billed on
either a monthly or annual basis with a standard set price payable
dependent on the size of box.
Where we earn fees from our ATMs or from interchange this is recognised
at the point the service is delivered.
ATM and
interchange fees
Expenses that are directly related and incremental to the generation of fee and commission
income are presented within fee and commission expense.
As disclosed in note 1, we provide services solely within the UK and therefore revenues are not
presented on a geographic basis. Revenue is grouped solely by contract-type as we believe this
best depicts how the nature, amount and timing of our revenue and cash flows are affected by
economic factors.
Group
Service charges and other fee income
Safe deposit box income
ATM and interchange fees
Fee and commission income
Fee and commission expense
Total net fee and commission income
2021
£’million
2020
£’million
25.5
15.1
30.6
71.2
(1.6)
69.6
22.9
15.0
23.2
61.1
(1.2)
59.9
Metro Bank PLC Annual Report & Accounts 2021
169
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
4. Net gains on sale of assets
Group
Investment securities held at amortised costs
Investment securities held at fair value through other comprehensive income
Loan portfolios
Total net gains on sale of assets
2021
£’million
0.4
0.3
8.7
9.4
2020
£’million
4.2
0.1
69.0
73.3
Disposal of investment securities
During the year ended 2021 some of our investment securities were called early by the issuers resulting in a gain being
recognised on these assets.
Disposal of loan portfolios
On 18 December 2020 we agreed to sell a portfolio of £3.1 billion of loans to NatWest. The portfolio of mortgages sold was
subject to a 10% carve out, which related to a group of specifically identified loans on which NatWest undertook further
due diligence prior to completion in February 2021. The transaction was in line with our strategy to enhance risk-adjusted
returns on capital through the ongoing focus on balance sheet optimisation. In addition to increasing our MREL resources,
the sale created additional lending capacity and enabled us to rebalance asset mix towards higher yielding assets such as
specialist mortgages and unsecured loans.
The £8.7 million gain relates to the 10% carve out which completed in early 2021. The sale of the loan portfolio was not
considered to constitute a change to our business model which is outlined in note 12.
5. Other income
Accounting policy
Other income is accounted for as follows:
Product or service
Foreign currency
transactions
Rental income
Grant income
Nature, timing and satisfaction of performance obligations and
payment terms
Gains on foreign currency transactions is the spread earned on foreign
currency transactions performed for our customers along with any
associated fees. It is recognised at the point in time that the exchange
is executed.
Rental income is primarily earned from the letting out of surplus space in
some of our properties. The revenue is recognised on a straight-line basis
over the life of the lease.
Grant income primarily relates to amounts recognised in relation to the
amounts drawn down against the Capability and Innovation Fund award
(further details of which can be found in note 23). Income is recognised in
line with the delivery of the commitments we agreed to as part of the bid.
Group
Foreign currency transactions
Rental income
Grant income
Other
Total other income
2021
£’million
27.7
0.9
10.5
5.1
44.2
2020
£’million
24.0
0.9
23.9
0.9
49.7
170
Metro Bank PLC Annual Report & Accounts 2021
6. General operating expenses
Group
People costs (note 7)
Information technology costs
Occupancy costs
Money transmission and other banking-related costs
Transformation costs
Remediation costs
Capability and Innovation Fund (C&I) costs1
Legal and regulatory fees
Professional fees
Contractor costs2
Printing, postage and stationery costs
Travel costs
Marketing costs
Business acquisition and integration costs
Other
Total general operating expenses
2021
£’million
239.0
57.2
32.9
50.6
8.9
45.9
8.1
6.6
50.1
2.1
5.6
1.1
4.7
2.4
20.9
536.1
2020
£’million
197.6
48.4
34.4
46.0
16.7
40.8
21.6
5.5
54.1
5.6
6.2
1.8
6.4
5.4
11.8
502.3
1. C&I costs represent the non-capitalisable costs of delivering the C&I digital commitments. It includes £2.5 million (2020: £3.2 million) of people costs. These
are included within C&I costs rather than people costs to better reflect their nature. In addition to these costs the grant income recognised in note 5 is also
used to offset property costs relating to the store commitments delivered.
2. Contractor costs are shown net of both amounts capitalised and amounts included within the transformation costs, remediation costs and C&I costs lines.
Information technology costs
Information technology costs include costs expensed in relation to software licenses, support from third party providers,
back up costs and cloud computing costs.
Occupancy costs
Occupancy costs consist of the non-IFRS 16 property costs of occupying our stores and offices, including rates, utilities
and property maintenance costs as well as irrecoverable VAT on lease payments. These costs remained flat during the year
reflecting our limited store growth during 2021.
Money transmission and other banking related costs
Money transmission and other banking related costs are made up of the overheads relating to servicing our deposits
and lending that do not constitute either part of the effective interest rate, or fee and commission expense. The increase
in costs during the year is reflective of both the increase and change in mix of our lending and account activity during
the year.
Professional fees
Professional fees primarily consists of research and development costs not capitalised, which in the year totalled
£29.4 million (2020: £32.7 million). This does not include any costs of colleagues working on these projects that are
included in the people costs line. Including these costs we spent £53.5 million (2020: £49.9 million) on research and
development costs not capitalised.
Included within legal, regulatory and professional fees is £nil million (2020: £0.2 million) in respect of the Financial Services
Compensation Scheme (FSCS) levy.
Transformation, remediation, Capability and Innovation Fund and business acquisition and integration costs
Further details on transformation, remediation, Capability and Innovation Fund and business acquisition and integration
costs can be found on page 225.
Metro Bank PLC Annual Report & Accounts 2021
171
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
7. People costs
Group
Wages and salaries¹
Social security costs¹
Pension costs¹
Equity-settled share-based payments2
Total people costs
2021
£’million
201.2
22.0
13.4
2.4
239.0
2020
£’million
166.9
17.9
10.8
2.0
197.6
1. Amounts are net of people costs which are capitalised as well as those relating to C&I (see note 6) as these costs will be offset against the C&I grant income
in note 5.
2. Included within equity-settled share-based payments is £nil million (2020: (£0.2 million)) in respect of share awards granted to key members of
management in 2016 in recognition of their significant contribution to the successful listing on the London Stock Exchange. These share awards vested
annually until April 2021. These related to shares held in treasury, rather than share options, and as such did not get recorded in the share option reserve.
During the year £6.9 million (2020: £7.2 million) of people costs were capitalised as part of our intangibles assets (further
details can be found in note 15).
The average monthly number of persons employed during the year was 4,184 (2020: 3,850).
Group
Customer-facing
Non-customer-facing
Total number of persons employed
2021
2020
2,062
2,122
4,184
2,175
1,675
3,850
Pension costs
Payments were made amounting to £14.0 million (2020: £11.2 million) to colleagues’ individual personal pension plans
during the year. This includes pension contributions that were capitalised as well as those relating to colleagues working on
C&I which are not included in the figures above.
8. Fees payable to our auditors
During the year, the Group (including its subsidiaries) obtained the following services from the Company’s auditors:
Group
Audit of the Consolidated and Company financial statements¹
Audit of the financial statements of the Company’s subsidiaries
Audit-related assurance services2
Total fees payable to our auditors
2021
£’000
2,342
143
232
2,717
2020
£’000
1,923
183
115
2,221
1. The fee includes £300,000 related to the prior year.
2. Audit-related services consist of independent assurance work relating to CASS, country-by-country reporting, Bank of England TFSME assurance report
and the interim review
172
Metro Bank PLC Annual Report & Accounts 2021
9. Taxation
Accounting policy
Current tax
Our current tax comprises the expected tax payable or receivable on the taxable profit for the year
and any adjustment to the tax payable or receivable in respect of previous years. It is measured
using tax rates enacted or substantively enacted at the reporting date.
Where we have tax losses that can be relieved only by carry-forward against taxable profits of
future periods, a deductible temporary difference arises. Those losses carried forward are set off
against deferred tax liabilities carried in the balance sheet.
Deferred tax
Deferred tax is recognised in respect of temporary differences arising between the tax bases of
assets and liabilities and their carrying amounts in the financial statements. Deferred tax is
determined using tax rates (and laws) that have been enacted or substantively enacted by the date
of the balance sheet and are expected to apply when the related deferred tax asset is realised or
the deferred tax liability is settled.
The principal differences arise from trading losses, depreciation of property, plant and equipment
and relief on research and development expenditure.
We recognise a deferred tax asset to the extent that it is probable that future taxable profits will
be available against which they can be used and deferred tax liabilities are provided on taxable
temporary differences. Deferred tax assets and liabilities are reviewed at each reporting date and
are reduced to the extent that it is no longer probable that the related tax benefit will be realised
or the deferred tax liability settled.
Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset
current tax assets against current tax liabilities and where the deferred tax assets and liabilities
relate to taxes levied by the same taxation authority on either the same taxable entity or different
taxable entities where there is an intention to settle on a net basis.
Metro Bank PLC Annual Report & Accounts 2021
173
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
9. Taxation continued
Tax expense
The components of the tax credit/(expense) for the year are:
Group
Current tax
Current tax
Adjustment in respect of prior years
Total current tax credit/(expense)
Deferred tax
Origination and reversal of temporary differences
Effect of changes in tax rates
Adjustment in respect of prior years
Total deferred tax (expense)/credit
Total tax (expense)/credit
2021
£’million
2020
£’million
(0.5)
0.6
0.1
3.4
(5.4)
(1.2)
(3.2)
(3.1)
(0.1)
(0.5)
(0.6)
3.6
2.1
4.6
10.3
9.7
Reconciliation of the total tax (expense)/credit
The tax (expense)/credit shown in the income statement differs from the tax expense that would apply if all accounting
losses had been taxed at the UK corporation tax rate.
A reconciliation between the (expense)/credit and the accounting loss multiplied by the UK corporation tax rate is
as follows:
Group
Accounting loss before tax
Tax expense at statutory tax rate of 19% (2019: 19%)
Tax effects of:
Non-deductible expenses – depreciation on non-qualifying fixed assets
Non-deductible expenses – investment property impairment
Non-deductible expenses – remediation
Non-deductible expenses – other
Impact of intangible asset impairment on R&D deferred tax liability
Share-based payments
Adjustment in respect of prior years
Current year losses for which no deferred tax asset has been recognised
Effect of changes in tax rates
Tax credit/(expense) reported in the consolidated income statement
2021
£’million
(245.1)
46.6
(2.7)
(1.8)
(7.1)
(0.1)
3.0
(0.3)
(0.6)
(34.7)
(5.4)
(3.1)
Effective
tax rate
%
19.0%
(1.1%)
(0.8%)
(2.9%)
–
1.2%
(0.1%)
(0.3%)
(14.1%)
(2.2%)
(1.3%)
2020
£’million
(311.4)
59.2
(2.4)
(3.2)
(6.6)
(0.7)
0.2
(0.2)
4.1
(42.8)
2.1
9.7
Effective
tax rate
%
19.0%
(0.8%)
(1.0%)
(2.1%)
(0.2%)
0.1%
(0.1%)
1.3%
(13.7%)
0.7%
3.2%
The effective tax rate for this year is 1.3% (2020: (3.2 %)). The main reasons for this, in addition to the reported accounting
loss before tax for the year, are set out below:
Impact of intangible asset impairment on research and development tax relief
During 2021 we impaired intangible assets relating to the 2020 RateSetter acquisition resulting in a net deferred tax charge.
These impairments related to the peer-to-peer element of the RateSetter lending platform that ceased to provide the
Group with any value following the acquisition of the back book in April 2021.
Share based payments
During the period the Metro Bank share price fell from £1.40 to £1.04. In 2020 the share price fell from £2.06 to £1.40.
This had the impact of reducing the deferred tax asset held resulting in a deferred tax charge.
Adjustment in respect of prior years
Following the filing of the 2020 corporation tax return we have made an adjustment for R&D intangible assets which is
partly offset by an adjustment for fixed assets.
174
Metro Bank PLC Annual Report & Accounts 2021
Losses for which no deferred tax asset has been recognised
The tax effected value of losses for which no deferred tax asset has been recognised is £34.7 million (2020: £42.8 million).
This is due to our long term investment in cost, revenue and infrastructure transformation impacting our profits in the
short term.
Effect of changes in tax rates
This relates to the remeasurement of deferred tax rates following a change to the main UK corporation tax rate. An increase
in the UK corporation rate from 19% to 25% for taxable profits over £250,000 (effective 1 April 2023) was substantively
enacted on 24 May 2021.
Group
2021
Deferred tax assets
Deferred tax liabilities
Deferred tax liabilities
(net)
At 1 January 2021
Income statement
Other comprehensive
income
Acquisition
At 1 December 2021
31 December 2021
31 December 2020
Unused
tax losses
£’million
Investment
securities and
impairments
£’million
Share-
based
payments
£’million
Property,
plant and
equipment
£’million
Intangible
assets
£’million
Unused
tax losses
£’million
Investment
securities and
impairments
£’million
Share-
based
payments
£’million
Property,
plant and
equipment
£’million
Intangible
assets
£’million
Total
£’million
Total
£’million
13
–
13
12
1
–
–
13
3
2
5
2
–
3
–
5
–
–
–
–
–
–
–
–
–
(23)
(23)
(16)
(7)
–
–
(23)
–
(7)
16
(28)
(7)
(10)
3
–
–
(7)
(12)
(12)
(3)
3
–
(12)
12
–
12
–
12
–
–
12
3
(1)
2
4
(1)
(1)
–
2
–
–
–
–
–
–
–
–
–
(16)
(16)
(15)
(1)
–
–
(16)
–
(10)
15
(27)
(10)
(4)
–
–
(6)
(10)
(12)
(15)
10
(1)
(6)
(12)
Unrecognised deferred tax assets
We have total unused tax losses of £810 million for which a deferred tax asset of £203 million has not been recognised as
we continue to be loss making in the short term due to our long term investment in cost, revenue and infrastructure
transformation. The impact of recognising the deferred tax asset in the future would be material although tax benefits
would be spread over a number of years. In addition, the 50% corporate loss restriction in place extends the timeline over
which we can offset losses against future profits. This will be reassessed for the year ending 31 December 2022 in light of
actual performance against management forecasts and prevailing market conditions. There is no time limit beyond which
these losses expire.
Due to unrealised investment property impairments of £10.4 million there is an unrecognised deferred tax asset of
£2.6 million (2020: £1.9 million).
Relevant disclosures for the Company have not been included as they are not materially different to the Group disclosures.
Metro Bank PLC Annual Report & Accounts 2021
175
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
10. Financial instruments
Accounting policy
Repurchase agreements
Where we sell financial assets subject to sale and repurchase agreements are retained in their
respective balance sheet categories. The associated liabilities are included in the repurchase
agreements line. The difference between the sale and repurchase price of repurchase agreements
is treated as interest and accrued over the life of the agreements using the effective interest
method as set out in note 2.
Where we use financial assets to raise finance through repurchase agreements subject the assets
become encumbered and are not available for transfer or sale.
Other financial instruments
Our accounting policies in respect of our other financial instruments can be found in their
respective notes, where applicable.
Our financial instruments primarily comprise customer deposits, loans and advances to customers and investment
securities, all of which arise as a result of our normal operations.
The main financial risks arising from our financial instruments are credit risk, liquidity risk and market risks (price and
interest rate risk). Further details on these risks can be found within the Risk Report on pages 52 to 91.
The financial instruments we hold are simple in nature and we do not consider that we have made any significant or
material judgements relating to the classification and measurement of financial instruments under IFRS 9.
Cash and balances with the Bank of England, trade and other receivables, trade and other payables and other assets and
liabilities which meet the definition of financial instruments are not included in the table below.
Classification of financial instruments
Assets
Loans and advances to customers
Investment securities
Financial assets held as fair value
through profit and loss
Assets classified as held for sale
Liabilities
Deposits from customers
Deposits from central bank
Debt securities
Financial liabilities held as fair value
through profit and loss
Derivative financial liabilities
Repurchase agreements
31 December 2021
31 December 2020
Fair value
through
profit and
loss
£’million
FVOCI
£’million
Amortised
cost
£’million
Total
£’million
Fair value
through
profit and
loss
£’million
FVOCI
£’million
Amortised
cost
£’million
Total
£’million
–
–
3
–
–
–
–
–
10
–
–
798
12,290
4,776
12,290
5,574
–
–
–
–
–
–
–
–
–
–
3
–
16,448
3,800
588
16,448
3,800
588
–
–
169
–
10
169
–
–
30
–
–
–
–
30
8
–
–
773
12,090
2,640
12,090
3,413
–
–
–
–
–
–
–
–
–
295
30
295
16,072
3,808
600
16,072
3,808
600
–
–
196
30
8
196
Financial assets and liabilities held at fair value through profit and loss
The financial assets held at fair value through profit and loss consist of loans previously absorbed by the RateSetter
provision fund. Following the acquisition of the legacy peer-to-peer back book from RateSetter investors in April 2021
these loans are now owned by the Company. Following the back book purchase the Group no longer has any liability in
respect of the provision fund.
176
Metro Bank PLC Annual Report & Accounts 2021
Financial assets pledged as collateral
We have pledged £5,463 million (2020: £5,363 million) of the financial assets above as encumbered collateral which can
be called upon in the event of default. Of this, £1,491 million (2020: £1,186 million) is made up of high-quality securities and
£3,956 million (2020: £4,177 million) is from our own loan portfolio.
This does not include cash balances pledged as collateral which are shown separately within note 17.
11. Cash and balances with the Bank of England
Accounting policy
Cash and balances with the Bank of England consists of both cash on hand and demand deposits,
both at other banks as well as the Bank of England. In addition, it includes highly liquid investments
that are readily convertible to known amounts of cash and which are subject to insignificant risk of
changes in value. Investment securities are only classified as cash if they have a short maturity of
three months or less from the date of acquisition and are in substance cash equivalents, e.g. debt
investments with fixed redemption dates that are acquired within a short period of their maturity.
Where cash is pledged as collateral and as such is not available on demand this is included within
other assets within note 17.
Unrestricted balances with the Bank of England
Cash and unrestricted balances with other banks
Money market placements
Total cash and balances with the Bank of England
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
3,361
177
30
3,568
2,788
146
59
2,993
3,361
156
30
3,547
2,788
127
59
2,974
The expected credit loss held against cash and balances with the Bank of England is less than £0.1 million (31 December
2020: less than £0.1 million).
12. Loans and advances to customers
Accounting policy
Loans and advances to customers are classified as held at amortised cost. Our business model is
that customer lending is held to collect cash flows, with no sales expected in the normal course of
business. We aim to offer products with simple terms to customers, and as a result, all loans
comprise solely payments of principal and interest. Loans are initially recognised when cash is
advanced to the borrower at fair value – which is the cash consideration to originate the loan
including any transaction costs – and measured subsequently at amortised cost using the effective
interest rate method, which is detailed further in note 2. Interest on loans is included in the income
statement and is reported as ‘Interest income’. Expected credit losses (ECL) are reported as a
deduction from the carrying value of the loan. Changes to the ECL during the year are recognised
in the income statement as ‘Expected credit loss expense’.
Consumer lending
Retail mortgages
Commercial lending (excluding asset and invoice finance)
Total loans and advances to customers (Company)
Asset and invoice finance
Total loans and advances to customers (Group)
31 December 2021
31 December 2020
Gross
carrying
amount
£’million
890
6,723
4,526
12,139
320
12,459
ECL
allowance
£’million
(42)
(19)
(102)
(163)
(6)
(169)
Net
carrying
amount
£’million
848
6,704
4,424
11,976
314
12,290
Gross
carrying
amount
£’million
204
6,892
4,874
11,970
274
12,244
ECL
allowance
£’million
(25)
(26)
(98)
(149)
(5)
(154)
Net
carrying
amount
£’million
179
6,866
4,776
11,821
269
12,090
Metro Bank PLC Annual Report & Accounts 2021
177
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
12. Loans and advances to customers continued
Further information on the movements in gross carrying amounts and ECL can be found in note 30. An analysis of the
gross loans and advances by product category is set out below:
Group
Overdrafts
Credit cards
Term loans
Total consumer lending
Residential owner occupied
Retail buy-to-let
Total retail mortgages
Total retail lending
Professional buy-to-let
Bounce back loans
Coronavirus business interruption loans
Recovery loan scheme¹
Other term loans
Commercial term loans
Overdrafts and revolving credit facilities
Credit cards
Asset and invoice finance
Total commercial lending
Gross loans and advances to customers
Amounts include:
Repayable at short notice
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
66
13
811
890
5,022
1,701
6,723
7,613
950
1,304
165
157
1,791
4,367
156
3
320
4,846
12,459
73
10
121
204
5,051
1,841
6,892
7,096
1,117
1,353
114
–
2,138
4,722
149
3
274
5,148
12,244
66
13
811
890
5,022
1,701
6,723
7,613
950
1,304
165
157
1,791
4,367
156
3
–
4,526
12,139
73
10
121
204
5,051
1,841
6,892
7,096
1,117
1,353
114
–
2,138
4,722
149
3
–
4,874
11,970
181
171
181
171
1. Recovery loan scheme includes £66 million acquired from third parties under forward flow arrangements (31 December 2020: £nil). The loans are held in
a trust arrangement in which we hold 99% of the beneficial interest, with the issuer retaining the remaining 1% (the trust retains the legal title loans).
13. Investment securities
Accounting policy
Our investment securities may be categorised as amortised cost, FVOCI or fair value through profit
and loss. Currently all investment securities are non-complex, with cash flows comprising solely
payments of principal and interest. We hold some securities to collect cash flows; other securities
are held to collect cash flows, and to sell if the need arises (e.g. to manage and meet day-to-day
liquidity needs). Therefore, we have a mixed business model and securities are classified as either
amortised cost or FVOCI as appropriate. We do not categorise any investment securities as fair
value through profit and loss.
Settlement date accounting is used when recording financial asset transactions where a trade is
settled through the regular settlement cycle for that particular investment.
Investment securities held at amortised cost
Investment securities held at amortised cost consist entirely of debt instruments. They are
accounted for using the effective interest method, less any impairment losses.
Investment securities held at FVOCI
Investment securities held at FVOCI consist entirely of debt instruments. Investment securities held
at FVOCI are initially recognised at fair value, which is the cash consideration including any
transaction costs, and measured subsequently at fair value with gains and losses being recognised
in other comprehensive income, except for impairment losses and foreign exchange gains and
losses, until the investment security is derecognised. Interest is calculated using the effective
interest method.
178
Metro Bank PLC Annual Report & Accounts 2021
Investment securities held at FVOCI
Investment securities held at amortised cost
Total investment securities
Investment securities held at FVOCI
Sovereign bonds
Residential mortgage-backed securities
Covered bonds
Multi-lateral development bank bonds
Total investment securities held at FVOCI
Investment securities held at amortised cost
Sovereign bonds
Residential mortgage-backed securities
Covered bonds
Multi-lateral development bank bonds
Asset backed securities
Total investment securities held at amortised cost
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
798
4,776
5,574
773
2,640
3,413
798
4,776
5,574
773
2,640
3,413
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
566
38
156
38
798
386
50
337
–
773
566
38
156
38
798
386
50
337
–
773
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
1,198
1,687
442
1,289
160
4,776
495
1,624
521
–
–
2,640
1,198
1,687
442
1,289
160
4,776
495
1,624
521
–
–
2,640
Metro Bank PLC Annual Report & Accounts 2021
179
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
14. Property, plant and equipment
Accounting policy
Property, plant and equipment
Our property, plant and equipment primarily consists of investments and improvements in our store
network and is stated at cost less accumulated depreciation and any recognised impairment.
We depreciate property, plant and equipment on a straight-line basis to its residual value using the
following useful economic lives:
Leasehold improvements
Freehold land
Buildings
Fixtures, fittings and equipment
IT hardware
We keep depreciation rates, methods and the residual values underlying the calculation of
depreciation of items of property, plant and equipment under review to take account of any change
in circumstances.
Lower of the remaining life of the lease or the useful life of the asset
Not depreciated
Up to 50 years
5 years
3 to 5 years
All items of property, plant and equipment are reviewed at the end of each reporting period for
indicators of impairment.
Right-of-use assets
All of our leases within the scope of IFRS 16 relate to our stores and head office properties.
Upon the recognition of a lease liability (see note 22 for further details) a corresponding right-of-use
asset is recognised. This is adjusted for any initial direct costs incurred, lease incentives paid or
received and any restoration costs at the end of the lease (where applicable).
The right-of-use asset is depreciated on a straight-line basis over the life of the lease.
All right-of-use assets are reviewed at the end of each reporting period for indicators of impairment.
Investment property
Investment property is also stated at cost less accumulated depreciation and any recognised
impairment. Depreciation is calculated on a consistent basis with that applied to land and buildings
as disclosed.
Investment
property
£’million
Leasehold
improvements
£’million
Freehold
land and
buildings
£’million
Fixtures,
fittings and
equipment
£’million
IT Hardware
£’million
Right-of-use
assets
£’million
Total
£’million
18
–
–
–
–
18
12
–
–
–
–
–
12
6
292
12
–
(10)
(14)
280
66
14
–
–
(9)
(3)
68
212
298
29
–
–
14
341
21
4
–
–
–
3
28
313
25
–
–
(1)
–
24
15
4
–
–
–
–
19
5
11
1
–
(11)
–
1
7
2
–
–
(9)
–
–
1
330
(4)
(29)
(2)
–
295
47
18
6
(4)
–
–
67
228
974
38
(29)
(24)
–
959
168
42
6
(4)
(18)
–
194
765
Group
Cost
1 January 2021
Additions
Disposals
Write-offs
Transfers
31 December 2021
Accumulated depreciation
1 January 2021
Depreciation charge for the year
Impairments
Disposals
Write-offs
Transfers
31 December 2021
Net book value
180
Metro Bank PLC Annual Report & Accounts 2021
Group
Cost
1 January 2020
Additions
Recognised in business combinations
Disposals
Write-offs
Transfers
31 December 2020
Accumulated depreciation
1 January 2020
Depreciation charge for the year
Recognised in business combinations
Impairments
Disposals
Write-offs
Transfers
31 December 2020
Net book value
Investment
property
£’million
Leasehold
improvements
£’million
Freehold
land and
buildings
£’million
Fixtures,
fittings and
equipment
£’million
IT Hardware
£’million
Right-of-use
assets
£’million
Total
£’million
18
–
–
–
–
–
18
10
–
–
2
–
–
–
12
6
314
6
1
–
(11)
(18)
292
49
11
1
9
–
(2)
(2)
66
226
262
18
–
–
–
18
298
14
5
–
–
–
–
2
21
277
26
3
–
–
(4)
–
25
12
5
–
1
–
(3)
–
15
10
10
2
1
–
(2)
–
11
5
4
–
–
–
(2)
–
7
4
332
4
3
(9)
–
–
330
16
16
–
16
(1)
–
–
47
283
962
33
5
(9)
(17)
–
974
106
41
1
28
(1)
(7)
–
168
806
Impairments
During the year impairments were recognised in relation to the right of use assets on the three stores announced for
closure. Prior to impairment, the right of use assets and lease liabilities were remeasured through to the next break clause.
The leasehold improvements, fixtures and fittings associated with these stores have been written off on the basis that they
will not provide the Group with any economic benefit post closure.
Impairment indicators were also identified in respect of other items of our property, plant and equipment. The assets,
which included our stores, were tested for impairment. We do not consider individual stores to be cash generating units
(CGU), on the basis that they do not generate sufficiently independent cash flows. Instead all the our stores and associated
assets are deemed to belong to our retail bank CGU. Further details on the impairment testing of our CGUs can be found
in note 15.
The recoverable amount of the retail bank CGU was found to be in excess of its carrying amount and as such no
impairment was recognised.
Write-offs
As well as the write-offs relating to the store closures outlined above during the year we wrote-off a number of items of IT
hardware that are no longer being used or no longer providing the Group with any economic benefit.
Transfers
Transfers represent costs associated with the improvements made to previously leased stores which have been purchased.
These stores were purchased where there was a strong commercial rationale for doing so.
Contractual commitment for the acquisition of property, plant and equipment
As at 31 December 2021 we had no contractual commitments relating to the acquisition of property, plant and equipment
that are not reflected in the tables above (31 December 2020: £nil).
Relevant disclosures for the Company have not been included as they are not materially different to the Group disclosures.
Metro Bank PLC Annual Report & Accounts 2021
181
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
15. Intangible assets
Accounting policy
Goodwill
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration
transferred over our interest in net fair value of the net identifiable assets, liabilities and contingent
liabilities of the acquiree and the fair value of the non-controlling interest in the acquiree.
For the purpose of impairment assessment, goodwill acquired in a business combination is allocated
to each of the cash-generating units (CGUs), or groups of CGUs, that is expected to benefit from the
synergies of the combination. Each unit or group of units to which the goodwill is allocated
represents the lowest level within the entity at which the goodwill is monitored for internal
management purposes.
Goodwill is not amortised, however it is tested for impairment at the end of each reporting period.
The recoverable amount of a CGU is the higher of its fair value less cost to sell, and the present value
of its expected future cash flows.
If the recoverable amount is less than the carrying value, an impairment loss is charged to the income
statement. Goodwill is stated at cost less accumulated impairment losses. Any impairment is
recognised immediately as an expense and is not subsequently reversed.
Other intangible assets
Software includes both purchased items and internally developed systems, which consists principally
of identifiable and directly associated internal colleague, contractor and other costs.
Purchased intangible assets and costs directly associated with the development of systems are
capitalised as intangible assets where there is an identifiable asset which we control and which will
generate future economic benefits in accordance with IAS 38.
Costs to establish feasibility or to maintain existing performance are recognised as an expense.
Intangible assets are amortised on a straight-line basis within the income statement using the
following useful economic lives:
Core banking software1
Other banking software
Software licences
Customer contracts
Brands
All intangible assets are reviewed at the end of each reporting period for indicators of impairment.
up to 20 years
3 to 10 years
licence period
10 years
5 years
1. Core banking software consists of our central banking transaction platform. The original platform was assessed as having a
20-year life due to it being the central component of our digital infrastructure. It was upgraded during 2019 with the upgrade
assessed as having a 15-year life. Our core banking software has been in use since we first opened and given its significance is
unlikely to be replaced in the foreseeable future.
182
Metro Bank PLC Annual Report & Accounts 2021
Group
Goodwill
£’million
Brands
£’million
Software
£’million
Total
£’million
Goodwill
£’million
Brands
£’million
Software
£’million
Total
£’million
2021
2020
Cost
1 January
Additions
Recognised in business combinations
Write-offs
Deferred grant (see note 23)
31 December
Amortisation
1 January
Amortisation charge for the year
Impairments
Write-offs
31 December
Net book value
10
–
–
–
–
10
–
–
–
–
–
10
2
–
–
–
–
2
–
–
–
–
–
2
328
39
–
(32)
1
336
86
38
7
(26)
105
231
340
39
–
(32)
1
348
86
38
7
(26)
105
243
4
–
6
–
–
10
–
–
–
–
–
10
–
–
2
–
–
2
–
–
–
–
–
2
224
81
32
(10)
1
328
60
33
–
(7)
86
242
228
81
40
(10)
1
340
60
33
–
(7)
86
254
Software
Software consists of both internally generated (including the RateSetter platform) and externally acquired licences.
As at 31 December 2021 externally acquired licences had a net book value of £6 million (31 December 2020: £9 million).
Out of our total intangible assets, £98 million of software assets were under the course of construction at 31 December
2021 (31 December 2020: £99 million).
Write-offs
The write-offs in the year consisted primarily of software and applications that are no longer being used and are no longer
providing any further economic benefits.
Goodwill and impairment testing of cash generating units
An impairment test on the carrying value of the assets in our CGUs has been undertaken. As at 31 December 2021 we had
two main CGUs being the retail bank and our asset and invoice finance business and no changes have been made to our
CGUs during the year. Both of our CGUs contain goodwill and as such are tested annually for impairment. Additional
impairment indicators were identified in relation to the retail bank CGU in relation to both its intangible assets as well as
property, plant and equipment (see note 14).
Asset and invoice finance business
Retail bank
Total
2021
£’million
4
6
10
Metro Bank PLC Annual Report & Accounts 2021
183
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
15. Intangible assets continued
The recoverable amount for both CGUs was determined by a value-in-use (VIU) calculation. The VIU was higher than
their carrying value and therefore no impairment charge has been recognised for the current year (2020: no charge).
The VIU calculation is based on our Board-approved Long Term Plan which covers the five year period from 2022 to 2026
inclusive. Our Long Term Plan is constructed using our best estimate of the future performance of the business and
encompasses commercially sensitive estimates including lending and deposit yields and volumes, costs over the period
and the timing and benefit of key strategic priorities (see pages 20 to 21). The Long Term Plan is built on the assumption
that we remain appropriately capitalised to fund our anticipated growth. We have determined that we will be able to meet
the appropriate regulatory requirements, which has been based on an analysis of both our existing and planned capital
structure. This is consistent with the assessment undertaken by the Directors in respect of assessing viability, which can be
found on pages 90 to 91.
The profitability for each CGU per the Long Term Plan is adjusted for non-cash items (including depreciation and
amortisation), capital expenditure and long-term funding costs (which are reflected in the discount rate) to establish the
cash flows for the VIU. Cash flows beyond the five years have been extrapolated using a decreasing growth rate for years
six to 10 at which point a terminal growth rate of 2% is applied. The period of projection and growth rates used reflects our
anticipated growth profile after the five year planning period, as well as the nature and life of the assets within the CGUs.
The terminal growth rate of 2% represents the predicted long-term GDP growth rate of the UK economy (the only market
both CGUs operate in).
A pre-tax discount rate of 13.3% has been used for the VIU calculation. The discount rate is based on our post-tax weighted
average cost of capital (which is grossed up to a pre-tax rate). The rate is compared to industry peers to ensure it is
appropriate and also reflects the risks specific to the assets in the CGUs.
The VIU is most sensitive to changes in the projected profitability per the Long Term Plan and the discount rate applied
(which are dependent on the assumptions regarding capital outlined above). If adjusted independently of all other
variables, reasonable changes to the assumption in either of these factors over the next 12 months would not cause the
recoverable of either CGU to fall below its carrying amount.
2021
Software
£’million
2020
Software
£’million
293
64
(33)
1
325
84
37
(27)
94
231
221
81
(10)
1
293
59
32
(7)
84
209
Company
Cost
1 January
Additions
Write-offs
Deferred grant (see note 23)
31 December
Amortisation
1 January
Amortisation charge for the year
Write-offs
31 December
Net book value
184
Metro Bank PLC Annual Report & Accounts 2021
16. Prepayments and accrued income
Prepayments
Accrued income
VAT receivable
Total prepayments and accrued income
Current portion
Non-current portion
17. Other assets
Due from other banks1
Cash pledged as collateral
Other2
Amounts owed by Group undertakings
Total other assets
Current portion
Non-current portion
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
28
38
2
68
68
–
30
46
1
77
77
–
24
38
2
64
64
–
26
46
1
73
73
–
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
–
36
40
–
76
52
24
2,568
36
17
–
2,621
2,595
26
–
36
39
317
392
365
27
2,568
36
16
260
2,880
2,854
26
1. Due from other banks comprises solely of the amount receivable from NatWest in respect of the portion of the loan portfolio that was derecognised
31 December 2020, less amounts already received as at 31 December 2020.
2. Other balance primarily comprises customer transactions in process or items in the course of collection over year end.
18. Deposits from customers
Total deposits from customers as at 31 December 2021 comprised of 52% from retail customers (31 December 2020: 56%)
and 48% from commercial customers (31 December 2020: 44%).
Deposits from retail customers
Deposits from commercial customers
Total deposits from customers
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
8,527
7,921
16,448
8,960
7,112
16,072
8,527
7,921
16,448
8,960
7,112
16,072
Metro Bank PLC Annual Report & Accounts 2021
185
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
19. Deposits from central banks
Deposits from central banks consists solely of amounts drawn down under the Bank of England’s Term Funding Scheme
(TFS) and Term Funding Scheme with additional incentives for SMEs (TFSME).
Amounts drawn down under TFS
Amounts drawn down under TFSME
Deposits from central banks
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
–
3,800
3,800
3,258
550
3,808
–
3,800
3,800
3,258
550
3,808
In 2021, £3,250 million of TFS drawings were refinanced into TFSME. TFSME was closed to further drawdowns in October
2021 and our drawdowns will mature in 2024, 2025 and 2027 in the amounts of £550 million, £1,860 million and £1,390
million respectively.
20. Debt securities
Accounting policy
Debt securities in issue are recognised initially at fair value, being proceeds less transaction costs.
Subsequently, debt securities are measured at amortised cost using the effective interest method.
Name
Issue date
Currency
Amount issued
£’million
Coupon rate
Call date
Maturity date
Fixed Rate Reset Callable Subordinated Notes
Fixed Rate Reset Senior Non-Preferred Notes
26/06/18
08/10/19
GBP
GBP
250
350
5.50% 26/06/23
9.50% 08/10/24
26/06/28
08/10/25
1 January
Movements in micro hedging arrangements
Unwind of issuance costs
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
600
(14)
2
588
591
7
2
600
600
(14)
2
588
591
7
2
600
The Bank of England has extended the implementation deadline for a holding company to June 2023 to align with the call
date on our Fixed Rate Reset Callable Subordinated Notes. Should we opt to not call these notes in June 2023 they will
continue to provide funding, however there will be a reduced benefit to Tier 2 capital and MREL.
186
Metro Bank PLC Annual Report & Accounts 2021
21. Derivatives
Accounting policy
In accordance with our risk management strategy, to the extent not naturally hedged, we use
interest rate swaps to manage our exposure to interest rate risk. On adoption of IFRS 9 we chose
to continue applying the hedge accounting rules set out in IAS 39 as we employ dynamic portfolio
hedge accounting of interest rate risk across fixed rate financial assets and fixed rate financial
liabilities. Relevant differences between IFRS as issued by the IASB and UK-adopted IAS
specifically relate to our dynamic hedges of non-interest bearing liabilities and fixed rate mortgages.
Where we are using interest rate swaps to hedge the changes in fair value attributable to the
interest rate risk of a recognised asset or liability that could affect profit or loss, we apply fair value
hedge accounting. If there is an effective hedge relationship, the hedged item (such as fixed rate
mortgages or non-interest bearing customer deposits) is adjusted for fair value changes in respect
of the hedged risk. These fair value changes are recognised in the income statement together with
the fair value movements on the hedging instrument (the interest rate swaps).
Where we are using interest rate swaps to hedge the exposure to variability in cash flows
attributable to interest rate risk on a recognised asset or liability or a highly probable forecast
transaction that could affect profit or loss, we apply cash flow hedge accounting. If there is an
effective hedge relationship, the effective portion of the movement in fair value of the hedging
instrument (the interest rate swap) is recognised in other comprehensive income and taken to the
cash flow hedge reserve. The financial hedged item (such as floating rate loans and advances to
customers) is accounted for as normal in line with IFRS 9 accounting requirements.
Hedge accounting is discontinued when a hedge ceases to be highly effective, a derivative expires
or is sold, the underlying hedged item matures or is repaid, or periodically if a new underlying
hedged item or hedging instrument is added to the hedge relationship. Where a fair value hedge is
de-designated (either due to becoming ineffective or as part of our dynamic approach to hedge
accounting) any hedge adjustments accrued to that point are amortised over the remaining life of
the hedged item. When a cash flow hedge is de-designated any accumulated amounts in the cash
flow hedge reserve are recycled to profit or loss as and when the hedged forecast cash flows
impact the income statement so long as the hedged forecast cash flows are still expected.
At the inception of every hedge, we produce hedge documentation which identifies the hedged
risk, hedged item and hedging instrument. This documentation sets out the methodology used for
testing hedge effectiveness.
We use derivatives as part of our approach to hedging interest rate and foreign exchange exposure.
Our derivative financial instruments are analysed in the table below.
31 December 2021
31 December 2020
Assets
Liability
Assets
Liability
Fair value
£’million
Notional
contract
amount
£’million
Fair value
£’million
Notional
contract
amount
£’million
Fair value
£’million
Notional
contract
amount
£’million
Fair value
£’million
Group and Company
Interest rate swaps/Designated as
hedging instruments
–
–
9
1,164
Foreign currency swaps/Designated
as held at fair value through profit
and loss
Total
1
1
160
160
2
11
162
1,326
–
1
1
–
127
127
8
1
9
Notional
contract
amount
£’million
1,431
129
1,560
Metro Bank PLC Annual Report & Accounts 2021
187
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
21. Derivatives continued
Hedge accounting
Our hedging strategy is divided into micro hedges, where the hedged item is an identifiable asset or liability, and portfolio
hedges, where the hedged item is a portfolio of mortgage assets.
The designated risk components of hedged items are as follows:
– Benchmark interest rate risk as a component of interest rate risk.
– Exchange rate risk for foreign currency financial assets and financial liabilities.
Other risks such as credit risk and liquidity risk are managed separately and are not included in the hedge
accounting relationship.
The changes in the designated risk component usually account for the largest portion of the overall change in fair value
of the hedged item.
Portfolio fair value hedges
During 2019 we implemented a macro hedging programme as part of which we increased our use of interest rate swaps
to manage our interest rate risk. So far the macro hedging programme has been applied to our fixed rate mortgage
assets only.
We determine hedged items by analysing portfolios of fixed rate mortgages into repricing time buckets based on
expected, rather than contractual, repricing dates. The hedging instruments are designated appropriately to those
repricing time buckets.
The hedge relationship is tested for effectiveness prospectively at the designation date, and retrospectively at each
de-designation on a monthly basis. This is done by comparing fair value movements of the designated proportion of the
bucketed mortgages, against the fair value movements of the derivatives, to ensure that they are within an 80% to
125% range.
The aggregated fair value changes in the hedged mortgages are recognised on the balance sheet as an asset and liability
respectively. At the end of every month, we de-designate the hedge relationships and redesignate them as new hedges in
order to minimise the ineffectiveness from early repayments and accommodate new exposures. At de-designation, the fair
value hedge accounting adjustments are amortised on a straight-line basis over the remaining period until the repricing of
the mortgage. Amortisation begins at the date of de-designation.
Micro fair value hedges
We use this hedging strategy on fixed rate assets and liabilities held at fair value through other comprehensive income and
amortised cost as well as on our fixed rate debt issuance.
Hedge ineffectiveness
Hedge ineffectiveness within portfolio fair value hedges of the fixed rate mortgage portfolio can occur due to a number of
potential sources, such as:
– non-zero derivative designated in a hedge relationship;
– mismatches between contractual terms such as basis, timing, principal and notionals; or
– change in credit risk of interest rate swaps.
Summary of hedging instruments in designated hedge relationships
The amounts relating to items designated as hedging instruments in fair value hedge relationships to manage our exposure
to interest rates are:
Group and Company
Interest rate swaps
Total derivatives designated as fair
value hedges
31 December 2021
31 December 2020
Assets
Liability
Assets
Liability
Notional
contract
amount
£’million
Carrying
amount
£’million
–
–
–
–
Notional
contract
amount
£’million
1,164
1,164
Carrying
amount
£’million
10
10
Notional
contract
amount
£’million
Carrying
amount
£’million
–
–
–
–
Notional
contract
amount
£’million
1,431
1,431
Carrying
amount
£’million
8
8
188
Metro Bank PLC Annual Report & Accounts 2021
Summary of hedged items in designated hedge relationships
The items designated as hedged items in fair value hedge relationships to manage our exposure to interest rates are:
31 December 2021
31 December 2020
Carrying amount
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Carrying amount
Accumulated amount of fair
value hedge adjustments
included in the carrying
amount of the hedged item
Assets
£’million
Liabilities
£’million
Assets
£’million
Liabilities
£’million
Assets
£’million
Liabilities
£’million
Assets
£’million
Liabilities
£’million
Group and Company
Fixed rate mortgages1
Fixed rate debt issuance2
Fixed rate investment securities at
FVOCI3
Fixed rate investment securities at
amortised cost4
Fixed rate loans1
456
–
–
443
195
60
5
–
–
–
2
7
1
–
–
Total derivatives designated as fair
value hedges
716
443
10
–
–
–
–
–
–
663
–
263
62
7
–
457
–
–
–
8
–
4
2
1
–
7
–
–
–
995
457
15
7
1. Hedged item and the cumulative fair value changes are recorded in Loans and advances to customers.
2. Hedged item and the cumulative fair value changes are recorded in Debt securities in issue (see note 20).
3. Hedged items are recorded in Investment Securities held at FVOCI and the cumulative fair value changes are recorded in Other reserves.
4. Hedged item and the cumulative fair value changes, are recorded in Investment Securities held at amortised costs.
For the purposes of calculating ineffectiveness recognised in the profit or loss, the total accumulated amount of fair value
hedge adjustment is used.
Summary of ineffectiveness from designated hedge relationships
An analysis of the hedge ineffectiveness recognised in profit or loss for the designated fair value hedge relationships is set
out below:
Group and Company
(Loss)/gain arising from fair value hedges
Hedging instrument
Hedged item attributable to the hedged risk
Total ineffectiveness arising from fair value hedges
2021
£’million
2020
£’million
(0.6)
0.8
0.2
(0.2)
(0.3)
(0.5)
LIBOR transition
As outlined in note 1 during 2021 we have adopted Interest Rate Benchmark Reform Phase 2 – Amendments to IFRS 9,
IAS 39, IFRS 7, IFRS 4 and IFRS 16 (the Phase 2 amendments).
As a result of the transition some of our hedging arrangements have moved from being based on LIBOR to SONIA. The
Phase 2 amendments have allowed us to amend the designation of our hedging relationships and the associated hedge
documentation to reflect these changes without discontinuing the hedging relationships. The impact of the changes does
not have a significant impact on our consolidated financial statements.
Metro Bank PLC Annual Report & Accounts 2021
189
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
22. Leases
Accounting policy
At the inception of a contract we assess whether the contract contains a lease.
At the commencement of a lease we recognise a lease liability and right-of-use asset (see note 14
for further details). The lease liability is initially measured as the present value for the future lease
payments discounted at the rate implicit in the lease (where available) or our incremental cost of
borrowing. Generally we use our deemed incremental cost of borrowing as the discount rate.
Following initial recognition, the lease liability is measured using the effective interest method.
Where we are reasonably certain to exercise a break in the lease, only the lease payments up until
the date of the break are included.
We subsequently remeasure the lease liability when there is a change to an index or rate used or
when there is a change in expectation that we will exercise a purchase option or break clause or if
we extend the lease. When such an adjustment is made to the lease liability a corresponding
adjustment is made to the right-of-use asset.
Irrecoverable VAT on lease payments is excluded from the lease liability and is taken to the income
statement over the period which is due. This is included within note 6, General operating expenses,
under ‘occupancy expense’.
We have elected not to recognise a lease liability and right-of-use assets for any leases that have a
term of less than 12 months, or are for an asset which is deemed to be of low value (item is worth
less than £5,000). For these leases, the lease payments are recognised as an expense in the
income statement on a straight-line basis over the life of the lease.
All of our leases within the scope of IFRS 16 relate to our stores and head office properties.
Lease liabilities
1 January
Additions and modifications
Recognised in business combinations
Disposals
Lease payments made
Interest on lease liabilities
31 December
Current
Non-current
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
327
(6)
–
(40)
(29)
17
269
25
244
341
4
3
(9)
(31)
19
327
29
298
325
(6)
–
(40)
(27)
17
269
25
244
341
4
–
(9)
(30)
19
325
28
297
Right-of-use assets
All of our disclosures relating to right-of-use assets, including our accounting policy, can be found in note 14.
Additions and modifications
As part of our decision to close three stores the lease liabilities on these stores were remeasured out to their first break
clause (where available). This led to a modification of the lease liabilities of £6 million, with a corresponding adjustment
made to the associated right-of-use assets.
Disposals
The disposals during year relate to the four stores where we purchased the freehold or long-lease during the year
(2020: three stores). Following the purchase both the lease liabilities and right-of-use assets relating to these stores were
derecognised. Additionally we disposed of the majority of our leases at Old Bailey office space, which we vacated during
2020. We had already impaired the right-of -use assets related during 2020 following our decision to no longer
use this space.
190
Metro Bank PLC Annual Report & Accounts 2021
Low value and short leases
During the year ended 31 December 2021 £0.7 million (year ended 31 December 2020: £0.2 million) was recognised in the
income statement with respect to assets of low value or a lease of less than 12 months.
Future income due under non-cancellable property leases
We lease out surplus space in some of our properties. The table below sets out the cash payments expected over the
remaining non-cancellable term of each lease, exclusive of VAT.
Receivable
Within one year
Due in one to five years
Due in more than five years
Total
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
1
4
4
9
1
4
5
10
1
4
4
9
1
4
5
10
Finance lease receivables
Through our asset finance business we lease a variety of assets to third parties, which typically consist of plant, machinery
and vehicles. These rentals typically cover the assets’ useful economic life and as such any residual value is minimal.
Amounts receivable are classified as loans and advances to customers and are categorised within our asset and invoice
finance lending per the breakdown provided in note 12.
Group
Within one year
Due in one to five years
Due in more than five years
Total
Group
31 December 2021
31 December 2020
Total future
minimum
payments
£’million
Unearned
finance
income
£’million
Present
value
£’million
Total future
minimum
payments
£’million
Unearned
finance
income
£’million
Present
value
£’million
7
10
–
17
(1)
(1)
–
(2)
6
9
–
15
8
13
–
21
(1)
(1)
–
(2)
7
12
–
19
23. Deferred grants
Accounting policy
Grants are recognised where there is reasonable assurance that we will both receive the grant and
will be able to comply with all the attached conditions. When the grant relates to an expense item,
it is recognised as income on a systematic basis over the periods that the related costs, for which it
is intended to compensate, are expensed. When the grant relates to the purchase of an asset, it is
recognised directly against the cost of the asset.
1 January
Released to the income statement
Offset against capital expenditure (see note 15)
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
28
(10)
1
19
50
(23)
1
28
28
(10)
1
19
50
(23)
1
28
Our only deferred grant relates to amounts awarded in relation to the Capability and Innovation Fund which formed part
of the RBS alternative remedies programme. The programme was aimed to increase competition in the UK business
banking marketplace.
As part of the grant we are subject to delivering a number of public commitments. These commitments can be found
on BCR’s (the awarding body) website. As at 31 December 2021 we are currently on track with the delivery of these
commitments.
Metro Bank PLC Annual Report & Accounts 2021
191
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
24. Provisions
Accounting policy
We recognise provisions when it is probable that an outflow of economic benefits will be required
to settle a present legal or constructive obligation that has arisen as a result of past events and for
which a reliable estimate can be made. The provision is measured at its current present value.
Provision
Customer remediation
Dilapidations
Onerous contracts
Legal and regulatory
Other provisions
Description
We are committed to doing the right thing but occasionally we
identify issues that have caused detriment as a result of
our actions.
Where we have to refund costs to customers we provide for this
at the point the obligation arises. The amounts recognised include
any associated interest due.
Dilapidations provisions are recognised in regard to certain
properties we lease.
The majority of our stores and offices have an automatic right to
renewal at the end of the lease under the provisions of the
Landlord and Tenant Act 1954 (‘the act’). Where this is the case
we do not provide for restorations on these sites since we have no
intention of vacating at the end of the lease term. For sites that are
outside the act, or sites within the act where we think there is a
chance we will vacate a site at the end of its lease, a provision is
made for dilapidations.
The provision is made in line with the underlying obligations
contained within the lease.
Onerous contract provisions are recognised when the unavoidable
costs of meeting the obligations under the contract exceed the
economic benefits we expect to be received under it.
The provision is recognised as the net cost of exiting from the
contract, which is the lower of the cost of fulfilling it and any
compensation or penalties arising from failure to fulfil it.
Provisions are made relating to the outcome of legal cases and
regulatory investigations based on our best estimate of settlement
following consultation with our lawyers and advisors. The inclusion
of a provision does not constitute any admission of wrongdoing or
legal liability. Details of individual cases are provided where these
are material to our financial statements and disclosure would not
be prejudicial to the outcome of the case.
Other provisions consist of other sundry amounts that are
provided for in the ordinary course of our business.
No provision has been recognised in relation to any of the legal and regulatory matters set out in note 32.
Critical accounting
judgement
Recognition of provisions
A key area of judgement applied in the preparation of these financial statements is determining
whether a present obligation exists and where one does, in estimating the probability, timing and
amount of any outflows. In determining whether a provision needs to be made and whether it can
be reliably estimated, we consult relevant professional experts and reassess our judgements on an
ongoing basis. In the early stages of legal and regulatory matters, it is typically the case that it is not
possible to reliably estimate the outcome and in these cases we do not provide for their outcome,
however do provide further disclosures outlining the matters in further detail.
Additional information about legal and regulatory matters which constitute contingent liabilities is
available in note 32.
192
Metro Bank PLC Annual Report & Accounts 2021
1 January
Additions
Released
Utilised
31 December
Customer
remediation
£’million
Dilapidations
£’million
2
–
–
(1)
1
3
2
(2)
–
3
2021
Onerous
contracts
£’million
6
5
(4)
(2)
5
2020
Legal and
regulatory
£’million
Other
provisions
£’million
Total
£’million
–
5
–
–
5
–
1
–
–
1
1 January
Additions
Recognised in business combinations
Released
Utilised
31 December
Customer
remediation
£’million
Dilapidations
£’million
Onerous
contracts
£’million
Legal and
regulatory
£’million
Other
provisions
£’million
12
1
–
–
(11)
2
3
–
–
–
–
3
–
9
3
–
(6)
6
–
–
–
–
–
–
2
–
–
(2)
–
–
11
13
(6)
(3)
15
Total
£’million
17
10
3
(2)
(17)
11
All additions have been recognised in the income statement, with the exception of £2 million provision for dilapidations.
This has been recognised as an addition to the right-of-use assets (see note 14).
Dilapidations
The amounts provided in respect of dilapidations are calculated based on assessments by an independent qualified valuer.
They represent the best estimate of the present value to restore the site to the condition required under the lease. As the
date restoration is required may be up to 25 years in the future, there is uncertainty in this estimation. Additionally, for sites
that are outside the act, should we be successful in renewing the lease at the end of its term, it is possible that the provision
recognised may not be utilised.
The additional provision for dilapidations during the year relates to the three stores we will be closing in 2022 (where a
provision had not already been recognised). A provision for the restoration of the Old Bailey office space was substantially
released in the year following the disposal of the majority of this site.
The provision made in relation to these sites is expected to be utilised within the next two years.
Onerous contracts
Onerous contracts primarily relate to the non-rental costs of fulfilling property contracts from which we will no longer
benefit. The additions in the year primarily relate to the three stores announced for closures and have been determined
with reference to the occupancy costs from the date of closure through to the next lease break. Rental costs on these sites
from which we will receive no future economic benefits are represented by an impairment to the right of use asset (see
note 14 for further details). The utilisation and releases in the year relate to both occupancy costs at Old Bailey, a previous
head office site, the majority of which has now been disposed of, as well as a provision in relation to negative margin
peer-to-peer loans, which is no longer required following the acquisition of the RateSetter back book in April 2021.
The majority of our current onerous contract provisions are anticipated to be utilised within the next two years.
Legal and regulatory
Provision for regulatory matters consists of £5 million provided in respect of the FCA investigation into potential rule
breaches in the period prior to the announcements made on 23 January 2019 and 26 February 2019 in relation to risk-
weighted assets and AIRB accreditation respectively.
As at 31 December 2021 we believe there to be sufficient certainty in the outcome of this investigation to make a provision
against the likely penalty. The actual level of penalty remains uncertain. Management expects that the outcome will sit
within a range up to £13 million. The provision reflects management’s best estimate of the outcome at this stage.
Metro Bank PLC Annual Report & Accounts 2021
193
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
25. Other liabilities
Trade creditors
Taxation and social security costs
Accruals
Deferred income
Deferred consideration
Amounts payable to group undertakings
Other liabilities
Total other liabilities
Current portion
Non-current portion
26. Called-up share capital
Group
31 December
2021
£’million
Group
31 December
2020
£’million
Company
31 December
2021
£’million
Company
31 December
2020
£’million
4
11
76
37
8
–
86
222
175
47
4
9
101
7
8
–
69
198
172
26
4
10
75
37
8
7
76
217
170
47
4
8
98
7
8
–
55
180
154
26
Accounting policy
On issue of new shares, incremental directly attributable costs are shown in equity as a deduction
from the proceeds.
We have a single class of shares. As at 31 December 2021, we had 172.4 million ordinary shares of 0.0001p
(31 December 2020: 172.4 million) authorised and in issue.
Called-up ordinary share capital, issued and fully paid
The called-up share capital reserve is used to record our nominal share capital. At 31 December 2021 our called-up share
capital was £172.42 (31 December 2020: £172.42).
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
–
–
–
–
Share premium
The share premium reserve is used to record the excess consideration of any shares we have issued over the nominal
share value.
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
1,964
1,964
1,964
1,964
194
Metro Bank PLC Annual Report & Accounts 2021
27. Retained losses
Retained losses records our cumulative losses since our formation. The Group’s retained losses also include the
accumulated earnings of our subsidiaries since they were acquired.
1 January
Loss for the year
31 December
Group
2021
£’million
(694)
(248)
(942)
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
(392)
(302)
(694)
(689)
(252)
(941)
(397)
(292)
(689)
No dividends were paid during the year (2020: none). We do not currently have any distributable reserves and, as such, it is
unlikely a dividend will be paid in the foreseeable future.
28. Other reserves
Share option reserve
The share option reserve is used to record movements in relation to share options awarded under our CSOP plans.
1 January
Equity-settled share-based payment charges (note 7)
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
16
2
18
14
2
16
16
2
18
14
2
16
Fair value though other comprehensive income reserve
The FVOCI reserve is used to record changes in the fair value of investment securities designated at FVOCI. When
investment securities held at FVOCI are sold, any accumulated gains or losses are transferred to the income statement.
1 January
Changes in fair value
Deferred tax movements
31 December
Group
2021
£’million
Group
2020
£’million
Company
2021
£’million
Company
2020
£’million
3
(11)
3
(5)
(3)
6
–
3
3
(11)
3
(5)
(3)
6
–
3
Treasury shares
We have a small number of shares held in treasury relating to awards originally granted to key members of management in
2016 in recognition of their significant contribution to the successful listing on the London Stock Exchange (see note 7 for
further details). The final tranche of these awards vested in April 2021 and the remaining balance represents awards that
did not vest owing to the original conditions of the grant not being fulfilled. These are held by an employee benefit trust,
which is consolidated within the Group accounts. The balance on the reserve is less than £1 million (31 December 2020: less
than £1 million) and therefore not been separately disclosed as a component of reserves due to its immaterial size.
Metro Bank PLC Annual Report & Accounts 2021
195
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
29. Share based payments
Accounting policy
The grant date fair value of options awarded to colleagues is recognised as an expense over
the period in which colleagues become unconditionally entitled to the options. The expense
(representing the value of the services received by us) is measured by reference to the fair value of
the awards granted on the date of the grant. The cost of the colleague services received in respect
of the awards granted is recognised in the consolidated income statement over the period that the
services are received, which is the vesting period. Graded vesting is applied where relevant.
Vesting conditions are limited to service and performance conditions. For performance-based
schemes, the relevant performance measures are projected to the end of the performance period
in order to determine the number of options expected to vest. This estimate of the performance
measures is used to determine the option fair value, discounted to present value. The Group revises
the number of options that are expected to vest, including an estimate of lapses at each reporting
date based on forecast performance measures. The impact of the revision to original estimates, if
any, is recognised in the income statement, with a corresponding adjustment to equity.
The fair value of colleague awards plans is calculated at the grant date using a Black-Scholes and
Monte Carlo model. The resulting cost is charged to the income statement over the vesting period.
The value of the charge is adjusted to reflect expected and actual levels of vesting.
We provide share award schemes to colleagues as part of their remuneration packages, and we operate a number of
share-based compensation schemes, namely the Deferred Variable Reward Plan (DVRP) and Long Term Incentive Plan
(LTIP). The granting of awards is designed to provide incentives to colleagues to deliver long-term returns. No individual
has a contractual right to participate in the plans or to receive any guaranteed benefits and the granting of awards remains
at the discretion of the Remuneration Committee. Standard share options are granted for no consideration, are not
pensionable and carry no voting rights.
All our options are equity settled and we have no legal or constructive obligation to repurchase the shares or settle the
options in cash. Exercises of awards granted can be satisfied by market purchase or issue of new shares (via our Employee
Benefit Trust). Further details on our treasury share can be found in note 28.
In 2021 we revised our approach to share-based compensation, although continue to recognise charges in relation to prior
year schemes which continue to vest. Total share based compensation charges totalled £2.4 million in the year ended 2021
(2020: £2.0 million)
Long Term Incentive Plan
The LTIP is the primary long-term incentive plan for the members of the Group’s Executive Committee. It was approved by
shareholders at the 2021 AGM. Under the plan, annual awards, based on a percentage of salary, may be offered. The extent
to which an award vests is measured over a three-year period (four-years for the initial awards granted in 2021) against
financial targets, which consist of return on tangible equity and relative total shareholder return, as well as continued
employment within the Group.
Deferred Variable Reward Plan
The DVRP was first introduced in 2010 and the latest plan was approved by shareholders at the 2021 AGM. Although
originally designed for all colleagues, the plan is now operated primarily for senior managers (in 2021 this only consisted
of the Executive Committee). Under the current rules participants are required to defer a proportion of any bonus paid
into nominal price awards, a proportion of which vest immediately and the remainder of which vest over seven years.
There are no further performance conditions on these shares, other than continued employment within the Group. All
awards under the DVRP are subject to a one year holding period, once exercised and all awards have a life of 10 years from
the date of grant.
More information is available in relation to both the DVRP and LTIP is available within the Remuneration Report.
196
Metro Bank PLC Annual Report & Accounts 2021
Awards outstanding
The table below summarises the movements in the number of options outstanding and their weighted average
exercise price:
Group
Outstanding at 1 January
Granted
Exercised
Lapsed
Outstanding at 31 December
Exercisable at 31 December
2021
2020
Number
of options
‘000
Weighted
average
exercise price
£
Number
of options
‘000
Weighted
average
exercise price
£
7,170
3,646
(3)
(336)
10,477
4,202
12.99
–
0.93
5.49
13.37
18.29
4,760
2,733
–
(323)
7,170
3,468
19.98
0.93
–
14.06
12.99
19.74
The average share price during 2021 was 111p (2020: 114p). For share options exercised during the period, the weighted
average share price at the date of exercise was 113p (2020: no options exercised).
Fair value of options granted
The number of options outstanding at year end was as follows:
Exercise price
£0.00
£0.93
£7.94
£9.00
£10.00
£12.00
£13.00
£13.50
£14.00
£16.00
£20.00
£32.73
£35.36
Total
2021
2020
Weighted
average
remaining
contractual
life years
Weighted
average
remaining
contractual
life years
Number
of options
‘000
9.4
8.3
7.2
–
0.8
1.8
2.2
2.8
n/a
n/a
4.2
5.2
6.2
6.2
–
2,629
752
47
128
235
60
616
194
607
446
639
817
7,170
–
9.3
8.2
0.8
1.8
2.8
3.2
3.8
n/a
n/a
5.2
6.2
7.2
7.2
Number
of options
‘000
3,646
2,403
712
–
128
235
60
616
194
611
444
633
795
10,477
The total fair value of options granted in 2021 was £3.8 million (2020: £2.3 million), based on the following assumptions:
Group
Weighted average risk-free interest rate
Weighted average expected life
Weighted average expected volatility
Weighted average expected dividend yield
Weighted average share price
Weighted average exercise price
2021
awards
0.00% to 0.71%
1 to 8 years
136%
nil
£1.11
£0.00
Volatility has been estimated by taking the historical volatility in the Group’s share price since we listed in 2016.
An assumption is also made in respect of how many shares will lapse due to the vesting criteria not being met. For the
award granted in 2021 as these we made to members of the Executive Committee the lapse assumption has been set
at 0%.
Metro Bank PLC Annual Report & Accounts 2021
197
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses
Accounting policy
We assess on a forward-looking basis the expected credit losses (ECL) associated with the assets
carried at amortised cost and FVOCI and recognise a loss allowance for such losses at each
reporting date.
Impairment provisions are driven by changes in credit risk of loans and securities, with a provision
for lifetime expected credit losses recognised where the risk of default of an instrument has
increased significantly. Risk of default and expected credit losses must incorporate forward-looking
and macroeconomic information.
Loans and advances
Sophisticated impairment models have been developed for our retail and commercial loan
portfolios, with three core models: revolving products; fixed term loans; and mortgages. Expected
credit losses are calculated for drawn loans, and for committed lending.
The same broad calculation approach is applied for each core model. Expected credit losses are
calculated by multiplying three main components, being the probability of default, loss given
default and the exposure at default, discounted at the original effective interest rate.
Key model inputs, judgements and estimates include:
– Consideration of when a significant increase in credit risk occurs.
– Probability of default (PD), loss given default and exposure at default as well as their
modelled impact.
– Macroeconomic scenarios and weightings applied.
Significant increase in credit risk
IFRS 9 requires a higher level of expected credit loss to be recognised for underperforming loans.
This is considered based on a staging approach:
Stage
ECL recognised
Description
Stage 1
Stage 2
Stage 3
Purchased or
originated
credit-impaired
(POCI) assets
Financial assets that have had no
significant increase in credit risk since
initial recognition or that have low
credit risk (high quality investment
securities only) at the reporting date.
Financial assets that have had
a significant increase in credit risk
since initial recognition but that
do not have objective evidence
of impairment.
Financial assets that are credit
impaired at the reporting date. A
financial asset is credit impaired when
it has met the definition of default.
We define default to have occurred
when a loan is greater than 90 days
past due (non-performing loan) or
where the borrower is considered
unlikely to pay.
Financial assets that have been
purchased and had objective
evidence of being ‘non-performing’
or ‘credit impaired’ at the point
of purchase.
12-month expected credit losses
Total losses expected on defaults which
may occur within the next 12 months.
Losses are adjusted for probability-
weighted macroeconomic scenarios.
Lifetime expected credit losses
Losses expected on defaults which may
occur at any point in a loan’s lifetime.
Losses are adjusted for probability-
weighted macroeconomic scenarios.
Lifetime expected credit losses
Losses expected on defaults which may
occur at any point in a loan’s lifetime.
Losses are adjusted for probability-
weighted macroeconomic scenarios.
Interest income is calculated on the
carrying amount of the loan net of
credit allowance.
Lifetime expected credit losses
At initial recognition, POCI assets do not
carry an impairment allowance. Lifetime
expected credit losses are incorporated
into the calculation of the asset’s
effective interest rate. Subsequent
changes to the estimate of lifetime
expected credit losses are recognised as
a loss allowance.
198
Metro Bank PLC Annual Report & Accounts 2021
A significant increase in credit risk may be identified in a number of ways:
– Quantitative criteria – where the numerically calculated probability of default on a loan has
increased significantly since initial recognition. This is assessed using detailed models which assess
whether the lifetime PD at observation is greater than the lifetime PD at origination by a portfolio
specific threshold. Given the different nature of the products and the dissimilar level of lifetime
PDs at origination, we implement different thresholds by sub-products within each portfolio (term
loans, revolving loan facilities and mortgages). The threshold is set at three times the median PD
of the portfolio at origination.
– Qualitative criteria – instruments that are 30 days past due or more are allocated to Stage 2,
regardless of the results of the quantitative analysis. In addition instruments classified on the Early
Warning List as higher risk, are allocated to Stage 2, regardless of the results of the
quantitative analysis.
A loan will be considered to be ‘non-performing’ or ‘credit impaired’ when it meets our definition of
default – that is to say, the loan is 90 days past due, or the borrower is considered unlikely to pay
without realisation of collateral. Unlikeliness to pay is assessed through the presence of triggers
including the loan being in repossession, the customer having been declared bankrupt, or evidence
of financial distress leading to forbearance.
A loan may also be considered to be non-performing when it is subject to forbearance measures,
consisting of concessions in relation to:
– a modification of the previous terms and conditions of the loan which the borrower is not
considered able to comply with; or
– a total or partial refinancing of a troubled debt contract that would not have been granted had the
borrower not been in financial difficulties.
It may not be possible to identify a single discrete event which defines an asset as ‘non-performing’
or ‘credit impaired’. Instead, the combined effect of several events may cause financial assets to
become credit impaired.
A probation period is implemented before transferring a financial instrument to a lower stage (i.e.
from Stage 3 to Stage 2, or from Stage 2 to Stage 1). Specifically, in order to move an account from
Stage 3 to Stage 2, we apply a backstop such that the instrument should meet the Stage 2 criteria
for three consecutive months. The same logic is applied when transferring an account from Stage 2
to Stage 1.
Probability of default
The probability of default represents the likelihood of a borrower defaulting on its financial
obligation either over the next 12 months (for Stage 1 accounts), or over the remaining lifetime of
the loan (for Stage 2 and 3 accounts). A probability of default is calculated for all loans based on
historic data and incorporates:
– Credit quality scores.
– Life cycle trends depending on a loan’s vintage.
– Factors indicating the quality of the vintage.
– Characteristics of the current and future economic environment.
Metro Bank PLC Annual Report & Accounts 2021
199
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Loss given default
The loss given default (LGD) represents our expectation of the extent of a loss on a defaulted
exposure, and is expressed as a percentage considering expected recoveries on defaulted
accounts. We apply two LGD rates – one for unsecured lending and one for secured lending.
LGD rates have been modelled considering a range of inputs, including:
– Value of collateral on secured portfolios – a key driver of the expected recovery in the event
of default.
– Expected haircut applied to the collateral value to reflect a forced sale discount.
– Price index forecasts applied to project collateral values into the future.
– Stress factors based on macroeconomic scenarios.
Exposure at default
This is the amount that we expect to be owed at the point of default. This is subject to judgement
since a balance will not necessarily remain static between the balance sheet date and the point of
expected default. For example:
– Interest should be accrued.
– Repayments may be received on mortgages.
– For a revolving product, further drawings may be taken between the current point in time and the
point of default.
– Estimations of these factors will be incorporated into our estimate of exposure at default.
PD, LGD and exposure at default are calculated and applied at an individual account level for
secured lending. For unsecured lending, PD and exposure at default are calculated and applied at
an individual account level, but LGD is assessed at a portfolio level and applied to accounts on an
individual basis.
Macroeconomic scenarios
The ECL recognised in the financial statements reflects the effect on expected credit losses of
a range of possible outcomes, calculated on a probability-weighted basis, based on a number of
economic scenarios and including management overlays where required. These scenarios are
representative of our view of forecast economic conditions, sufficient to calculate unbiased ECL,
and are designed to capture material ‘non-linearities’ (i.e. where the increase in credit losses if
conditions deteriorate, exceeds the decrease in credit losses if conditions improve).
In the normal course of business, we use three scenarios. These represent a ‘most likely outcome’,
(the ‘Baseline’ scenario) and two, less likely, ‘Outer’ scenarios on either side of the Baseline scenario,
referred to as an ‘Upside’ and a ‘Downside’ scenario respectively. The Baseline scenario captures
the most likely economic future; the downside scenario presents particular adverse economic
conditions; and the upside scenario presents more favourable economic conditions. During 2021
a fourth, ‘Severe downside’ macroeconomic scenario has been introduced across all portfolios to
ensure the set of scenarios adequately reflect a wider range of downside risks which have been
previously included within management overlays.
Key scenario assumptions are set using data sourced from independent external economists.
This helps ensure that the IFRS 9 scenarios are unbiased and maximise the use of
independent information.
The following assumptions, considered to be the key drivers of ECL, have been used for the
scenarios applied:
– UK interest rates (five year mortgage rate).
– UK unemployment rates.
– UK HPI changes, year-on-year.
– UK GDP changes, year-on-year.
200
Metro Bank PLC Annual Report & Accounts 2021
Macroeconomic scenarios impact the ECL calculation through varying PDs and LGDs. We use UK
HPI to index mortgage collateral which has a direct impact on LGDs. Other metrics are considered
to have a direct impact on PDs and were selected following a search and data calibration exercise
of possible drivers. A list of around 15 potential drivers were initially considered, representing
drivers which capture trends in the economy at large, and may indicate economic trends which
will impact UK borrowers. The list included variables which impact economic output, interest rates,
inflation, stock prices, borrower income and the UK housing market. An algorithm was then used
to choose the subset of drivers which had the greatest significance and predictive fit to our data.
Each scenario was determined by flexing the baseline scenario, taking into account a number
of factors in the global and UK economy such as commodity prices, global interest rates, UK
investment spend and exchange rates, as well as the possible impact of recessionary conditions
or financial shocks. A simulation process was designed to determine the weighting to apply to
each scenario based on its severity and the range of possible scenarios for which that scenario
was representative. A summary of each scenario and weighting used at 31 December 2021 are as
follows:
– Baseline scenario (40% weight) – Reflects the projection of the median, or ‘50%’ scenario,
meaning that in the assessment there is an equal probability that the economy might perform
better or worse than the baseline forecast.
– Upside scenario (20% weight) – This above-baseline scenario is designed so there is a 10%
probability the economy will perform better than in this scenario, broadly speaking, and a 90%
probability it will perform worse.
– Downside scenario (30% weight) – In this recession scenario, in which a deep downturn develops,
there is a 90% probability the economy will perform better, broadly speaking, and a 10%
probability it will perform worse.
– Severe Downside scenario (10% weight) –In this recession scenario, in which a deep downturn
develops, there is a 96% probability the economy will perform better, broadly speaking, and a 4%
probability it will perform worse.
These assumptions are considered sufficient to capture any material non-linearities.
The weightings applied to each scenario at 31 December 2020 were Baseline – 40%, Upside – 30%
and Downside – 30%.
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2021 are as follows:
Interest rates (%) –
five year mortgage rate
Base
Upside
Downside
Severe downside
UK unemployment (%) Base
UK house price index –
% change year-on-year
UK GDP – % change
Upside
Downside
Severe downside
Base
Upside
Downside
Severe downside
Base
Upside
Downside
Severe downside
2022
2.7%
3.0%
2.3%
2.1%
4.7%
3.9%
6.2%
7.2%
3.4%
14.2%
(12.8%)
(16.3%)
3.9%
7.7%
(2.3%)
(3.9%)
2023
3.3%
3.6%
2.8%
2.6%
4.4%
3.3%
6.6%
7.5%
6.0%
8.5%
(8.1%)
(10.3%)
3.1%
1.7%
5.7%
5.4%
2024
3.7%
4.2%
3.1%
2.9%
4.4%
3.5%
6.5%
7.2%
5.2%
4.8%
(1.9%)
(2.5%)
1.4%
1.2%
2.4%
2.2%
2025
4.1%
4.6%
3.1%
3.1%
4.5%
3.8%
6.3%
7.1%
3.7%
2.1%
4.4%
4.3%
1.0%
1.1%
1.7%
1.8%
Metro Bank PLC Annual Report & Accounts 2021 201
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
The assumptions used for the ECL estimate as at 31 December 2020 are as follows:
Interest rates (%)
Base
Upside
Downside
UK unemployment (%) Base
UK house price index –
% change year-on-year
UK GDP – % change
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
2021
2.2%
2.4%
1.7%
7.4%
6.4%
9.2%
(5.0%)
(1.1%)
(9.8%)
6.8%
10.7%
1.8%
2022
2.8%
2.9%
2.3%
6.8%
5.6%
9.3%
(3.2%)
7.6%
(1.9%)
5.4%
3.9%
7.0%
2023
3.3%
3.7%
2.6%
5.9%
5.0%
8.3%
5.7%
7.4%
4.7%
2.7%
2.4%
3.0%
2024
3.6%
4.2%
2.7%
5.5%
4.8%
7.6%
5.8%
5.5%
6.8%
1.0%
1.1%
1.0%
Following the initial four-year projection period, the Upside, Downside and Severve downside
scenarios converge to the Baseline scenario. The rate of convergence varies based on the
macroeconomic factor, but at a minimum convergence takes place three years from the initial
four-year projection period.
We recognise that applying the above scenarios will not always be sufficient to determine an
appropriate ECL in all economic environments. The scenarios applied comprise our best estimate
of economic impacts on the ECL, and the actual outcome may be significantly different.
Investment securities and other financial assets
Impairment provisions have been calculated based on our best estimate of expected credit
losses on other assets classified and measured at amortised cost and fair value through other
comprehensive income. These include investment securities, cash held at banks and other financial
assets. These impairment provisions are not material.
202
Metro Bank PLC Annual Report & Accounts 2021
Critical accounting
judgement
Measurement of the expected credit loss allowance
The measurement of ECL is complex and involves the use of significant judgements. We consider
that the following represent key judgements in respect of the measurement of the ECL.
Significant increase in credit risk
IFRS 9 requires a higher level of expected credit loss to be recognised for underperforming
loans as a lifetime ECL is recognised compared to a 12-month ECL for performing loans. This is
considered based on a staging approach. Financial assets that have had no significant increase
in credit risk since initial recognition, or that have low credit risk at the reporting date, are
considered to be performing loans and are classified as ‘Stage 1’. Losses are calculated based
on our expectation of defaults which may occur within the next 12 months. Assets which are
considered to have experienced a significant increase in credit risk since initial recognition, but
that do not have objective evidence of impairment, are classified as ‘Stage 2’. Losses are calculated
based on defaults which may occur at any point in the asset’s lifetime.
Judgement is required to determine when a significant increase in credit risk has occurred. An
assessment of whether credit risk has increased significantly since initial recognition, resulting in
transfer to Stage 2, is performed at each reporting period by considering the change in the PD
expecting over the remaining life of the financial instrument. The assessment explicitly or implicitly
compares the PD occurring at the reporting date compared to that at initial recognition, taking into
account reasonable and supportable information, including information about past events, current
conditions and future economic conditions.
In response to the COVID-19 pandemic we introduced the ability for our customers to request
payment deferrals or covenant suspensions. As at 31 December 2021 all payment deferrals provided
on our mortgage and consumer lending portfolios had ended. The use of a payment deferral is not
in itself considered to be trigger of a significant increase in credit risk and as such the granting
of a COVID-19 related payment deferral does not in itself result in a transfer between stages for
the purposes of IFRS 9. Payment deferral is however a potential indicator of an increase risk and has
been reflected via a post model overlay.
Use of post model overlays and adjustments
We have applied expert judgement to the measurement of the expected credit loss in the form
of post model overlays and adjustments.
Post model adjustments
Post model adjustments (PMAs) refer to increases/decreases in ECL to address known model
limitations, either in model methodology or model inputs. These rely on analysis of model inputs
and parameters to determine the change required to improve model accuracy. These may be
applied at an aggregated level, however they will usually be applied at an account level.
Post model overlays
Post model overlays (PMOs) reflect management judgement. These rely more heavily on expert
judgement and will usually be applied at an aggregated level. For example, where recent changes
in market and economic conditions have not yet been captured in the macroeconomic factor inputs
to models (e.g. industry specific stress event).
The appropriateness of PMAs and PMOs is subject to rigorous review and challenge, including
review by the Audit Committee (see page 117).
Metro Bank PLC Annual Report & Accounts 2021 203
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Critical accounting
judgement
ECL assessment
Given the continued economic uncertainty, and further uncertainty on how the pandemic will
unfold, we continue to maintain prudent levels of PMOs. The level of PMAs/PMOs has been reduced
during 2021 with the total percentage of ECL stock comprised of PMAs/PMOs reducing to 26%
(2020: 50%).
PMAs make up £9.1 million of the ECL stock for the year ending 31 December 2021 (2020:
£23.1 million) and are being held in anticipation of IFRS 9 commercial models being implemented
into production by H1 2022, once these are validated and approved through internal governance
process, and are comprised of:
– IFRS 9 commercial Secured LGD model (2021: £9.8 million; 2020: £9.9m) – A management
overlay raised in H2 2021 in anticipation of the new IFRS 9 Commercial model has been applied
whilst this model is being reviewed.
– IFRS 9 commercial Business Loans Lifetime PD model scope extended to commercial Revolving
facilities (2021: (£0.7) million; 2020: £10.9 million).
In 2020 a PMA of £2.3 million was also applied in respect of commercial fixed term EAD model
(2020: £nil).
PMOs make up £35.0 million of the ECL stock for the year ending 31 December 2021 (2020:
£54.0 million) and are comprised of:
– An overlay to reflect the existing payment deferrals provided to customers – For mortgages
and consumer lending a portfolio level overlay has been maintained to reflect the increased risk
for customers currently benefiting from COVID-19 payment deferrals (2021: £2.7 million; 2020:
£10.9 million). This overlay has been reduced during 2021 as customers have demonstrated
consistent repayments following the end of the deferral period. We expect this to be fully
unwound in the first half of 2022.
– Uncertainties to economic forecast – To reflect the additional uncertainty not captured in the
scenarios used. The latest commercial portfolio macroeconomic scenarios include a favourable
view of GDP which reflects the benefits of the easing of lock-down restrictions. Further,
government support schemes have artificially delayed default emergence. The commercial
economic forecasts have been lagged, to capture the future default risk expected to emerge,
as government support schemes came to an end in the second half of 2021. (2021: £9.6 million;
2020: £16.5 million).
– An expert judgement overlay for the commercial portfolio – To reflect additional downside risks
as a result of COVID-19 and associated severe economic scenarios, including sector-based stress
for customers benefiting from temporary COVID-19 support, additional stress on Hospitality
sector due to the recent Omicron variant and a contagion overlay to reflect cross default risk
(2021: £13.4 million; 2020: £10.6 million).
– An expert judgement overlay for the Mortgage portfolio – To reflect additional downside risks as
a result of COVID-19 and associated severe economic scenarios (2021: £4.2 million; 2020: £nil).
– Climate change impact – An expert judgement overlay has been raised for 2021 to reflect the
impact of Climate change on property values for the mortgage and commercial portfolios
(2021: £5.1 million; 2020: £nil). The impact of climate change on our ECL will continue to evolve
over time as the impacts of both climate change and associated policy responses by government
become clearer.
In 2020 overlays were also applied in respect of Brexit (£8.5 million) and potential losses on
government backed lending schemes (£7.5 million).
The overlays which reflect the continued COVID-19 uncertainty will continue to be reassessed
based on the evolving economic, COVID-19 outlook and observation of performance data
during 2022.
All PMOs impact the ECL measurement, however not all adjust the staging.
204
Metro Bank PLC Annual Report & Accounts 2021
Critical accounting
estimate
Measurement of the expected credit loss allowance
We consider that the key source of estimation uncertainty relates to the formulation and
incorporation of multiple forward-looking economic scenarios into the ECL estimates to meet
the measurement objective of IFRS 9.
Multiple forward-looking economic scenarios
The ECL recognised in the financial statements reflects the effect on expected credit losses of a
range of possible outcomes, calculated on a probability-weighted basis, based on a number of
economic scenarios and including management overlays where required. These scenarios are
representative of our view of forecast economic conditions, sufficient to calculate unbiased ECL.
The following assumptions, considered to be the key drivers of ECL, have been used for the
scenarios applied:
– UK interest rates.
– UK unemployment rates.
– UK HPI changes, year on year.
– UK GDP changes, year on year.
The weightings applied to each scenario at 31 December 2021 and 31 December 2020 are:
Baseline
Upside
Downside
Severe downside
31 December
2021
%
31 December
2020
%
40%
20%
30%
10%
40%
30%
30%
–
The weightings used are reviewed each reporting period to ensure these remain appropriate and
as such are considered to represent significant accounting estimates. We have performed an
assessment of the impact on the ECL if each of the Baseline, Upside, Downside and Severe
downside scenarios were applied to the ECL calculation using a 100% weighting (that is, ignoring
all other scenarios in each case):
£’million
Baseline
Upside
Downside
Severe downside
Weighted
Stage 1
Stage 2
Stage 3
42
39
56
62
47
39
35
58
71
49
70
69
76
78
73
Total
151
143
190
211
169
The sensitivities disclosed above represent example scenarios and may not represent actual
scenarios which occur in the future. If one of these scenarios did arise then at that time the ECL
would not equal the amount disclosed above, as the amounts disclosed do not take account of the
alternative possible scenarios which would be considered at that time.
Post model overlays and individually assessed provisions are reflected in the above sensitivities as
are any resulting movements in staging allocation.
Metro Bank PLC Annual Report & Accounts 2021 205
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Expected credit loss expense
Group
Retail mortgages
Consumer lending
Commercial lending (excluding asset and invoice finance)
Asset and invoice finance
Expected credit losses included within gains on sale of assets
Held for sale assets
Write-offs and other movements
Total expected credit loss expense
2021
£’million
2020
£’million
(7)
17
4
1
–
–
7
22
18
12
87
3
6
1
–
127
Investment securities
All investment securities held at FVOCI are deemed to be in Stage 1. Any credit loss allowance is, however, included as part
of the revaluation amount in the FVOCI reserve. At 31 December 2021, the loss allowance included within the FVOCI
reserve is £0.1 million (31 December 2020: £0.1 million).
All investment securities held at amortised cost are deemed to be in Stage 1. The total expected credit loss recognised for
these assets at 31 December 2021 is £0.1 million (31 December 2020: £0.1 million).
Loss allowance
The following tables explain the changes in both the gross carrying amount and loss allowances of our loans and advances
during the year.
Collateral
Collateral is usually held in the form of real estate, guarantees, debentures and other liens that we can call upon in the event
of the borrower defaulting. At 31 December 2021, 79% (31 December 2020: 84%) of our loans consisted of retail mortgages
and commercial term loans secured on collateral, with average debt-to-value of 55% (31 December 2020: 56%) and 57%
(31 December 2020: 56%) respectively. Further details on the collateral of our loans can be found in the Risk Report.
As at 31 December 2021 we didn’t hold any financial instruments for which no loss allowance was recognised because of
collateral (31 December 2020: none).
Retail mortgages
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2021
Transfers to/(from)
5,911
863
118
– 6,892
(5)
(17)
(4)
Stage 1¹
362 (345)
(17)
Transfers to/(from)
Stage 2
(469) 477
(8)
Transfers to/(from)
Stage 3
(19)
(26)
45
Net remeasurement
due to transfers²
New lending³
Repayments,
additional
drawdowns and
interest accrued
Derecognitions⁴
Changes to model
–
894
–
233
–
–
(131)
(1,002)
(17)
(122)
(2)
(22)
–
–
–
–
–
–
–
–
–
–
(8)
8
–
–
1
–
(1)
1
(1)
–
1,127
7
(1)
(1)
(4)
(150)
(1,146)
–
1
–
1
–
–
–
1
assumptions⁵
–
31 December 2021 5,546 1,063
–
–
114
–
–
– 6,723
3
(2)
1
(12)
(1)
(5)
206
Metro Bank PLC Annual Report & Accounts 2021
–
–
–
–
–
–
–
–
–
–
(26) 5,906
846
114
– 6,866
–
–
–
354 (337)
(17)
(468) 476
(8)
(19)
(25) 44
6
(5)
7
893
(1)
229
–
–
–
3
(131)
(1,001)
(17)
(121)
(2)
(21)
–
–
–
–
–
–
–
–
–
–
6
1,122
(150)
(1,143)
3
1
(19) 5,544 1,051
3
(1)
109
–
3
– 6,704
due to
transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Transfers to held
for sale
Derecognitions
Changes to model
assumptions
31 December 2020
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2020
Transfers to/(from)
9,874 502
54
– 10,430
–
(3)
(5)
–
(8)
9,874
499
49
– 10,422
Stage 1
109 (106)
(3)
Transfers to/(from)
Stage 2
(559) 560
(1)
Transfers to/(from)
Stage 3
(55) (22)
77
Net remeasurement
–
–
–
(1)
1
–
–
–
–
–
1
(1)
–
–
108 (105)
(3)
–
–
–
(559)
560
(1)
–
(55)
(21)
76
–
–
–
–
–
–
–
522
–
48
–
1
–
571
1
(3)
(8)
(3)
(1)
–
–
–
(8)
(6)
1
519
(8)
45
(1)
1
–
–
(8)
565
–
–
–
–
–
(122)
(11)
–
–
(133)
–
–
–
–
–
(122)
(11)
–
–
(133)
(289)
(7)
(3,569) (101)
–
(10)
–
(296)
– (3,680)
1
3
–
1
–
1
–
–
1
(7)
(288)
5 (3,566) (100)
–
(9)
–
(295)
– (3,675)
–
5,911
–
863
–
118
–
–
– 6,892
(6)
(5)
(6)
(17)
2
(4)
–
–
(10)
(6)
(26) 5,906
(6)
846
2
114
–
(10)
– 6,866
1. Represents stage transfers prior to any ECL remeasurements.
2. Represents the remeasurement between the twelve month and lifetime ECL due to stage transfer. In addition it includes any ECL change resulting from
model assumptions and forward looking information on these loans.
3. Represents the increase in balances resulting from loans and advances that have been newly originated, purchased or renewed as well as any ECL that has
been recognised in relation to these loans during the year.
4. Represents the decrease in balances resulting from loans and advances that have been fully repaid, sold or written off.
5. Represents the change in ECL to those loans that remain within the same stage through the year.
Metro Bank PLC Annual Report & Accounts 2021 207
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Consumer lending
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Gross carrying amount
Loss allowance
Net carrying amount
–
–
5
–
12
1 January 2021
Transfers to/(from)
149
43
12
Stage 1
8
(8)
Transfers to/(from)
Stage 2
(6)
6
Transfers to/(from)
Stage 3
(2)
(3)
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2021
–
697
–
66
(20)
(40)
(9)
(13)
–
786
–
82
(1)
(7)
–
21
–
–
–
–
–
1
–
–
–
1
204
(6)
(9)
(10)
–
–
–
(1)
–
–
1
–
2
–
776
1
(16)
–
(7)
–
–
(2)
(2)
(9)
(30)
(60)
–
1
–
2
–
7
–
890
3
(18)
3
(8)
–
(16)
–
–
–
–
–
–
–
–
–
–
(25)
143
34
–
–
–
7
(7)
(6)
6
(2)
(1)
2
–
–
3
(1)
(32)
1
681
-
59
(2)
3
–
10
(20)
(39)
(9)
(11)
6
(42)
3
768
3
74
(1)
–
–
5
–
–
–
–
–
1
–
–
–
1
Total
179
–
–
–
(1)
744
(30)
(50)
6
848
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2020
Transfers to/(from)
223
–
10
–
233
(3)
(1)
(9)
–
(13)
220
(1)
1
–
220
Stage 1
–
–
Transfers to/(from)
Stage 2
(62)
62
–
–
Transfers to/(from)
Stage 3
(3)
(1)
4
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2020
–
55
–
2
–
–
(14) (20)
–
(50)
–
149
–
43
(1)
(1)
–
12
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(1)
–
–
–
–
–
–
57
–
(2)
(7)
–
(3)
–
–
–
–
–
–
–
–
–
–
–
(61)
61
–
–
(3)
(1)
4
(10)
(2)
–
53
(7)
2
(3)
–
(35)
(51)
–
–
–
–
–
1
–
–
–
1
(14) (20)
–
(50)
–
204
(2)
(6)
–
(9)
1
(10)
–
–
(1)
(25)
(2)
143
–
34
(1)
–
1
2
–
–
–
–
–
–
–
–
–
–
–
–
(10)
55
(35)
(50)
(1)
179
208
Metro Bank PLC Annual Report & Accounts 2021
–
–
–
(22)
484
(163)
(655)
4
4,424
–
–
–
–
–
–
–
Commercial lending (excluding asset and invoice finance)
Our top 10 commercial exposures total £326 million (2020: £366 million), representing 7% (2020: 8%) of our total
commercial lending.
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2021
Transfers to/(from)
3,843 906
125
–
4,874
(15) (43) (40)
–
(98)
3,828 863
85
–
4,776
–
(7)
7
–
–
–
182 (177)
(5)
–
Stage 1
189 (184)
(5)
Transfers to/(from)
Stage 2
(292) 299
(7)
–
–
Transfers to/(from)
Stage 3
(179)
(81) 260
–
–
–
1
(2)
1
–
–
(291) 297
(6)
–
–
427
–
58
–
6
–
–
–
491
3
(4)
(9)
(2)
(16)
(1)
–
3
(3)
–
–
–
–
(179) (78) 257
(22)
(7)
3
423
(9)
56
(16)
5
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2021
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
(31)
(120)
(443) (192)
(12)
(41)
–
–
(163)
(676)
–
2
–
8
–
11
–
–
–
21
(120)
(12)
(31)
(441) (184) (30)
–
–
3,425 775
–
326
–
–
–
4,526
(3)
10
(23) (28)
(3)
(51)
–
4
– (102)
(3)
3,402
10
747
(3)
275
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2020
Transfers to/(from)
3,628
72
51
–
3,751
(4)
(1)
(6)
–
(11)
3,624
71
45
–
3,740
Stage 1
13
(11)
(2)
Transfers to/(from)
Stage 2
(678) 679
(1)
Transfers to/(from)
Stage 3
(80) (20) 100
–
1,462
–
199
–
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(1)
–
–
–
–
13
(11)
(2)
–
(678) 679
(1)
–
(80)
(19)
99
–
1,669
–
(4)
(28) (29)
(3)
(13)
–
–
(57)
(20)
–
1,458
(28) (29)
5
186
–
–
–
–
–
–
–
–
(57)
1,649
(111)
(391)
1
(7)
(14) (24)
–
–
(117)
(429)
–
1
–
1
–
2
–
–
–
4
(111)
(390)
1
(7)
(13) (22)
–
–
(117)
(425)
assumptions
–
31 December 2020 3,843 906
–
–
125
–
–
–
4,874
(3)
(3)
(8)
(15) (43) (40)
–
–
(14)
(98)
(8)
3,828
(3)
863
(3)
85
–
–
(14)
4,776
Metro Bank PLC Annual Report & Accounts 2021 209
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Asset and invoice finance
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
1 January 2021
Transfers to/(from)
272
–
2
–
274
(4)
–
(1)
–
(5)
268
–
1
Stage 1
–
–
–
Transfers to/(from)
Stage 2
(5)
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Transfers to/(from)
–
–
–
(5)
5
–
–
Stage 3
(2)
–
2
–
–
–
–
–
–
–
(2)
–
2
–
–
–
269
–
–
–
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2021
–
139
–
–
–
–
–
–
–
139
–
(2)
(1)
–
(1)
–
–
–
(2)
(2)
–
137
(1)
–
(1)
–
–
–
(2)
137
(47)
(43)
–
314
–
–
–
5
(1)
(2)
–
1
–
–
–
–
(48)
(45)
–
320
–
1
1
(4)
–
–
–
(1)
–
1
–
(1)
–
–
–
–
–
2
1
(6)
(47)
(42)
1
310
–
–
–
4
(1)
(1)
–
–
–
–
–
–
(48)
(43)
1
314
£’million
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Stage 1 Stage 2 Stage 3
POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
301
–
–
–
301
(2)
–
–
–
(2)
299
–
–
–
299
1 January 2020
Transfers to/(from)
Stage 1
Transfers to/(from)
Stage 2
Transfers to/(from)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(4)
–
4
–
–
–
–
Stage 3
(4)
–
4
–
Net remeasurement
due to transfers
New lending
Repayments,
additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2020
–
100
–
–
–
1
–
–
–
101
–
(2)
–
–
(1)
–
–
–
(1)
(2)
–
98
–
–
(1)
1
–
–
(1)
99
(90)
(35)
–
272
–
–
–
–
(2)
(1)
–
2
–
–
–
–
(92)
(36)
–
274
–
–
–
(4)
–
–
–
–
–
–
–
(1)
–
–
–
–
–
–
(90)
(35)
–
(5)
–
268
–
–
–
–
(2)
(1)
–
1
–
–
–
–
(92)
(36)
–
269
210
Metro Bank PLC Annual Report & Accounts 2021
Total
£’million
1 January 2021
Transfers to/(from)
Stage 1
Transfers to/(from)
Gross carrying amount
Loss allowance
Net carrying amount
Stage 1 Stage 2 Stage 3 POCI
Total
Stage 1 Stage 2 Stage 3 POCI
Total
Stage 1 Stage 2 Stage 3 POCI
Total
10,175 1,812
257
– 12,244
(30) (69) (55)
– (154) 10,145 1,743 202
– 12,090
559 (537) (22)
–
–
(16)
16
–
–
–
543
(521) (22)
–
–
–
1 January 2020
Transfers to/(from)
Stage 1
Transfers to/(from)
Stage 2
(772) 787
(15)
–
–
2
(3)
1
–
–
(770) 784
(14)
–
Transfers to/(from)
Stage 3
(202) (110) 312
–
–
–
6
(6)
–
–
(202) (104) 306
–
–
Net remeasurement
due to transfers
New lending
Repayments, additional
drawdowns and
interest accrued
Derecognitions
Changes to model
assumptions
31 December 2021
Off-balance sheet items
Commitments and
guarantees¹
–
2,157
–
357
–
18
–
–
1 2,533
11
(23)
(11)
(13)
(19)
(10)
– (19)
– (46)
11
2,134
(11)
344
(19)
8
–
(19)
1 2,487
(318)
(16)
(1,528) (327) (72)
(57)
–
(391)
– (1,927)
–
5
–
11
–
20
–
–
–
36
(318)
(16)
(1,523) (316) (52)
(57)
–
–
10,071 1,925 462
–
–
–
1 12,459
4
14
(4)
(47) (49) (73)
14
–
(4)
4
– (169) 10,024 1,876 389
14
–
(391)
– (1,891)
–
14
1 12,290
1,245
–
1,245
£’million
Stage 1 Stage 2 Stage 3 POCI
Total
Stage 1 Stage 2 Stage 3 POCI
Total
Stage 1 Stage 2 Stage 3 POCI
Total
Gross carrying amount
Loss allowance
Net carrying amount
14,026
574
115
– 14,715
(9)
(5) (20)
–
(34) 14,017
569
95
– 14,681
122
(117)
(5)
–
Stage 2
(1,299) 1,301
(2)
–
Transfers to/(from)
Stage 3
(142)
(43) 185
–
–
–
–
(1)
1
–
–
–
121
(116)
(5)
–
1
(1)
–
–
–
(1,298) 1,300
(2)
–
–
2
(2)
–
–
(142)
(41) 183
–
–
–
–
Net remeasurement
due to transfers
New lending
Repayments, additional
drawdowns and
interest accrued
Transfers to held for
sale
Derecognitions
Changes to model
assumptions
31 December 2020
Off-balance sheet items
Commitments and
guarantees
–
2,139
–
249
–
10
–
–
– 2,398
1
(11)
(43) (34)
(3)
(16)
–
–
(76)
(30)
1
2,128
(43) (34)
7
233
(76)
–
– 2,368
(337)
(30)
(10)
–
(377)
–
–
–
–
–
(337)
(30)
(10)
–
(377)
(289)
–
(4,045) (115) (36)
(7)
–
(296)
– (4,196)
1
4
–
2
–
4
–
–
1
10
(288)
(4,041)
(7)
–
(113) (32)
–
(295)
– (4,186)
–
10,175
–
1,812
–
257
–
–
– 12,244
(16)
–
(9)
(30) (69) (55)
(25)
–
–
(16)
– (154) 10,145 1,743 202
(9)
–
(25)
– 12,090
769
–
769
1. Represents undrawn lending facilities. Further details can be found in note 31.
Metro Bank PLC Annual Report & Accounts 2021
211
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
30. Expected credit losses continued
Credit risk exposures
Retail mortgages
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
Consumer lending
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
31 December 2021
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
5,544
2
–
–
5,546
1,010
27
26
–
1,063
38
9
16
51
114
–
–
–
–
–
5,911
–
–
–
5,911
802
18
43
–
863
47
8
13
50
118
–
–
–
–
–
31 December 2021
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
786
–
–
–
786
71
2
9
–
82
2
–
3
16
21
–
–
–
1
1
149
–
–
–
149
38
3
2
–
43
–
–
–
12
12
–
–
–
–
–
Commercial lending (excluding asset and invoice finance)
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
31 December 2021
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
3,414
11
–
–
3,425
654
43
78
–
775
117
2
23
184
326
–
–
–
–
–
3,843
–
–
–
3,843
863
21
22
–
906
96
2
11
16
125
–
–
–
–
–
Asset and invoice finance credit risk exposure
£’million
Up to date
1 to 29 days past due
30 to 89 days past due
90+ days past due
Gross carrying amount
31 December 2021
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Lifetime ECL
313
1
–
–
314
2
3
–
–
5
1
–
–
–
1
–
–
–
–
–
272
–
–
–
272
–
–
–
–
–
–
–
–
2
2
–
–
–
–
–
Write-off policy
We write off financial assets (either partially or fully) when there is no realistic expectation of receiving further payment
from the customer. Indicators that there is no reasonable expectation of recovery include debt sale to a third party and
ceasing enforcement activity. We may write-off financial assets that are still subject to enforcement activity.
Modification of financial assets
We sometimes renegotiate the terms of loans provided to customers with a view to maximising recovery. Restructuring
activities include extended payment arrangements or the modification or deferral of payments.
The modifications, including payment deferrals have not led to any material modification gains or losses being recognised.
212
Metro Bank PLC Annual Report & Accounts 2021
31. Financial commitments
Accounting policy
To meet the financial needs of our customers, we enter into various irrevocable commitments.
These generally consist of financial guarantees, letters of credit and other undrawn commitments
to lend.
Even though these obligations are not recognised on the balance sheet, they do contain credit risk
and an ECL is calculated and recognised for them (see note 30).
When these commitments are drawn down or called upon, and meet the recognition criteria as
detailed in note 12, these are recognised within our loans and advances to customers.
At 31 December 2021, we had undrawn loan facilities granted to retail and commercial customers of £1,245 million
(2020: £769 million). The increase from 2020 to 2021 reflects a large pipeline of RLS lending as at 31 December 2021.
In addition, as part of our retail and commercial operations, we had commitments of £302 million (2029: £351 million)
in respect of credit card and overdraft facilities. These commitments represent agreements to lend in the future, subject
to certain conditions. Such commitments are cancellable, subject to notice requirements, and given their nature are not
expected to be drawn down to the full level of exposure.
32. Legal and regulatory matters
As part of the normal course of business we are subject to legal and regulatory matters which, with the exception of the
matters set out below, are not considered to have a material impact on the business.
The matters outlined below represent contingent liabilities and as such at the reporting date no provision has been made
for any of these cases within the financial statements (details of our provisions are set out in note 24). This is because,
based on the facts currently known, it is not practicable to predict the outcome of any of these matters or reliably estimate
any financial impact. Their inclusion does not constitute any admission of wrongdoing or legal liability.
Financial Crime
In 2017 and 2019 initial disclosures were made to the US Office of Foreign Assets Control (OFAC) in relation to Cuba and
Iran. We completed our review in respect of these matters in December 2021 and have submitted our findings to OFAC.
We continue to engage and co-operate fully with our regulators. At this stage it is not practicable to identify the likely
outcome or to estimate the potential financial impact with any certainty.
In addition, we continue to engage and co-operate fully with the FCA’s enquiries regarding the Bank’s financial crime
systems and controls. These enquiries remain at a relatively early stage.
33. Offsetting of financial assets and liabilities
Accounting policy
Financial assets and liabilities are offset and the net amount reported in the balance sheet when
there is a legally enforceable right to offset the recognised amounts and there is an intention to
settle on a net basis or realise the asset and settle the liability simultaneously.
31 December 2021
31 December 2020
Effects of offsetting
on the balance sheet
Related amounts
not offset
Effects of offsetting
on the balance sheet
Related amounts
not offset
Gross
amounts
offset in
the balance
sheet
£’million
Net
amounts
presented
in the
balance
sheet
£’million
Gross
amount
£’million
Amounts
pledged as
collateral
£’million
Net
amount
£’million
Gross
amount
£’million
Gross
amounts
offset in
the balance
sheet
£’million
Net
amounts
presented
in the
balance
sheet
£’million
Amounts
pledged as
collateral
£’million
Net
amount
£’million
12,290
5,574
1
16
76
–
–
(11)
(28)
–
12,290
5,574
(10)
(12)
76
(3,956)
(1,491)
–
–
(36)
8,334
4,083
(10)
(12)
40
12,090
3,413
1
15
2,621
–
–
(9)
(27)
–
12,090
3,413
(8)
(12)
2,621
(4,177)
(1,186)
–
–
(36)
7,913
2,227
(8)
(12)
2,585
Group
Assets
Loans and advances to
customers
Investment securities
Derivative financial assets
Deferred tax assets
Other assets
Metro Bank PLC Annual Report & Accounts 2021
213
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
34. Fair value of financial instruments
Accounting policy
Determination of fair value
‘Fair value’ is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or, in its
absence, the most advantageous market to which we have access at that date. The fair value of
a liability reflects its non-performance risk.
In order to show how fair values have been derived, financial instruments are classified based on
a hierarchy of valuation techniques, as summarised below:
– Level 1 financial instruments − Those where the inputs used in the valuation are unadjusted quoted
prices from active markets for identical assets or liabilities that we have access to at the
measurement date. We consider markets as active only if there are sufficient trading activities with
regards to the volume and liquidity of the identical assets or liabilities and when there are binding
and exercisable price quotes available on the balance sheet date.
– Level 2 financial instruments − Those where the inputs that are used for valuation are significant,
are derived from directly or indirectly observable market data available over the entire period of
the instrument’s life. Such inputs include quoted prices for similar assets or liabilities in active
markets, quoted prices for identical instruments in inactive markets and observable inputs other
than quoted prices such as interest rates and yield curves, implied volatilities, and credit spreads.
In addition, adjustments may be required for the condition or location of the asset or the extent
to which it relates to items that are comparable to the valued instrument. However, if such
adjustments are based on unobservable inputs which are significant to the entire measurement,
we will classify the instruments as Level 3.
– Level 3 financial instruments − Those that include one or more unobservable input that is
significant to the measurement as whole.
31 December 2021
Quoted
market
price
Level 1
£’million
Using
observable
inputs
Level 2
£’million
With
significant
unobserv-
able inputs
Level 3
£’million
Carrying
value
£’million
Total fair
value
£’million
Carrying
value
£’million
31 December 2020
Quoted
market
price
Level 1
£’million
Using
observable
inputs
Level 2
£’million
With
significant
unobserv-
able inputs
Level 3
£’million
Total fair
value
£’million
Group
Assets
Loans and advances to
customers
12,290
–
–
12,356
12,356
12,090
–
–
11,892
11,892
Investment securities held
at FVOCI
798
760
38
–
798
773
723
50
–
773
Investment securities held
at amortised cost
Financial assets held
at FVTPL
Liabilities
Deposits from customers
Deposits from central bank
Debt securities
Financial liabilities held
at FVTPL
Derivative financial
liabilities
Repurchase agreements
4,776
2,977
1,710
60
4,747
2,640
1,021
1,567
66
2,654
3
–
16,448
3,800
588
–
10
169
–
–
495
–
–
–
–
–
–
–
–
10
–
3
3
30
–
16,452
3,800
–
16,452
3,800
495
16,072
3,808
600
–
–
483
–
–
169
–
30
10
169
8
196
–
–
–
–
–
–
–
–
8
–
30
30
16,147
3,808
–
16,147
3,808
483
30
30
–
196
8
196
Cash and balances with the Bank of England, trade and other receivables, trade and other payables, assets classified as
held for sale and other assets and liabilities which meet the definition of financial instruments are not included in the tables.
Their carrying amount is a reasonable approximation of fair value.
214
Metro Bank PLC Annual Report & Accounts 2021
Information on how fair values are calculated are explained below:
Loans and advances to customers
Fair value is calculated based on the present value of future principal and interest cash flows, discounted at the market rate
of interest at the balance sheet date, adjusted for future credit losses and prepayments, if considered material.
Investment securities
The fair value of investment securities is based on either observed market prices for those securities that have an active
trading market (fair value Level 1 assets), or using observable inputs (in the case of fair value Level 2 assets).
Financial assets and liabilities held at fair value through profit and loss
The financial assets at fair value through profit and loss relate to the loans and advances previously assumed by the
RateSetter provision fund. Following the purchase of the RateSetter back book from peer-to-peer investors in April 2021
the provision fund ceased to have liability for further claims which resulted in a net release of £18 million of assets and
liabilities held at fair value through profit and loss.
Deposits from customers
Fair values are estimated using discounted cash flows, applying current rates offered for deposits of similar remaining
maturities. The fair value of a deposit repayable on demand is approximated by its carrying value.
Debt securities
Fair values are determined using the quoted market price at the balance sheet date.
Deposits from central banks/repurchase agreements
Fair values are estimated using discounted cash flows, applying current rates. Fair values approximate carrying amounts as
their balances are generally short-dated.
Derivative financial liabilities
The fair values of derivatives are obtained from discounted cash flow models or option pricing models as appropriate.
35. Related parties
Key management personnel
Our key management personnel, and persons connected with them, are considered to be related parties. Key management
personnel are defined as those persons having authority and responsibility for planning, directing and controlling the
activities of the Group. The Directors and members of the Executive Leadership Team are considered to be the key
management personnel for disclosure purposes.
Key management compensation
Total compensation cost for key management personnel for the year by category of benefit was as follows:
Group
Short-term benefits
Post-employment benefits
Share-based payment costs
Total compensation for key management personnel
2021
£’million
2020
£’million
5.4
0.1
1.3
6.8
5.3
0.1
0.7
6.1
Short-term employee benefits include salary, medical insurance, bonuses and cash allowances paid to key management
personnel. The share-based payment cost represents the IFRS 2 charge for the year which includes awards granted in prior
years that have not yet vested.
Metro Bank PLC Annual Report & Accounts 2021
215
Strategic reportFinancial statementsGovernanceAdditional information Notes to the financial statements continued
35. Related parties continued
Banking transactions with key management personnel
We provide banking services to Directors and other key management personnel and persons connected to them. Loan
transactions during the year and the balances outstanding at 31 December were as follows:
Group
Loans outstanding at 1 January
Loans relating to persons and companies newly considered related parties
Loans relating to persons and companies no longer considered related parties
Loans issued during the year
Loans outstanding as at 31 December
Interest expense on loans payable to the Group (£’000)
2021
£’million
2020
£’million
1.9
–
(0.5)
1.8
3.2
30
0.7
1.8
(0.6)
–
1.9
34
There were three (31 December 2020: three) loans outstanding at 31 December 2021 totalling £3.2 million (31 December
2020: £1.9 million). Of these, two are residential mortgages secured on property and one is an asset finance loan; all loans
were provided on our standard commercial terms.
In addition to the loans detailed above, we have issued credit cards and granted overdraft facilities on current accounts to
Directors and key management personnel.
Credit card balances outstanding at 31 December were as follows:
Group
Credit cards outstanding as at 31 December
Deposit transactions during the year and the balances outstanding at 31 December were as follows:
Group
Deposits held at 1 January
Deposits relating to persons and companies newly considered related parties
Deposits relating to persons and companies no longer considered related parties
Net amounts withdrawn
Deposits outstanding as at 31 December
Transactions with Group companies
Details of transactions with Group companies can be found within note 37.
2021
£’000
5
2020
£’000
22
2021
£’million
2020
£’million
2.1
0.1
(0.1)
(0.6)
1.5
3.3
0.2
(0.3)
(1.1)
2.1
216
Metro Bank PLC Annual Report & Accounts 2021
36. Loss per share
Basic loss per share is calculated by dividing the loss attributable to ordinary equity holders of Metro Bank by the weighted
average number of ordinary shares in issue during the year.
Loss attributable to ordinary equity holders of Metro Bank (£’million)
Weighted average number of ordinary shares in issue – basic (‘000)
Basic loss per share (pence)
2021
2020
(248.2)
172,421
(144.0)
(301.7)
172,420
(175.0)
Diluted loss per share has been calculated by dividing the loss attributable to ordinary equity holders of Metro Bank by the
weighted average number of ordinary shares in issue during the year plus the weighted average number of ordinary shares
that would be issued on the conversion to shares of options granted to colleagues. As we made a loss during both the
years to 31 December 2021 and 31 December 2020, the share options would be antidilutive, as they would reduce the loss
per share. Therefore, all the outstanding options have been disregarded in the calculation of dilutive loss per share.
Loss attributable to ordinary equity holders of Metro Bank (£’million)
Weighted average number of ordinary shares in issue – diluted (‘000)
Diluted loss per share (pence)
2021
2020
(248.2)
172,421
(144.0)
(301.7)
172,420
(175.0)
There have been no transactions involving ordinary shares or potential ordinary shares between the reporting date and the
date of the completion of these financial statements which would require the restatement of EPS.
37. Investment in subsidiaries
The Group had the following subsidiaries at 31 December 2021:
Name
SME Invoice Finance Limited1
SME Asset Finance Limited1
RDM Factors Limited1
Retail Money Market LTD2
RateSetter Trustee Services Limited2
RateSetter Motor Limited2
Security Trustee Services Limited2
Vehicle Credit Limited3
Vehicle Stocking Limited3
Country of
incorporation
and place
of business
UK
UK
UK
UK
UK
UK
UK
UK
UK
Nature of business
Invoice financing and factoring
Asset finance
Dormant
Peer to peer lending
Dormant
Dormant
Dormant
Motor Finance
Dormant
Proportion of
ordinary shares
directly held by
the Parent (%)
Proportion of
ordinary shares
directly held by
the Group (%)
100
–
–
100
–
–
100
100
–
–
100
100
–
100
100
–
–
100
1. Registered address One Southampton Row, London, W21B 5HA.
2. Registered address 6th Floor, 55 Bishopsgate, London, EC2N 3AS.
3. Registered address No.1, Osiers Business Centre, Leicester, LE19 1DX.
The proportion of the voting rights in the subsidiary undertakings held directly by the Company do not differ from the
proportion of ordinary shares held.
We are currently in the process of winding up a number of the subsidiaries.
Metro Bank PLC Annual Report & Accounts 2021
217
Strategic reportFinancial statementsGovernanceAdditional information
Notes to the financial statements continued
37. Investment in subsidiaries continued
Investment in subsidiaries
1 January
Cost of subsidiaries acquired
Capital injections into subsidiaries post acquisition
Impairment of subsidiaries
31 December
Company
2021
£’million
Company
2020
£’million
59
–
18
(46)
31
15
11
33
–
59
In April 2021 we purchased the back book of peer-to-peer loans from RateSetter investors. As a result of that transaction
the provision fund that RateSetter operated (via RateSetter Trustee Services Limited) for the benefit of these investors
ceased to have liability for further claims, which resulted in a net release of £18 million of liabilities. This was treated as a
deemed capital contribution due to the resulting increase in the subsidiary’s net asset.
Following the acquisition of the back book we have been rationalising the Group structure with nearly all activities being
transferred to the Company during the year. We envisage dissolving the majority of the remaining RateSetter subsidiaries
over the course of 2022.
Given that limited trading activities continue to occur in the RateSetter business we undertook an impairment assessment.
The recoverable amount of the investment in RateSetter has been determined to be the fair value of the net assets remaining
in the business, which will be distributed back to the Company. This resulted in an impairment charge of £46 million.
Transactions between the Company and Group subsidiaries
Interest on inter-Company loan with SME Asset/Invoice Finance
Servicing fees paid to RateSetter
Amounts outstanding as at 31 December owed by SME Asset/Invoice Finance
Amounts outstanding as at 31 December owed to RateSetter
Company
2021
£’million
Company
2020
£’million
6.4
5.9
Company
2021
£’million
312
5
6.7
0.5
Company
2020
£’million
260
–
The expected credit loss recognised within the Company’s financial statements in respect of the inter-Company loan
facility is less than £0.1 million (31 December 2020: less than £0.1 million).
The transactions above are eliminated upon consolidation.
38. Post balance sheet events
There have been no material post balance sheet events.
218
Metro Bank PLC Annual Report & Accounts 2021
Country-by-country report
The reporting obligations set out in Article 89 of the European Union’s Capital Requirements Directive IV (CRD IV) have
been implemented in the UK by the Capital Requirements (Country-by-Country Reporting) Regulations. The purpose of
the regulations is to provide clarity on the source of the Group’s income and the locations of its operations.
The Company, Metro Bank, is a credit institution for the purposes of CRD IV and is therefore within the scope of Country-
by-Country Reporting. Our activities are disclosed within note 1 to the financial statements.
For the purposes of Country-by-Country Reporting, the appropriate disclosures required are summarised below:
Number of employees (average full-time equivalent)
Turnover (£’million)
Loss before tax (£’million)
Tax expense (£’million)
Corporation tax paid (£’million)
No public subsidies were received during the year.
UK
4,184
418.5
245.1
3.1
–
Basis of preparation
Country
Metro Bank PLC and its subsidiaries only operate with the United Kingdom (UK) and are all UK registered entities.
Full-time equivalent employees (FTEs)
FTEs are allocated to the country in which they are primarily based for the performance of their employment duties.
The figures disclosed represent the average number of FTEs, all of which were employed in the UK.
Turnover and loss before tax
Turnover and loss before tax are compiled from the Metro Bank PLC consolidated financial statements for the year ended
31 December 2021, which are prepared in accordance with International Financial Reporting Standards (IFRSs). Turnover
represents the sum of the Group’s net interest income, net fee and commission income, net gains on sale of assets and
other income.
Tax credit and corporation tax paid
Corporation tax paid represents the net cash taxes paid to the tax authority, HMRC, during 2021. Corporation tax paid is
reported on a cash basis and will normally differ from the tax expense recorded for accounting purposes due to:
– Timing differences in the accrual of the tax charge.
– The Group brought forward into 2021 tax losses from previous years that were used to extinguish a portion of its taxable
profits in 2021 and will be similarly used in future years.
– Other differences between when income and expenses are accounted for under IFRSs and when they become taxable.
Metro Bank PLC Annual Report & Accounts 2021 219
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report
to the directors of Metro Bank PLC
Report on the audit of the country-by-country information
Opinion
In our opinion, Metro Bank PLC’s (the “group”) country-by-country information for the year ended 31 December 2021 has
been properly prepared, in all material respects, in accordance with the requirements of the Capital Requirements
(Country-by-Country Reporting) Regulations 2013.
We have audited the country-by-country information for the year ended 31 December 2021 in the Country-by-Country
Report.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”), including ISA (UK)
800 and ISA (UK) 805, and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’
responsibilities for the audit of the country-by-country information section of our report. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the
country-by-country information in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Emphasis of matter – Basis of preparation
In forming our opinion on the country-by-country information, which is not modified, we draw attention to note 1 of the
country-by-country information which describes the basis of preparation. The country-by-country information is prepared
for the directors for the purpose of complying with the requirements of the Capital Requirements (Country-by-Country
Reporting) Regulations 2013. The country-by-country information has therefore been prepared in accordance with a
special purpose framework and, as a result, the country-by-country information may not be suitable for another purpose.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group’s ability to continue to adopt the going concern basis of
accounting included:
– Evaluation of management’s financial and regulatory capital forecasts. We also performed a comparison of the 2021
budget and the actual results to assess the accuracy of the budgeting process;
– Reviewing the severity and assumptions behind management’s severe but plausible downside scenarios and, using our
knowledge from the audit, calculating our own sensitivities. We evaluated the impacts on the group’s compliance with
minimum regulatory capital requirements;
– Gaining an understanding of the status of the company’s application to the PRA for advanced IRB model approval,
including inquiries of management, a review of correspondence and discussions with the PRA;
– Considering the potential mitigating actions that management may have available to it, including portfolio asset sales, and
assessing whether these were in the control of management and possible in the going concern period of assessment and
evaluating the impact on regulatory capital; and
– Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of past stress events. We also
substantiated the liquid resources held, and liquidity facilities available to the group, for example, with the Bank of
England.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions
that, individually or collectively, may cast significant doubt on the group’s ability to continue as a going concern for a
period of at least twelve months from the date on which the country-by-country information is authorised for issue.
In auditing the country-by-country information, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the country-by-country information is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s
ability to continue as a going concern.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant
sections of this report.
220
Metro Bank PLC Annual Report & Accounts 2021
Responsibilities for the country-by-country information and the audit
Responsibilities of the directors for the country-by-country information
The directors are responsible for the preparation of the country-by-country information in accordance with the
requirements of the Capital Requirements (Country-by-Country Reporting) Regulations 2013 as explained in the basis of
preparation in note 1 of the Country-by-Country Report and the accounting policies in the Consolidated and Company
financial statements, and for determining that the basis of preparation and accounting policies are acceptable in the
circumstances. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of country-by-country information that is free from material misstatement, whether due to fraud or error.
In preparing the country-by-country information, the directors are responsible for assessing the group’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the group or to cease operations, or have no realistic alternative
but to do so.
Auditors’ responsibilities for the audit of the country-by-country information
It is our responsibility to report on whether the country-by-country information has been properly prepared in accordance
with the relevant requirements of the Capital Requirements (Country-by-Country Reporting) Regulations 2013.
Our objectives are to obtain reasonable assurance about whether the country-by-country information as a whole is free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs
(UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of this country-by-country information.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with
our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent
to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to breaches of the rules of the Financial Conduct Authority (FCA), Prudential Regulatory Authority
(PRA) and the Consumer Credit Act 1974, and we considered the extent to which non-compliance might have a material
effect on the country-by-country information. We also considered those laws and regulations that have a direct impact on
the country-by-country information such as applicable UK tax legislation and the Capital Requirements (Country-by-
Country Reporting) Regulations 2013. We evaluated management’s incentives and opportunities for fraudulent
manipulation of the country-by-country information (including the risk of override of controls), and determined that the
principal risks were related to posting manual journal entries to manipulate financial performance and management bias in
accounting estimates. Audit procedures performed included:
– Enquiries of the Audit Committee, management, internal audit and the group’s legal counsel, including consideration of
known or suspected instances of non-compliance with laws and regulation and fraud;
– Evaluation of the design and implementation of controls designed to prevent and detect irregularities relevant to financial
reporting;
– Reviewing key correspondence with regulators, such as the FCA and the PRA in relation to the group’s compliance with
banking regulations;
– Incorporating unpredictability into the nature, timing and/or extent of our testing;
– Challenging assumptions and judgements made by management in their estimation of the allowance for ECL on loans
and advances to customers, the assessment of the carrying value of non-financial assets (excluding goodwill) and the
ability of the group to continue as a going concern ; and
– Identifying and testing journal entries including those posted by infrequent or unexpected users, those posted to unusual
account combinations and those posted late in the financial reporting process.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of
non-compliance with laws and regulations that are not closely related to events and transactions reflected in the country-
by-country information. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not
detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional
misrepresentations, or through collusion.
Metro Bank PLC Annual Report & Accounts 2021
221
Strategic reportFinancial statementsGovernanceAdditional information Independent auditors’ report continued
to the directors of Metro Bank PLC
A further description of our responsibilities for the audit of the country-by-country information is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinion, has been prepared for and only for the group’s directors in accordance with the Capital
Requirements (Country-by-Country Reporting) Regulations 2013 and for no other purpose. We do not, in giving this
opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into
whose hands it may come, save where expressly agreed by our prior consent in writing.
The engagement partner responsible for this audit is Jonathan Holloway.
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 March 2022
222
Metro Bank PLC Annual Report & Accounts 2021
Other disclosures
(Unaudited)
Reconciliation of statutory balance sheet to risk-weighted assets
31 December 2021
31 December 2020
Group
Cash and balances with the Bank of England
Loans and advances to customers
Investment securities held at fair value through other
comprehensive income
Investment securities held at amortised cost
Financial assets held at fair value through profit and loss
Property, plant and equipment
Intangible assets
Prepayments and accrued income
Assets classified as held for sale
Deferred tax asset1
Other assets
Total assets
Off-balance sheet assets
Credit risk (excluding counterparty credit risk)
CRR
Market risk
Operational risk
Total risk-weighted assets
Financial
statements
£’million
3,568
12,290
798
4,776
3
765
243
68
–
–
76
22,587
Average risk
density
1%
42%
2%
6%
–
100%
26%
84%
–
n/a
97%
29%
Average risk
density
1%
42%
5%
12%
–
100%
30%
81%
36%
n/a
22%
31%
Risk-
weighted
assets
£’million
33
5,204
Financial
statements
£’million
2,993
12,090
773
2,640
30
806
254
77
295
–
2,621
22,579
19
301
–
765
64
57
–
5
74
6,522
188
6,710
6
9
729
7,454
Risk-
weighted
assets
£’million
32
5,068
39
328
–
806
75
62
105
2
567
7,084
167
7,251
7
14
685
7,957
1.
In the consolidated balance sheet per the financial statements, deferred tax is shown as a net figure with the deferred tax liability, however from a
regulatory perspective the deferred tax asset and liability are treated separately.
Metro Bank PLC Annual Report & Accounts 2021 223
Strategic reportFinancial statementsGovernanceAdditional information Alternative performance measures
(Unaudited)
In the reporting of financial information, we use certain measures that are not required under IFRS, the Generally Accepted
Accounting Principles (GAAP) under which we report. These measures are consistent with those used by management to
assess underlying performance. In addition, a number of non-IFRS metrics are calculated which are commonly used within
the banking industry.
These alternative performance measures have been defined below:
Cost of risk
Expected credit loss expense divided by average gross loans.
Expected credit loss expense (note 31)
Average gross lending
Cost of risk
Cost of deposits
Interest expense on customer deposits divided by the average deposits from customers for the year.
Interest on customer deposits (note 2)
Average deposits from customer
Cost of deposits
2021
£’million
22.4
12,330
0.18%
2021
£’million
40.1
16,369
0.24%
2020
£’million
126.7
14,675
0.86%
2020
£’million
99.1
15,262
0.65%
Loan-to-deposit ratio
Net loans and advances to customers expressed as a percentage of total deposits as at the year end. It is a commonly used
ratio within the banking industry to assess liquidity.
Loans and advances to customers (note 12)
Deposits from customer (note 19)
Loan-to-deposit ratio
Net interest margin
Net interest income as a percentage of average interest-earning assets.
Net interest income (note 2)
Average interest-earning assets
Net interest margin
2021
£’million
12,290
16,448
75%
2020
£’million
12,090
16,072
75%
2021
£’million
295.3
21,128
1.40%
2020
£’million
249.7
20,550
1.22%
Non-performing loan ratio
Gross balance of loans in stage three (non-performing loans) as a percentage of gross loans as at year end.
Stage three loans (note 30)
Loans and advances to customers (note 12)
Non-performing loan ratio
224
Metro Bank PLC Annual Report & Accounts 2021
2021
£’million
462
12,459
3.71%
2020
£’million
257
12,244
2.10%
Underlying loss
Underlying loss represents an adjusted measure, excluding the effect of certain items that are considered to distort
year-on-year comparisons, in order to provide readers with a better and more relevant understanding of the underlying
trends in the business.
The following items are considered to be non-underlying:
Non-underlying item
Listing Share Awards
Description
Share awards granted to key members of
management in 2016 in recognition of their
significant contribution to the successful
listing on the London Stock Exchange. These
share awards vest annually until April 2021.
Impairment and
write-offs of PPE and
intangible assets
The costs associated with non-current assets
that are no longer being used by and/or
generate future economic benefit for
the business.
Net BCR costs
These costs and income relate to the
delivering the commitments associated with
the Capability and Innovation Fund (awarded
by BCR). Further details on this grant can be
found in note 23.
Remediation costs
Remediation costs comprise of money spent
in relation to the RWA adjustment including
the associated investigations by the PRA and
FCA as well as work undertaken in relation to
financial crime.
Transformation costs
Transformation costs primarily consist of the
costs associated with redundancy
programmes during the year as part of our
approach to right-sizing teams as well as the
costs of work undertaken to establish our cost
reduction programme.
Business acquisition
and integration costs
The costs associated with acquiring and
integrating RateSetter.
Mortgage portfolio
sale
The gain on sale and associated costs of the
£3.1 billion mortgage portfolio sale. It also
includes the income and cost of servicing this
portfolio until it was transferred in 2021.
Reason for exclusion
The awards were one-off in nature as they
directly related to our listing on the London
Stock Exchange and are distinct from the annual
share options we grant. The last tranche of share
awards vested in 2021 and as such will not be
present in the non-underlying items in 2022.
The impairments and write-offs relating to PPE
and intangible assets is removed as they distort
comparison between years. This is on the basis
that the write-offs and impairments relate to
specific events and triggers which are not
consistent between years.
The commitments under the Capability and
Innovation Fund continue through to 2025. The
costs associated with fulfiling the commitments
and associated income are felt to distort year-on-
year comparison. Given the offsetting nature of
the income and expenditure, there is no net
impact on our profitability from this adjustment.
The remediation costs are felt to be time limited
and will disappear once the investigations have
concluded. As such are removed to allow greater
comparability between periods.
Following the conclusion of the PRA and near
completion of the associated FCA investigation
we anticipate these costs reducing into 2022
with the future costs primarily being in relation to
the regulatory matters regarding financial crime.
The transformation costs are seen as a non-
recurring cost stream aimed at addressing the
challenges the business faces. These are
therefore removed in order to prevent year-on-
year distortion. As we are approaching the final
stages of our turnaround we anticipate these
costs reducing in 2022 with no further
transformation costs being recognised in 2023.
We acquire businesses infrequently and the costs
are not anticipated to be recurring. Given the
integration of RateSetter was substantially
completed in 2021, any further costs will not be
presented as non-underlying going forward.
The sale of loan portfolios is generally not
considered in line with our business model. Given
the infrequency of sales and the quantum of the
gain it has been removed in order to prevent
year-on-year distortion. The portfolio transfer
completed in 2021 and as such will not be
present in the non-underlying items in 2022.
Metro Bank PLC Annual Report & Accounts 2021 225
Strategic reportFinancial statementsGovernanceAdditional information Alternative performance measures continued
(Unaudited)
A reconciliation from statutory loss before tax to underlying loss before tax is set out below.
Impairment
and write-off
of property,
plant,
equipment
and
intangible
assets
£’million
Statutory
basis
£’million
Listing Share
Awards
£’million
C&I fund
costs
£’million
Transforma-
tion costs
£’million
Remediation
costs
£’million
Business
acquisition
and
integration
costs
£’million
295.3
69.6
9.4
44.2
418.5
(536.1)
(80.2)
(24.9)
(641.2)
(22.4)
(245.1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24.9
24.9
–
24.9
0.4
–
–
(9.4)
(9.0)
9.0
–
–
9.0
–
–
–
–
–
–
–
8.9
–
–
8.9
–
8.9
–
–
–
–
–
45.9
–
–
45.9
–
45.9
–
–
–
–
–
2.4
–
–
2.4
–
2.4
Mortgage
portfolio
sale
£’million
Underlying
basis
£’million
–
295.7
–
(8.7)
(2.9)
(11.6)
3.3
69.6
0.7
31.9
397.9
(466.6)
–
(80.2)
–
3.3
–
(8.3)
–
(546.8)
(22.4)
(171.3)
Year ended 31 December 2021
Net interest income
Net fee and commission
income
Net gains on sale of assets
Other income
Total income
General operating expenses
Depreciation and
amortisation
Impairment and write-offs of
PPE and intangible assets
Total operating expenses
Expected credit loss expense
Loss before tax
Year ended 31 December 2020
Net interest income
Net fee and commission
income
Net gains on sale of assets
Other income
Total income
General operating expenses
Depreciation and
Statutory
basis
£’million
Listing Share
Awards
£’million
249.7
–
59.9
73.3
49.7
432.6
(502.3)
–
–
–
–
(0.2)
amortisation
(74.4)
–
Impairment
and write-off
of property,
plant,
equipment
and
intangible
assets
£’million
–
–
–
–
–
–
–
C&I fund
costs
£’million
Transforma-
tion costs
£’million
Remediation
costs
£’million
Business
acquisition
and
integration
costs
£’million
Mortgage
portfolio
sale
£’million
Underlying
basis
£’million
0.6
–
–
–
–
250.3
–
–
(23.3)
(22.7)
22.7
–
–
–
–
16.7
–
–
–
–
40.8
–
–
–
–
5.4
–
(69.0)
–
(69.0)
5.3
59.9
4.3
26.4
340.9
(411.6)
–
–
–
–
–
(74.4)
Impairment and write-offs of
PPE and intangible assets
Total operating expenses
Expected credit loss expense
Loss before tax
(40.6)
(617.3)
(126.7)
(311.4)
–
(0.2)
–
(0.2)
40.6
40.6
–
40.6
–
22.7
–
0.0
–
16.7
–
16.7
–
40.8
–
40.8
–
5.4
–
5.4
–
5.3
–
(63.7)
–
(486.0)
(126.7)
(271.8)
We also disclose a number of capital and liquidity metrics which are required by the PRA and FCA. The basis of calculation
of those metrics is defined within the relevant legislation.
226
Metro Bank PLC Annual Report & Accounts 2021
Shareholder information
Registered and other offices
The Company’s registered office and head office is:
One Southampton Row
London
WC1B 5HA
Telephone: 0345 08 08 500/0345 08 08 508
Website: www.metrobankonline.co.uk
Registrars
The Company has appointed Equiniti Limited to maintain its register of members. Shareholders should contact Equiniti
using the details below in relation to all general enquiries concerning their shareholding:
Equiniti Limited1,2
Aspect House
Spencer Road
Lancing, West Sussex BN99 6DA
Telephone: 0371 384 2311
International callers: +44 121 415 7095
1. Equiniti Limited and Equiniti Financial Services Limited are part of the Equiniti group of companies. Company share registration, employee scheme and
pension administration services are provided through Equiniti Limited, which is registered in England and Wales with No. 6226088. Investment and general
insurance services are provided through Equiniti Financial Services Limited, which is registered in England and Wales with No. 6208699 and is authorised
and regulated by the UK Financial Conduct Authority.
2. Lines are open from 8.30 to 5.30pm (UK time) Monday to Friday, excluding public holidays in England and Wales.
Unsolicited mail
The Company is required by law to make its share register available on request to unconnected organisations.
As a consequence, shareholders may receive unsolicited mail, including mail from unauthorised investment firms.
If you wish to limit the amount of unsolicited mail received, please contact the Mailing Preference Service, an
independent organisation whose services are free for consumers.
Further details can be obtained from:
Mailing Preference Service
MPS Freepost LON 20771
London
W1E 0ZT
Website: www.mpsonline.org.uk
Annual General Meeting
Subject to Government restrictions, we hope to hold an in person Annual General Meeting in May 2022. More information
will be published in the Notice of Meeting.
Metro Bank PLC Annual Report & Accounts 2021 227
Strategic reportFinancial statementsGovernanceAdditional information Shareholder information continued
Forward-looking statements
This annual report contains statements that are, or may be deemed to be, forward-looking statements. Forward-looking
statements typically use terms such as ‘believes’, ‘projects’, ‘anticipates’, ‘expects’, ‘intends’, ‘plans’, ‘may’, ‘will’, ‘would’,
‘could’ or ‘should’ or similar terminology. Any forward-looking statements in this annual report are based on the Company’s
current expectations and, by their nature, forward-looking statements are subject to a number of risks and uncertainties,
many of which are beyond the Company’s control, that could cause the Company’s actual results and performance to differ
materially from any expected future results or performance expressed or implied by any forward-looking statements. As a
result, you are cautioned not to place undue reliance on such forward-looking statements. Past performance should not be
taken as an indication or guarantee of future results, and no representation or warranty, expressed or implied, is made
regarding future performance.
No assurances can be given that the forward-looking statements in this annual report will be realised. The Company
undertakes no obligation to release the results of any revisions to any forward-looking statements in this annual report that
may occur due to any change in its expectations or to reflect events or circumstances after the date of this announcement
and the Company disclaims any such obligation.
Shareholder profile by size of holding as at 31 December 2021
Range
1–1,000
1,001–5,000
5,001–10,000
10,001–50,000
50,001–100,000
100,001–500,000
500,001–1,000,000
1,000,001 and above
Total
Shareholder profile by category as at 31 December 2021
Category
Private shareholders
Banks
Nominees and other institutional investors
Total
Total
number of
holdings
Percentage
of holders
Total number of
shares held at
31 December 2021
Percentage
of total
362
117
60
90
31
66
18
38
46.29%
14.96%
7.67%
11.51%
3.96%
8.44%
2.30%
4.86%
782 100.00%
102,585
279,952
463,363
2,040,618
2,284,533
13,905,926
11,760,809
141,582,855
172,420,641
0.06%
0.16%
0.27%
1.18%
1.32%
8.07%
6.82%
82.11%
100.00%
Number of
holders
Percentage
of holders
within type
Shares held at
31 December
2021
Percentage
of issued
share capital
1,130,963
50.52%
395
43,959
0.38%
3
384
49.10% 171,245,719
782 100.00% 172,420,641
0.66%
0.03%
99.31%
100.00%
It should be noted that many private investors hold their shares through nominee companies and therefore the percentage
of shares held by private shareholders may be higher than that shown.
228
Metro Bank PLC Annual Report & Accounts 2021
This book has been printed on paper
from well-managed forests, approved
by the Forest Stewardship Council®,
using vegetable inks. Our printer holds
ISO 14001 and FSC® environmental
certifications.
Designed and produced by
M
e
t
r
o
B
a
n
k
P
L
C
A
n
n
u
a
l
R
e
p
o
r
t
&
A
c
c
o
u
n
t
s
2
0
2
1
Metro Bank plc
metrobankonline.co.uk
Continue reading text version or see original annual report in PDF
format above