Metro Bank took to Twitter this weekend to reassure customers that it remains a “safe and secure haven” for their assets, as hundreds flocked to branches to withdraw cash and valuables from safety deposit boxes.
Despite the bank’s reassurances, its “shares fell more than 7% in early trading today to fresh all-time lows of 492p”, City A.M. reports.
So what is going on?
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Founded in 2010 by US entrepreneur Vernon Hill, Metro Bank was once the “darling of Britain’s challenger banks”, winning admiration for its rapid growth, says the Financial Times. However, in January the bank was rocked by an “embarrassing accounting error”, the newspaper continues.
Regulators found that the bank had mistakenly categorised some loans as lower risk than they really were, which meant the company did not have as much capital against large numbers of commercial property and professional buy-to-let loans as it should have done.
The £900m error has prompted investigations by the Financial Conduct Authority and the Prudential Regulatory Authority, while the value of shares in the bank have dropped by three-quarters since the blunder was announced.
Metro is now planning to raise £350m from investors to shore up its finances.
What were the rumours over the weekend?
“A WhatsApp message advised people to pull money out of their accounts and empty safe deposit boxes,” reports The Guardian. Long queues then quickly formed at some of the bank’s branches in west London.
An unnamed source close to the bank claimed the speculation began in a “‘small localised Asian community’ - who tend to keep their wealth in safety deposit boxes” and that the increased queues were also “localised”, says the FT.
What has Metro Bank said?
The bank has dismissed the “false rumours” on social media and messaging apps.
“There is no truth to these rumours and we want to reassure our customers that there is no reason to be concerned. We’re a profitable bank, rated No.1 for personal current account service by the CMA and committed to serving our 1.7 million customer accounts,” the bank said in a statement.
Metro assured its customers that deposits of up to £85,000 were protected by the Financial Services Compensation Scheme, and pointed out that the bank does not take ownership of the contents of safe deposit boxes, which remain customers’ property.
The statement added: “Metro Bank confirms that its plan to raise £350m of equity capital to support its growth is well advanced. Metro Bank has commenced final discussions with existing shareholders and new investors, and the feedback continues to be positive.”
