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Annual Report
and Accounts 2023
Metro Bank Holdings PLC Annual Report and Accounts 2023Metro Bank Holdings PLC Annual Report and Accounts 2023
Strategic report
1 Summary of the year
2 Our purpose and strategy framework
4 Chair’s statement
6 Operating environment
8 Chief Executive Officer’s statement
11 Business model
14 Key performance indicators
16 Financial review
20 Environmental, social and
governancereview
31 Non financial information and
sustainability information statement
34 Section 172 statement
35 Task Force on Climate-related
FinancialDisclosures
44 Risk overview summary
49 Viability statement
Governance
52 Corporate governance introduction
54 Board of Directors
56 2023 governance at a glance
57 Board activities and stakeholder
engagement
59 Stakeholder engagement
62 Letter from the Designated Non-
Executive Director forColleague
Engagement
64 Board leadership and company
purpose
66 Board roles and responsibilities
67 Board effectiveness
70 Group Audit Committee report
75 Group Risk Oversight Committee report
78 Group Nomination Committee report
82 People and Remuneration Committee
report
86 Remuneration at a glance
91 Remuneration for colleagues below
Board level
94 Directors’ remuneration policy
105 Annual report on remuneration
120 Directors’ report
Risk
125 Risk management framework
126 Risk governance and oversight
128 Risk culture
130 Financial risks
151 Non-financial risks
Financial statements
159 Independent auditors’ report
to themembers
of Metro Bank Holdings PLC
167 Consolidated statement of
comprehensive income
168 Consolidated balancesheet
169 Consolidated statement
of changesin equity
170 Consolidated cashflowstatement
171 Notes to the financial statements
219 Company balancesheet
220 Company statement
of changesin equity
221 Company cashflowstatement
222 Notes to the financial statements
Additional information
226 Country-by-country report
227 Independent auditors’
reporttotheDirectors of
MetroBankHoldingsPLC
229 Other disclosures
230 Alternative performance measures
235 Abbreviations
236 Shareholder information
Building resilience
Whilst 2023 has had its challenges, we have successfully
undertaken the ground work necessary to ensure we
have a strong platform for sustainable profitability in the
years ahead. This has seen us establish our new holding
company, execute a £925 million capital package and
take the first steps in delivering a disciplined cost
reduction programme.
Focused on growth
We remain focused on the opportunities for future
growth and ensuring we fulfil our ambition to be the
number one community bank. We will achieve this by
continuing to deliver on our strategy through which we
aim to create value for all our stakeholders.
Read more in the Chief Executive
Officer’s statement on page 8
Daniel Frumkin
Chief Executive Officer
The actions we have
taken provide us with
the platform to create
sustainable growth.
Governance Additional informationFinancial statementsRisk reportStrategic report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Summary of the year
Statutory profit/(loss) before tax
(£m)
(130.8)
(311.4)
(245.1)
(70.7)
30.5
2019
2020
2021
2022
2023
101
75
75
82
79
Loan to deposit ratio
(%)
2019
2020
2021
2022
2023
Deposits
(£bn)
14.5
16.1
16.4
16.0
15.6
2019
2020
2021
2022
2023
Underlying loss before tax
(£m)
(11.7)
(271.8)
(171.3)
(50.6)
(16.9)
2019
2020
2021
2022
2023
Loans and advances
(£bn)
14.7
12.1
12.3
13.1
12.3
2019
2020
2021
2022
2023
Net interest margin
(%)
1.51
1.22
1.40
1.92
1.98
2019
2020
2021
2022
2023
2023 has been a year of two halves: whilst the first six
months saw us return to profitability on both a statutory
and underlying basis, our results in the second six
months were impacted by speculation surrounding our
capital options, contributing to the need to raise capital.
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 retail, private,
small business and commercial customers.
Our approach
Our approach is centred on our colleagues,
customers and communities. This allows us
to deliver our ambition to be the number
one community bank and create FANS. Our
community-centric model and focus on our
localness informs everything we do and the
decisions we make.
Top 10
Most loved UK workplaces²
#1
In-store service for personal
and business customers¹
3m
Customer accounts
1. Competition and Markets Authority (CMA) survey carried out in Great Britain by Ipsos and BVA-BDRC between
January 2023 and December 2023 – Services in branches. Results at ipsos.com and bva-bdrc.com
2. Newsweek survey carried out in the United Kingdom. Results at newsweek.com
1
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Our purpose and strategy framework
Our AMAZEING behaviours
strengthen 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.
Strengthened
by our AMAZEING
behaviours
Our ambition is to
be the number one
community bank
Despite the challenges faced in 2023, our
ambition remains the same: to be the
number one community bank. Community
banking means being embedded inthe
local communities weserve and prioritising
local decision-making. It also means we
provide simple and straightforward
business, commercial and retail banking
services that meettheneeds of our
customers inthearea.
Our purpose is to create FANS.
FANS are customers created
through delivering exceptional
customer service, who then
champion us through actively
recommending ustofriends
andfamily.
This simple purpose guides
everything we do as it places the
customer at the heart of all of our
decision-making.
Read more about our people
and culture on page 22
It’s achieved
through our
purpose
Governance Additional informationStrategic report Financial statementsRisk report 2
Metro Bank Holdings PLC Annual Report and Accounts 2023
Supported by
our strategic
priorities
Aligned with
performance based
remuneration
Measured by our
key performance
indicators
Our purpose and strategy framework
Continued
Our business model is how we
generate stakeholder value. It
involves combining stores and
digital channels with exceptional
customer service to generate
sustainable long-term value and
tangible bookgrowth.
Integrated model
Our model combines delivery
through physical and digital
channels.
Unique culture
Our colleagues deliver superior
service and are the heart of our
people-people banking approach.
Service-led core deposits
We seek to attract core deposits
through our service-led
relationship 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.
Our strategic priorities are what
we focus on on a day-to-day basis
that are crucial to developing our
long-term success.
Revenue
Create FANS to deliver strong
growth.
Balance sheet optimisation
Continued focus on risk-adjusted
returns.
Cost
Cost discipline to support
profitable growth and
reinvestment.
Infrastructure
Protect value through safe,
scalableinfrastructure.
Communications
Engage colleagues, communities
and other stakeholders to tell our
story.
Our key performance indicators
(KPIs) are the metrics we monitor
tocheck we are on track withthe
delivery of our strategy as well as
to assesshow our business
model isperforming. These
consist of:
• Customer accounts.
• Colleague engagement.
• Customer satisfaction.
• Senior leadership diversity.
• Statutory profit/(loss).
• Underlying profit/(loss).
• Total capital plus MREL.
• Cost of deposits.
• Cost of risk.
• Statutory cost:income ratio.
• Return on tangible equity.
• Loan-to-deposit ratio.
• Total shareholder return.
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.
Delivered via
our business
model
Read more about our
business model on page 11
Read more about our
strategy on page 12
Read more about our
KPIs on page 14
Read more about our
remuneration on page 86
3
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chair’s statement
Dear stakeholder
I am pleased to introduce the first annual
report of Metro Bank Holdings PLC, following
the successful insertion of our new holding
company in May 2023. Whilst our name might
have changed, our ambition to be the number
one community bank has not, and 2023 has
been another key year in moving towards this.
As I reflect upon both the progress and
challenges we have overcome during the past
year, I do so with immense gratitude. The
continued trust shown to us by you, our
shareholders, bondholders, customers and
colleagues reinforces mine and the Board’s
determination to see Metro Bank thrive and
succeed. I want to take this opportunity to
express my deepest thanks to you all.
Capital raise
The announcement in October of our
£925million capital package (comprising
£150million of new equity, £175 million of new
MREL-eligible debt and £600 million of debt
refinancing) was a defining moment. The
Board was fully engaged in this process
andactive in both supporting and challenging
the executive team to set this important
foundation for the future. The shareholder
vote of over 90% in favour of this was a
demonstration of the support shareholders
have for the business and the importance of
strengthening our capital position.
Whilst we acknowledge that many
shareholders were unable to participate in
thecapital raise, we believe that the package
represented the best possible outcome for
allstakeholders and will allow us to move
forward with strengthened financial resources
and renewed sense of purpose.
As part of the capital package, Jaime Gilinski
Bacal – a long-time investor, became our
majority shareholder through his company,
Spaldy Investment Limited. Spaldy Investments
Limited is entitled to appoint up to three
shareholder appointed Non-Executive
Directors to the Board. Dorita Gilinski, who has
been a shareholder-appointed Non-Executive
Director since September 2022 will continue
as one of the three roles. The Board continues
to be made up of a majority of independent
Non-Executive Directors and together the
Board remains committed to fulfilling its
dutyto act on behalf of all shareholders and
wider stakeholders.
Results
Thefirst six months of 2023 saw us return
toprofitability on both a statutory and
underlying basis, a culmination of all the hard
work delivered by Dan and the team over the
past few years. The second six months of
2023, however, precipitated the conditions
that required us to raise capital.
Robert Sharpe
Chair
As I reflect upon both the progress and
challenges we have overcome during the
past year, I do so with immense gratitude.
In a world of continued uncertainty we remain focused
ondelivering value for all of our stakeholders. We aim
toachieve this through the continued execution of our
strategy and an unrelenting focus on our ambition to
bethe number one community bank.
Metro Bank Holdings PLC Annual Report and Accounts 2023
4Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chair’s statement
Continued
The increase in capital requirements inJuly
through the increase in the countercyclical
capital buffer, alongside the news that we
should not expect to receive AIRB approval
in2023 placed incremental pressure on
ourcapital position. The Board has been
continuously considering capital options, and
these factors, along with the need to refinance
our existing MREL debt before October 2024,
meant that the window for raising capital from
the market was scheduled for the fourth
quarter of 2023. At the start of October,
several speculative media reports contributed
to uncertainty around the capital negotiations
and an increased outflow of customer
deposits. Our strong levels of liquidity and
prudent approach meant these outflows were
manageable and, indeed, as at 31 December
2023 we had returned to broadly the same
deposit levels as we reported for the third
quarter, with strong liquidity and funding
regulatory ratios.
Since the capital package announcement,
andfinancial completion, we have seen core
deposit flows stabilise, supplemented through
a combination of repricing and new deposit
initiatives. The higher cost of this funding
combined with the higher interest rate payable
on our new and refinanced debt have acted
asa drag on underlying profitability in the
fourth quarter.
Crucially, the delivery of the capital package in
November has seen us restore our regulatory
capital ratios, ending the year with total
capital plus MREL of 22.0% (31 December
2022: 17.7%) providing both certainty to
stakeholders and a platform for future growth.
Responding to an evolving landscape
In November, the Board approved a cost saving
plan to ensure the organisation is right-sized
going forward. The programme included
reducing our store hours, leading to1,000
colleagues across stores and the widerbusiness
being made redundant. Alongside the cost
savings, plans include making additional
investments in areas including automation of
services, improving our productivity and
responding to customer trends.
The Board remains fully engaged in helping
drive our strategy and supporting the
executive team in its execution. In doing so, we
remain mindful of the need to appropriately
balance the interests and expectations of all
our stakeholders.
Governance
During the year we appointed Clare Gilligan
asour new Company Secretary. Clare joins us
from Bank of Ireland (UK) plc where she was
Company Secretary, bringing with her a
wealth of expertise. Her appointment helps
toensure that our governance framework
remains of the highest standard.
At the end of the year Anne Grim, Monique
Melis and Ian Henderson stepped down from
the Board. On 11 January, we announced that
James Hopkinson, Chief Financial Officer,
would step down as Executive Director and
would leave the business during the first
quarter of 2024 after a period of handover.
Iwould like to thank all of them for their
contribution.
The Board appointed Cristina Alba Ochoa to
act as interim Chief Financial Officer, effective
15 January 2024.
On 29 February 2024, we announced the
appointment of Marc Page as the permanent
Chief Financial Officer and member of the
Board from September 2024 (subject to
regulatory approval). Marc will join us from
Barclays where he was Chief Financial Officer
of Kensington Mortgages since its acquisition
by Barclays in 2023. He will bringwith him a
wealth of knowledge and experience across
retail banking strategy, distribution and
product management.
Whilst we will be a leaner organisation going
forward, including at Board level, this is not at
the expense of having the right level of skills
within the organisation.
Outlook
The road ahead is not without uncertainty.
Wecontinue to see political and economic
turbulence with a general election likely in
2024 set against the backdrop of cost-of-
living pressures and a subdued economy.
Alongside these external challenges, we also
face Bank-specific headwinds. This includes
entering 2024 with elevated funding costs,
which act as a drag on near-term profitability.
Despite these challenges, I remain confident in
our ability to be the number one community
bank. Metro Bank’s resilience and ability to
navigate obstacles as well as seize new
opportunities is one of its great strengths and
will drive our success in the coming year. We
will continue to champion customer service
and traditional banking values of trust,
honesty and integrity, delivering excellence in
our products and services and nurturing the
relationships we hold dear.
Robert Sharpe
Chair
16 April 2024
Where to find out more
How governance
issupporting our
transformation
Stakeholder impact
We focus on the impact on our
stakeholders of all the decisions we make
and ensuring we are delivering the right
outcomes to them is fundamental to
delivering our ambition to be the number
one community bank.
Read more in our Stakeholder
Engagement on pages 59 to 61 and
in our Section 172 Statement on
page 34.
Stakeholder engagement
We were pleased to get support of over
90% for all our resolutions in relation to the
capital package in November.
We look forward to further shareholder
engagement throughout 2024 including
atour AGM which will take place on
21 May 2024.
Read more in the Chair’s
governance letter on pages 52 to
53 and in our Section 172
Statement on page 34.
5
Governance Additional informationStrategic report Financial statementsRisk report
Competition Customer
behaviour
Economic and
political outlook
Metro Bank Holdings PLC Annual Report and Accounts 2023
Operating environment
The environment we operate in is both competitive and rapidly changing.
This presents us with challenges but also creates exciting opportunities for us as we grow.
How we see it
Whilst 2023 has been a turbulent year with continued global
uncertainty, the UK economy has been remarkably resilient,
despite entering a technical recession in the final two quarters
of the year. Inflation has fallen back from recent highs
although remains in excess of the Bank of England’s long-term
target of 2%. Part of this softening has been as a result of
continued increases in base rates which were increased from
3.50% to 5.25% over the course of the year. Whilst the outlook
is that rates have peaked, the increases seen in 2023 will
continue to impact customers in the years ahead as they
roll-off lower-cost fixed-rate borrowing. Although this has
resulted in an increase in arrears, this has come off a low base.
We have started to see signs of the job market softening, with
lower levels of hiring activities and the prospect of potential
rises in unemployment in 2024, adding to an uncertain
economic outlook.
How we are responding
We see the current levels of uncertainty remaining elevated
through 2024 due to continuing global conflict and key
elections in both the UK and USA, as well as a subdued
economic outlook.
We continue to take a prudent approach to expected credit
loss (ECL) provisioning and believe this reflects the current
uncertainties, including those related to slower economic
growth and increased unemployment.
At the end of 2023 we took the decision to move away from
unsecured lending given the return on capital it is providing in
the current economic climate.
How we see it
The UK banking market remains highly competitive in respect
of both deposits and lending.
For core current accounts, digital-only operators are achieving
high levels of customer satisfaction whilst incumbent players
continue to deploy switching offers and heavy marketing
campaigns to maintain market share. At the same time,
average current account balances are reducing industry-wide
as customers repay debt, deploy excess deposits into higher
rate savings and weather the increased cost of living.
In the lending market, larger incumbent players continue to
competitively price mortgages with mortgage rates ending
2023 at below 4%, compared to the base rate of 5.25%.
Equally, specialist lenders continue to make inroads into
non-relationship driven segments, often delivered via
intermediaries or aggregators.
We have also started to see the early signs of consolidation
within the industry, which is likely to see market share
concentrated further between larger incumbents.
How we are responding
We are continuing to invest in our deposit proposition to
ensure we remain competitive and gain market share. Whilst
we saw a reduction in average current account balances, both
due to wider-market forces and the speculation around our
capital raise, we continue to grow account numbers and
deepen customer relationships.
In the lending space we are focusing our attention on
targeting more specialist segments of the market. This is in
part due to the setback in our AIRB ambitions, which we
announced in September. Being a non-AIRB approved lender
makes it hard to compete in the prime ‘vanilla’ segment of the
market in respect of both volume and price due to the
structural disadvantages in the capital treatment of residential
mortgages compared to larger AIRB-approved competitors.
How we see it
Customer behaviour in 2023 has been marked by the higher
rate environment and cost-of-living pressures. This has seen
customers move their money to savings accounts to maximise
interest as well as becoming increasingly willing to switch
providers. The higher savings rates have also seen customers
making greater use of ISAs as a tax shield, particularly
amongst savers with high balances where interest payments
exceed the personal savings allowance.
We are also continuing to witness the acceleration of
digitisation with customers continuing to prefer digital-first
channels. This rise in use of new technology also gives rise to
increasingly sophisticated fraud.
How we are responding
We have increased our investment in our deposit gathering
channels including building out our ISA proposition ready for
the 2024 season. We were able to deploy some of these
deposit gathering tools in the fourth quarter where we were
able to quickly attract new deposits to replace balances lost in
response to the speculation surrounding our capital raise.
We expect the current digitisation trend to continue and we
will carry on making disciplined investment choices in
thisarea.
We remain committed to stores and maintaining a fully
integrated offering, although have reduced hours in response
to changing customer needs.
6Governance Additional informationStrategic report Financial statementsRisk report
Capital and
funding regime
Focus on
sustainability
Regulatory
environment
Metro Bank Holdings PLC Annual Report and Accounts 2023
Operating environment
Continued
How we see it
The UK regulatory environment has undergone significant
changes in recent years and continues to evolve, with multiple
changes on the horizon from key regulatory bodies.
Regulatory authorities including the Prudential Regulation
Authority (PRA) and Financial Conduct Authority (FCA) have
introduced reforms aimed at enhancing financial stability,
consumer protection and market integrity.
Key regulatory initiatives have included the new Consumer
Duty requirement and Basel 3.1, which sees changes to the
industry’s capital requirements.
We are also continuing to see regulators take a firm approach
to misconduct and ensuring fair outcomes for customers. An
example of this is the FCA’s review into historical motor
finance commission arrangements, the cost of which to
lenders could be significant.
How we are responding
We continue to deliver a range of comprehensive projects to
ensure we remain compliant with changes to the regulatory
environment. During the year, we have made good progress
on the implementation of our Consumer Duty requirements
and continue to prepare for the introduction of Basel 3.1.
We retain proactive engagement with our regulators, industry
bodies and other stakeholders to help shape the regulatory
agenda, provide feedback on proposed reforms and continue
to advocate for proportionate and pragmatic regulations that
support both innovation and growth, whilst protecting the
integrity of the financial system.
The current FCA investigation into motor finance shows the
continued focus of regulators on ensuring customers are
treated fairly. As a community bank we support the regulator
to achieve this outcome for customers.
How we see it
The UK’s stringent approach to capital management continues
to shape the banking industry. This is particularly true for new
and mid-sized challengers like ourselves who remain subject
to MREL requirements but unable to take advantage of the
structural advantages of larger players who are able to benefit
from their Advanced Internal Ratings Based (AIRB) status for
determining risk-weightings. This makes providing the
required return on capital challenging, particularly in
mainstream lending, which would benefit from additional
competition.
With respect to funding, the Bank of England’s continued
planned withdrawal of TFSME (combined with additional
quantitative tightening) will put additional pressure on banks’
funding requirements, with firms needing to either shrink
balance sheets or increase their deposits to replace this form
of funding. Equally, given the high-profile international bank
failures in 2023, we see liquidity remaining a core focus for
banks going into 2024, with firms likely to continue to hold
excess liquidity over minimum requirements.
How we are responding
The capital raise during the year saw us restore all our capital
ratios to above minima including CRD4 buffers.
The cost of capital remains high, both industry-wide and for
ourselves in particular. We are therefore continuing to ensure
we optimise our return on regulatory capital when
determining our product and pricing strategy. Equally, we are
working to ensure we are right-sizing our cost base to aid in
the delivery of sustainable organic capital generation.
We retain high levels of liquidity with a liquidity coverage ratio
(LCR) as at 31 December of 332% (compared to the minimum
requirement of 100%), and were able to weather deposit
outflows in response to press speculation in October 2023.
Our strong levels of liquidity have also allowed us to repay
£550 million of TFSME drawings early.
How we see it
2023 was the hottest year on record globally and we are
continuing to see the impacts of climate change both around
the world and in the UK.
As awareness of environmental and social issues continues to
grow, stakeholders are increasingly scrutinising companies’
responses to these sustainability challenges. In particular,
customers are continuing to have increased expectations of
companies they interact with to deliver for the environment
and wider society.
As well as our own decisions around sustainability, we
recognise the role we play in broader society, primarily
through the decisions over who and what we choose to
finance. We see that the financial system has a central role in
acting as a catalyst for change in broader society and as such
can play an outsized role in contributing to the transition to a
more sustainable and resilient economy.
How we are responding
We recognise the interconnectedness between sustainable
business practices and long-term financial performance and
as a result continue to integrate sustainability into all of our
core operations and decision-making processes.
We continue to deliver our plan to achieve our 2030 net zero
carbon emissions goal. In achieving this we remain committed
to being transparent in respect of our reporting of progress to
deliver this.
As a community bank we also recognise the importance of
giving back to society and this will continue to be achieved
through a range of initiatives which utilise our physical and
digital channels.
Our corporate governance structure ensures that
sustainability remains a key focus as part our ambition to be
the number one community bank.
7
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
The start of the year began with continued
momentum from 2022, which saw us return to
profit on both a statutory and underlying basis
and deliver our best set of results for several
years in the first half. For the full year, we
recognised an underlying loss before tax
of£16.9 million for 2023 (2022: loss of
£50.6million), impacted in part by deposit
pricing actions taken in the second half of the
year. On a statutory basis, we delivered a
profit before tax of £30.5 million (2022: loss of
£70.7 million), largely as the result of a one-off
gain from the capital restructure completed
inNovember.
2023 saw the continued execution of our
strategic priorities with tangible progress
made across all areas. We enter 2024 with an
improved and longer-dated capital position,
and continue to take a disciplined approach
tocost saving and have commenced further
activities to achieve the savings outlined, all
ofwhich will set us up to continue on our
pathto sustainable profitability, and deliver
onour ambition to be the number one
community bank.
Capital package
Going into the year we were always clear
about our need both to access the capital
markets comfortably ahead of the call date
forour MREL in October 2024 and to deliver
profitability as a prerequisite. The increased
capital requirements in July, combined with
the setback in September to our ambition to
achieve AIRB accreditation for residential
mortgages, put pressure on our capital
position, impacting the levels to which we
were able to grow capital organically.
Speculative media reporting contributed to
our decision to accelerate and address our
capital position in the fourth quarter.
The ability to secure the £925 million capital
package demonstrates our investors’ faith in
us and in our customer service-centric model.
We believe that this capital support provides
certainty for us going forward.
Strategic delivery
Throughout the year, our customers have
remained supportive and our promise to
provide better service and to support the
communities in which we operate continues
toresonate. Progress has been achieved in
theautomation of back-office processes and
investment in core infrastructure aimed at
ensuring the stability and security of systems.
Alongside this we have seen the launch of new
products including enhanced commercial
overdrafts and business credit cards. Whilst
we see near-term pressure on profitability
resulting from the increased cost of deposits
gathered in the final quarter of the year, we
are optimistic that the good work put in
throughout 2023 continues to set us up well
for the future.
Daniel Frumkin
Chief Executive Officer
We remain committed to increasing
market share as we support more
customers and communities.
With 3.0 million customer accounts covering retail, SME
and commercial, a national network of stores and our
continued digital investments we remain the UK’s leading
full-service mid-sized bank.
Metro Bank Holdings PLC Annual Report and Accounts 2023
8Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
Continued
Revenue
Revenue during the year benefitted from
increases in base rates and the continued
growth in customer accounts, with total
underlying income increasing 5% to
£546.5million (2022: £522.1 million).
Like most banks, a large proportion of our
lending is fixed rate and therefore, despite
base rates having stabilised, we are continuing
to see the benefits as older loans mature into
ahigher rate environment. We will see further
upside in 2024, 2025 and 2026 as loans and
fixed rate treasury investments continue to
reprice. Offsetting this, the weakened outlook
for base rates and the competitive nature of
the lending market will likely compress
front-book loan pricing through 2024.
We also saw the increase in base rates flow
through to deposit pricing, particularly as
competition in the savings market continued
to increase. As cost-of-living pressures
continue, which is leading to customers
utilising current account balances, and
industry-wide drawings under TFSME mature,
we envisage these pressures continuing
through 2024 and for the medium term. To
aidthis, we have been investing in our deposit
capabilities, including preparing for the ISA
season in 2024 through improvements to our
ISA switching capabilities. We have also
started to provide savings accounts on
deposit aggregator sites and are launching a
new ‘boost’ proposition for savings accounts.
While these deposits are more expensive than
our core current account deposits, they are
priced to be net interest income accretive,
enable more lending and help to support our
strong liquidity position.
Following the announcement of the successful
completion of the capital package in
November, we launched a deposit campaign
to replace the deposits we lost in October
resulting from speculative media reports.
Asaresult, our deposits ended the year at
£15.6 billion, up 1% from the level reported in
our interim results. This campaign and the
prevailing higher rate environment, saw
costof deposits in the second half of the
yearincrease to 1.29%, up from 0.66% in the
first half.
Our priority remains growing the number,
depth and quality of our deposit relationships
and we remain committed to supporting more
customers and communities.
Costs
We continue to take a disciplined approach to
costs, with underlying costs slightly down year
on year, despite the continued high inflationary
environment. The executive team has worked
hard to improve processes helping manage
costs. Our processes are still not as efficient
oras automated as we would want which
gives us the opportunity to identify and
deliver further cost savings going forward. As
committed at the time of the capital package,
we are on track to deliver up to £50 million in
annualised cost savings. As part of this
approach, we took the decision to reduce our
store hours, to focus on the times when
customers need us most, and introduced
changes to our organisational structure
resulting in a reduction of roles. As a people-
focused organisation, it is always incredibly
difficult to let good colleagues go. I want to
thank all of them for their hard work and
dedication to Metro Bank. Whilst this was a
very tough decision, it was ultimately
necessary and is a key step in helping support
our long-term sustainability. The exits agreed
result in £43 million of annual savings and we
remain confident in exceeding £50 million in
total annual cost savings in 2024.
We will continue to explore options to further
right-size our cost base in the months ahead,
as we look to secure a sustainably profitable
future for the bank. Part of this will include
continuing to review our options around stores
and our real estate which remain one of the
largest components of our fixed cost base.
Infrastructure
Whilst we have reduced our operating hours,
we remain committed to stores, which remain
central to our proposition. During the year, we
acquired a freehold site in Chester which will
be our next new location. We continue to
focus on building a pipeline to deliver our
growth in the years ahead and have placed
agreater focus on securing locations with a
strong SME presence. Further store openings
in the north of England will predominantly
focus on out-of-town locations with parking
which are easier for businesses to access and
can serve larger populations.
Although a physical presence remains core
toour offering, our priority will be to continue
to digitalise to ensure we remain both
competitive against larger high-street peers
and new digital entrants. A particular area of
focus will continue to be on enhancing our
self-service features as well as building out our
SME offering where we feel we are continuing
to win market share in an area which remains
underserved by the market.
During the year we worked to transform our
mortgage origination platform, which has
streamlined the process for both mortgage
intermediaries and customers. As mortgages
will continue to be the largest component of
our lending portfolio we envisage that this
investment will yield improvements in
productivity and allow us to launch a greater
range of products.
Where to find out more
How we are planning
on delivering
Our financial approach
Our results for the year reflect the
challenges faced in the final quarter of
theyear. Ensuring we are on a path to
sustainable profitability remains the
highest priority for the ExCo.
Read more in our financial review
on pages 16 to 19
Our approach to sustainability
As a community bank we recognise the
important role we play in delivering the
sustainability agenda. Key to this is
ensuring the decisions we take are right for
our customers, communities, colleagues,
suppliers and the environment.
Read more in our environmental,
social and governance review on
pages 20 to 33
Our approach to managing risk
Maintaining an effective approach to
riskmanagement underpins and
strengthens our ability to deliver, ensuring
decisions made are managed within
acceptable limits.
Read more in our risk report on
pages 124 to 157
9
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Chief Executive Officer’s statement
Continued
In May, we completed the implementation of
our holding company marking an important
milestone in meeting our requirements in
respect of the Bank of England’s resolution
framework.
Balance sheet optimisation
Over the course of 2023, the management
team actively constrained lending to around
replacement levels in an effort to build capital
organically. Following the capital raise it is
now more important than ever that we
continue to optimise our balance sheet and
utilise our capital stack most efficiently to get
the best possible sustainable returns for
allstakeholders.
The return to a more normalised interest rate
environment has led us to shift our focus away
from unsecured lending back towards
commercial, whilst mortgages will remain the
largest component of our balance sheet. With
the feedback from the PRA that we would not
receive AIRB approval in 2023, our focus is to
participate in niche parts of the mortgage
market where our manual underwriting
capacity is a competitive advantage. This will
likely mean that we seek to compete less for
vanilla mortgages where AIRB-approved
competitors benefit from a materially lower
RWA weightage than either standardised
weightages or those expected under the
Basel3.1 regulations. The pivot to commercial
and specialist lending will drive higher risk
adjusted returns but will also increase risk
density. In order to meet customer demand
and improve profitability, we will manage the
balance sheet to optimise returns, which may
include (but not limited to) periodically
utilising capital buffers or electing to access
capital markets to support growth.
Communication
Our focus on delivering excellent customer
service is reflected in the latest Independent
Competition and Markets Authority (CMA)
survey where we retained the number one
spot for in-store service for personal and
business customers. 2023 also saw us
implement Consumer Duty and sign up to the
Government’s Mortgage Charter supporting
our commitment to customers, especially as
many dealt with the effects of increases in the
cost of living.
Whilst we have reduced our store opening
hours in 2024, we remain committed to
maintaining a physical presence and ensuring
that stores remain both accessible and at the
heart of local communities. In 2023, we rolled
out our British Sign Language service which
customers can now access in any of our stores,
on the phone, in app or online. Fifty-two of our
stores are also now designated as Safe Spaces
– places where those suffering domestic abuse
can go to safely start the process of rebuilding
their lives.
Our community bank ethos also saw us deliver
our financial education programme Money
Zone in record numbers. The programme has
now been delivered to 2,800 schools and
250,000 children, which in 2023 included
delivering to 1,100 children in just one day at
the Hertfordshire Agricultural Society Food
and Farming Day. We have also introduced
bespoke programmes for our armed forces’
communities as well as for teenagers aged
16to 18.
Alongside Money Zone, we support our
communities through a wider range of
initiatives. We have dedicated over 5,600
hours to local causes ranging from litter picks
to sponsored walks, as well as celebrating
large scale community events, notably Pride
inLondon, Birmingham and Cardiff.
We are determined that the right-sizing of our
workforce will not impede our ability to be a
great place to work or a great place to bank.
We will continue to foster an environment
where colleagues can grow their careers and
thrive. I was particularly pleased that during
the year we were voted as a top 10 place to
work in the UK and our annual Voice of the
Colleague survey, conducted in October,
sawsome of the best results in our history as
well as being significantly higher than the
global benchmark.
We continue to focus on our culture of
promoting from within, with over 40% of the
positions in the first half of the year filled by
colleagues being promoted or moving around
the business. For the remaining hires, we
haveamplified our community focus when
recruiting talent, increased opportunities
available for apprentices from disadvantaged
backgrounds, run a series of roadshows
forprofessional returners trying to get back
into the workplace and engaged with later
incareer populations to support our
diverseworkforce.
In May, we launched a five-year partnership
with the England and Wales Cricket Board,
later jointly pledging to treble the number of
girls’ cricket teams to support the development
of women’s and girls’ cricket both at a national
and community level, with the aim of
delivering a lasting legacy for female
representation in the sport. The partnership
includes the sponsorship of key sporting
events including the Women’s Ashes where
we are the title partner.
Looking ahead
2023 has been a varied year for performance
with the continued strong momentum towards
achieving underlying profitability in the first
half of the year and our successful capital raise
being key highlights. These have been offset
by continued external headwinds combined
with the need to make difficult decisions in the
last quarter of the year. Some of these
decisions, including our higher cost of
deposits will continue to impact earnings
potential into 2024, whilst we will not fully
benefit from the effects of loan and
investment repricing until 2026, therefore
acting as a drag on our near-term results.
Despite this, I remain confident that the work
we have undertaken has allowed us to build
the foundations of a structurally profitable
bank – which is fundamentally different from
where we were four years ago.
I remain grateful for the continued support of
all our colleagues, customers, debt holders
and shareholders as well as wider stakeholders.
Daniel Frumkin
Chief Executive Officer
16 April 2024
10
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Business model
Our business model is simple. By delivering great customer service
we can attract and grow a sustainable deposit base, allowing us to
lend money to help individuals and businesses fund their ambitions.
delivers value for...
Customers
Without the loyalty of our customers we
would not exist. Ensuring we are turning
our customers into FANS ensures the
enduring success of our business.
Colleagues
We strive to make Metro Bank a great
place to work; where colleagues can excel,
grow and be themselves.
Investors
We are committed to ensuring that we can
be an attractive investment for equity and
bondholders. We never take our investors
for granted and are working hard to build
and maintain trust.
Regulators
We continue to play our part in ensuring
asafe and stable financial system.
Suppliers
Building a trusted supplier base is key
todelivering our ambitions. We want
toensure that as we grow they share in
oursuccess.
Communities
To be the number one community bank
wehave to be at the heart of the
neighbourhoods we serve, delivering
societal value day-in day-out.
How we make money
We make money through the difference we charge on the loans we issue
and the deposits we take, less our operating costs and changes in ECL.
is underpinned by...
Environmental and
social priorities
We ensure that our business
modeland approach is focused
onthe areas that matter most
toour stakeholders.
Risk management
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 against
ensuring this is done in a managed
and appropriate manner.
Governance
We are continually improving 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.
Read more on pages 20 to 43
Read more on pages 59 to 61
Read more on pages 16 to 19
Read more on pages 124 to 157
Read more on pages 51 to 123
Unique
culture
Service-led
core deposits
Integrated
model
Risk-adjusted
returns
Allowing us
to generate...
Combined
with...
Creating
long-term
value allowing
investment
in...
Creating FANS
who bring...
Our model
11
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Progress in 2023 Operating environment Priorities Risks
KPIs
Integrated
model
Our integrated model
aims to combine delivery
through physical and
digital channels.
We continue to deliver stand-out
service through our stores and
digital presence.
Our focus on our SME offering
has seen us launch a new
commercial overdraft and
business credit card which
includes straight through
processing and automated
decision-making. During the
yearwe transformed our
mortgage origination platform,
streamlining the process for
bothmortgage intermediaries
and customers. As mortgages
will continue to be the largest
component of our lending we
envisage that this investment
willyield improvements in
productivity, allowing us
tolaunch a greater range
ofproducts.
Competition
The UK banking market
continues to be very competitive
with high levels of innovation.
Toremain competitive we need
to continue to invest in all of our
channels to ensure they meet our
customers’ needs.
Consumer behaviour
Customers are continuing to
place a strong reliance on
in-person service, although
themove to digital continues.
Focus on sustainability
We continue to see strong
pressure from all of our key
stakeholders to ensure all of
ouroperations are sustainable.
We will explore options to
further right-size our cost base in
the months ahead. While we
remain committed to serving
customers through stores, we
will look to optimise how this
best works for our customers
and for our business. This is
expected to be through focusing
on opening smaller sites in
strategic locations in the north of
England, and through
reassessing our store opening
hours, based on how and when
our customers use our services.
Although a physical presence
remains core to our offering, our
focus will be to digitalise to
ensure we remain competitive
against both larger high-street
peers and new digital-first or
digital-only entrants.
Our principal risks in respect
ofdelivering our integrated
model are:
• Conduct risk.
• Operational risk.
• Strategic risk.
We continue to enhance our
processes and systems to
minimise the risk of operational
issues, and to continue delivering
on our strategy.
Number of accounts (m)
2.7
2022
2023
3.0
Customer satisfaction
85
2022
2023
76
New to bank
33
2022
2023
36
Existing
Unique culture
Our colleagues deliver
superior service and are
at the heart of our
people-people banking
approach.
We pride ourselves on being a
bank that puts our colleagues at
the heart of what we do. 2023
has been an incredibly difficult
year with changes to our
organisational structure resulting
in the reduction of 1,000 roles in
early 2024.
Despite this, we continue to be
focused on being an employer of
choice. In 2023 we were awarded
the Diversity, Equity & Inclusion
Award from The Top 1%
Workplace Awards 2023,
reflecting our commitment to
attract and retain talent from
within the diverse communities
we serve.
Competition
The market for talent remains
highly competitive, and the high
inflationary environment has
continued to put pressure on
wages. We must remain
competitive to help colleagues
and retain talent.
We are committed to ensuring
our people are our key focus
andthat recent cost reduction
measures do not impact our
unique culture. We will continue
to support a diverse and inclusive
workforce where colleagues can
be themselves, investing in
training and promoting from
within where possible.
Our cost reduction initiatives
in2024 will focus on further
automation to free up
colleagues’ time and allow
themto focus on what they
dobest – creating FANS.
Our principal risks in respect of
delivering our unique culture:
• Conduct risk.
• Legal risk.
• Operational risk.
• Strategic risk.
Planned automation and
strategic re-focus is key to
managing risk within a smaller
workforce.
Colleague engagement (%)
75
2022
2023
75
Senior leadership diversity
19
2022
2023
20
BAME
41
2022
2023
38
Female
Read more about risk on
pages 125 to 157
Read more KPIs on
pages 14 to 15
Read more about our
operating environment on
pages 6 to 7
Business model
Continued
12Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Business model
Continued
Progress in 2023 Operating environment Priorities Risks
KPIs
Service-led
core deposits
We seek to attract core
deposits through our
service-led relationship
banking model with
specific emphasis
onourcore retail and
SME franchise.
At the start of October, several
speculative media reports on the
strength of our capital position
led to an increased outflow of
customer deposits. Whilst
liquidity levels remained strong,
a deposit campaign was
launched in the last months of
the year to replace the deposits
lost. As at 31 December 2023,
wehad returned to broadly the
same deposit levels as we
reported for the third quarter,
albeit at a higher cost.
Through 2023, we have invested
in our deposit capabilities,
started to provide savings
accounts under our RateSetter
brand on deposit aggregator
sites, and launched new limited
edition savings accounts.
Competition
As interest rates have risen,
competition for deposits has
increased, both from challenger
banks and larger incumbents.
Alongside this, newer digital-
only fintechs continue to grow.
Regulatory environment
The regulatory environment
continues to work towards
ensuring the fair treatment of
customers with a particular focus
on vulnerable customers and
Consumer Duty. This trend is
seeing deposit-taking
institutions, like ourselves,
implement an increasing amount
of regulatory requirements.
During 2024, our focus will be
onutilising the deposit building
capabilities we built during 2023.
A key component of this will be
the new ISA season with a
particular emphasis on switching.
Alongside this, we will also
launch a new ‘boost’ proposition
for savings accounts, which will
provide us with greater flexibility
in the deposit pricing.
We also concentrate on
continuing to grow our current
account numbers, with priority
geared towards increasing
business accounts, where
balances tend to be higher, fee
earning opportunities are greater.
Our principal risks in respect
ofdelivering service-led core
deposits are:
• Conduct risk.
• Financial crime.
• Legal risk.
• Liquidity and funding risk.
• Market risk.
• Regulatory risk.
We continue to actively manage
our balance sheet to ensure we
retain high levels of liquidity and
appropriately hedge our interest
rate risk.
Alongside this, we continue to
enhance our controls and review
our products to both protect our
customers and ensure we are
delivering fair outcomes.
Cost of deposits (%)
0.20
2022
2023
0.97
Risk-adjusted
returns
We seek to balance our
lending mix through
abroad yetsimple
product offering that
ispriced proportionate
torisk.
Throughout 2023, we actively
constrained lending to around
replacement levels in an effort to
preserve capital. Going into the
year we were always clear about
our need to access the capital
markets, however external
pressures caused us to
accelerate our initial timetable.
We successfully completed the
delivery of a capital package in
November, following which we
decided to refocus our attention
on commercial and mortgage
lending, with a shift away from
consumer lending.
Like most banks, a large
proportion of our lending is fixed
rate and therefore despite base
rates having stabilised, we are
continuing to see the benefits as
older loans mature into a higher
rate environment.
Competition
Competition in the lending space
remains strong notably in the
mortgage space from larger
competitors as well as specialist
lenders in other key segments.
Capital and funding regime
The UK’s rigorous capital regime
continues to see large financial
firms, including ourselves,
dependent on capital markets to
support regulatory requirements.
Economic and political outlook
We expect interest rates to
continue at a more normalised
level in 2024, but financial
pressure on households
andanuncertain political
outlookremains.
Following the capital raise, we
continue to optimise our balance
sheet and utilise our capital stack
most efficiently to get the best
possible sustainable returns for
all stakeholders.
We plan to shift our focus away
from unsecured lending back
towards commercial, whilst
mortgages will remain the
largest component of our
balance sheet with a focus on
niche parts of the mortgage
market where our manual
underwriting capacity is a
competitive advantage.
Our principal risks in respect
ofdelivering risk-adjusted
returns are:
• Conduct risk.
• Credit risk.
• Market risk.
• Regulatory risk.
• Model risk.
• Capital risk.
• Strategic risk.
We take a prudent approach to
lending to minimise the risk of
losses. We continue to review
and update our credit models to
support this issue.
Cost of risk (%)
0.32
2022
2023
0.26
Loan-to-deposit ratio (%)
82
2022
2023
79
Total capital plus
MRELratio (%)
17.7
2022
2023
22.0
Read more about risk on
pages 125 to 157
Read more KPIs on
pages 14 to 15
Read more about our
operating environment on
pages 6 to 7
13
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Key performance indicators
Link to business model
Components of our business model
Our business model is set out on page 11.
Further details of each component of our
business model can be found on pages 12 to
13, including how our KPIs link to measure our
performance for each of these components.
Output of our business model
The output of our business model is to
generate long-term value and create tangible
book growth, 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. The scorecard measures are
aligned to the four components of our
business model to ensure management is
focused on these. In addition to this we
provide an LTIP which is linked to our
scorecard outcomes of long-term value
generation and tangible book growth.
Alternative performance measures
Where a financial KPI is an alternative
performance measure a reconciliation to the
nearest statutory measure can be found on
pages 230 to 234.
KPI performance during 2023
Despite the challenging operating
environment in 2023, we have performed
robustly on the majority of our KPIs. A
particular highlight has been maintaining
record colleague engagement scores and the
continued growth in customer numbers.
Customer satisfaction remains a key area of
focus as whilst our scores remain favourable
compared to market peers, we want to ensure
the reversal of the decrease seen in year on
new account openings, as well as to continue
to increase the net promoter score on
continuing relationships.
In respect of our financial metrics, we have
reported a statutory profit and a smaller
underlying loss for the year. Equally our capital
ratios have improved following successful
delivery of the capital package during
theyear.
We did see a noticeable increase in our
costofdeposits, which was driven by a
combination of rising base rates as well as
thecost of the deposit initiatives undertaken
in the fourth quarter.
Our KPIs are the metrics we monitor to check we are
on track with the delivery of our strategy as well as to
assess how our business model is performing.
Non-financial
Customer accounts (m) Colleague engagement
2.5
2.7
3.0
2021
2022
2023
2021
2022
2023
69
75
75
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 us.
Customer satisfaction (%) Senior leadership diversity (%)
New account openings Female
2021
2022
2023
90
85
76
2021
2022
2023
43
41
38
Continuing relationships Minority ethnic
2021
2022
2023
42
33
36
2021
2022
2023
20
19
20
How we define it
Net promoter score for new account openings
and continuing customer relationships.
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.
How we define it
Proportion of female/minority ethnic colleagues
amongst our senior leadership team (ExCo
andtheir directreports).
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.
Key
Score card measure
LTIP measure
Alternative performance measure
14Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Key performance indicators
Continued
Financial
Statutory profit/(loss) before tax (£m) Underlying loss before tax (£m)
 
Total capital plus MREL ratio (%)
(245.1)
(70.7)
30.5
2021
2022
2023
(171.3)
(50.6)
(16.9)
2021
2022
2023
20.5
17.7
22.0
2021
2022
2023
How we define it
Our earnings before tax as defined by International Accounting
Standards (IAS) and International Financial Reporting Standards
(IFRS).
Why it is important
Achieving sustainable profitability is the key financial measure to
demonstrate we are creating long-term value.
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 total capital plus MREL expressed as a percentage ofRWAs.
Why it is important
Our capital ratio represents the level of solvency of the bank, and
the ability to be resilient in events of stress. This is important for
all our stakeholders.
Cost of deposits (%) Cost of risk (%) Statutory cost:income ratio (%)
0.24
0.20
0.97
2021
2022
2023
0.18
0.32
0.26
2021
2022
2023
153
106
90
2021
2022
2023
How we define it
Interest expense on customer deposits divided by the average
deposits from customers for the year.
Why it is important
Our ability to attract service-led core deposits is a component of
our business model with cost of deposits being a key determinant
in measuring this.
How we define it
ECL expense divided by average gross loans for the year.
Why it is important
We seek to minimise our cost of risk, balanced with the interest
received, to ensure we are optimising our lending.
How we define it
Total costs (excluding ECL expense) expressed as proportion
oftotal income.
Why it is important
As we become more efficient, the ratio decreases and indicates
our path to achieve the relevant scale for our capabilities of
products and services.
Return on tangible equity (%)
 
Loan-to-deposit ratio (%) Total shareholder return (%)
 
(28)
(10)
4
2021
2022
2023
75
82
79
2021
2022
2023
(94)
(41)
(71)
2021
2022
2023
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
Net 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.
15
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Despite these challenges, we have entered
2024 with both a stronger capital and liquidity
position. We have taken the first steps to
deliver a disciplined cost reduction programme
that will act to mitigate many of the
headwinds we face and ensure a return to
sustainable profitability.
Statutory and underlying results
Financial information in this report is
prepared on a statutory (taken from our
financial statements on pages 158 to 224)
and underlying basis (which we use to
assess performance on a management
basis). Further details on how we calculate
underlying performance, as well as our
other alternative performance measures
can be found on pages 230 to 234.
Income statement
2023
£m
2022
£m
Change
%
Underlying net
interest income 411.9 404.2 2%
Underlying non-net
interest income 134.6 117.9 14%
Total underlying
income 546.5 522.1 5%
Underlying operating
expenses (530.2) (532.8) –
ECLexpense (33.2) (39.9) (17%)
Underlying loss
before tax (16.9) (50.6) (67%)
Non-underlying items 47.4 (20.1) n/a
Statutory profit/
(loss) beforetax 30.5 (70.7) n/a
Interest income
Interest income benefitted from a rising base
rate during the period, increasing 52% to
£855.7 million (2022: £563.7 million). Lending
income continues to be the largest component
of our interest income.
Summary of the year
2023 was another important year for us as we
returned to profit on both a statutory and
underlying basis in the first half of the year,
established our new holding company and
secured a successful capital package that will
allow us to continue to profitably grow the
business over the coming years.
For the full year ended 31 December 2023,
werecorded an underlying loss before tax of
£16.9 million, a reduction of 67% from 2022
(2022: loss of £50.6 million), partially
reflecting the higher cost of deposits and
wider market trend of declining current
account balances.
On a statutory basis we recognised a profit
before tax of £30.5 million (2022: loss of
£70.7million), reflecting the one-off gain on
the refinancing of our existing Tier 2 debt as
part of the capital package.
Additionally, non-underlying items included
£20.2 million of costs associated with our
announced cost reduction plan which is
designed to improve the ongoing efficiency
ofour business as we look to deliver
sustainable profitability.
Our results were impacted by the setback in
September to our ambitions to achieve AIRB
accreditation for residential mortgages and
associated speculative media reports
regarding our capital position led to an
outflow of customer deposits, with a decrease
in current account balances. Our strong levels
of liquidity and prudent approach meant these
outflows were manageable and we were able
to quickly replace these balances with
longer-term deposits, albeit at a higher cost,
which contributed to a material increase in
ourcostof deposits in the fourth quarter.
Residential mortgage assets benefitted from
higher rates for new and retained customers,
with asset yields increasing to 3.37% (2022:
2.65%). Our retail mortgages are 92% fixed,
with an average time to reversion of 2.41 years
(31 December 2022: 2.45 years); we expect to
see continued rate growth in the years ahead
as older balances roll-off and are replaced
with new lending at a higher rate.
Our commercial lending portfolio income
grew due to higher yields, predominantly
driven by our floating business loans which
have seen greater yields as a result of the
higher base rate environment, as well as
thecontinued attrition of lower-yielding
government-backed lending which was
written during the COVID-19 pandemic.
Commercial lending remains a strong and
growing part of our book; as part of our
strategy, we will continue to rotate and grow
our commercial lending, with a particular
focus on small and medium enterprises as
wellas more specialist lending.
Consumer lending income also increased,
driven by higher yielding originations due to
the base rate environment. In 2024, we will no
longer provide new consumer lending and
instead focus on the commercial and
specialised mortgages for new originations.
We also saw the benefits of increased rates
flowing through to our treasury portfolio with
interest income on our cash and investment
securities increasing. This increase was also
aided by our decision to adjust our portfolio
mix towards lower risk-weighted investment
securities and restrict levels of new lending
origination to repayment levels.
Interest expense
Interest expense increased 178% to
£443.8million (2022: £159.6 million). This
increase reflected the combination of the
continued gradual reduction in non-interest
bearing personal current accounts as well as
an increase in cost of deposits reflecting the
rising rate environment.
The reduction in average balances started
across the industry in late 2022 in response
toincreases in the cost of living, as customers
looked to pay down debt and move excess
deposits into savings accounts, as well as
weather the higher inflationary environment.
We saw additional attrition in the fourth
quarter following media speculation
surrounding our capital options although we
have continued to see the number of current
accounts grow.
During 2023, we have enhanced our deposit
capabilities, including serving aggregators and
the launch of limited-edition savings products.
This has successfully aided deposit inflows,
whilst also increasing our average cost of
deposits to 0.97% (2022: 0.20%).
Our wholesale funding expenses have also
increased as a function of interest rates, where
the largest expense is the Bank of England’s
Term Funding Scheme (TFSME) which is
directly linked to base rate. Due to a higher
rate environment, we have seen expenses for
TFSME increase to £161.3 million (2022:
£55.5million). Despite this increase, it remains
an additional stable cost of funding and is
accretive to net interest income.
During the year, we repaid early the TFSME
maturities scheduled for 2024 and the start of
2025. This repayment was partially funded by
repurchase agreements, which represented a
more cost-effective form of funding. We also
used repurchase agreements in the fourth
quarter which provided additional liquidity,
which were largely repaid by the year-end.
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Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Continued
A combination of these factors, along with
theincrease in base rate, led to an increase
ininterest expense on repurchase agreements
from £3.4 million in 2022 to £50.1 million
in2023.
As part of the capital package, our existing
Tier2 notes, which repriced to 9% in June 2023,
were redeemed and replaced with £150million
of new Tier 2 notes at a coupon of14%. The
redemption date of our existing MREL debt was
extended, and £175 million new MREL debt
issued, both at a coupon of 12%.
The repricing and restructuring has
resultedinan increase to interest expense
ondebt securities in 2023 which rose from
£48.7 million in 2022 to £55.7 million in 2023;
this increased cost of funding will continue
into thefuture. Despite the increased cost,
therefinancing of our wholesale debt has
enhanced our balance sheet strength,
provides additional certainty to all
stakeholders and allows us greater runway
tocontinue to deliver our strategy thereby
assisting in delivering greater earnings
potential in the future.
Non-interest income
Net fee and commission income has increased
by £8.6 million to £90.4 million in 2023 (2022:
£81.8 million), reflecting growth in retail and
business current account volumes. Interchange
income grew by £3.0 million to £40.0 million
(2022: £37.0 million) reflecting increased
consumer spending using a Metro Bank card.
Safe deposit box income increased by
£1.7million to £18.2 million (2022: £16.5 million)
reflecting higher volumes as occupancy levels
increased, driven by greater consumer
demand in strategic geographical locations.
Foreign exchange income has remained
broadly static year on year at £34.0million
(2022: £34.1 million), providing avaluable
source of income, whilst having minimal
impact on our capital ratios.
Operating expenses
2023 2022
Underlying cost: income ratio 97% 102%
Statutory cost: income ratio 90% 106%
Despite inflationary pressures, our disciplined
approach to cost management has led to a
slight decrease in underlying operating
expenses to £530.2 million compared to
£532.8 million in 2022.
This was aided by the decision at the end of
2022 to reduce the number of consultants
andcontractors used in the business, and to
streamline our project delivery capabilities.
Salary costs remain our biggest contributor
tooperating expenses and in the current year
we incurred costs of £241.2 million (2022:
£236.6 million). A £13.8 million provision for
the cost of the restructure has been booked
in2023 as a non-underlying item.
Professional fees have reduced significantly
by£15.2 million to £23.2 million (2022:
£38.4million) as we have moved away from
the use of contractors. In addition to this,
information technology costs have also
fallenby £2.5 million to £59.7 million (2022:
£62.2million), reflecting our cost discipline.
Occupancy expenses continue to be a fixed
cost being driven by our store portfolio;
costshave remained broadly flat despite
theinflationary environment as we continue
toactively reduce the cost base whilst
maintaining our presence on the high street.
The continued discipline in operational cost
has also funded areas of increased expenses,
including greater investment into deposit
product capability as well as a new multi-year
sponsorship of women and girls cricket with
the ECB. We see this as part of our ongoing
commitment to become the number one
community bank.
Non-underlying items
2023
£m
2022
£m
Change
%
Impairment and
write-off of property,
plant, equipment and
intangible assets (4.6) (9.7) (53%)
Remediation costs – (5.3) n/a
Transformation costs (20.2) (3.3) 512%
Capital raise and
refinancing 74.0 – n/a
Holding company
insertion costs (1.8) (1.8) –
Non-underlying items 47.4 (20.1) (336%)
We have recognised non-underlying income
in2023 of £47.4 million (2022: expenses of
£20.1million) driven by the capital package
secured in October 2023 which resulted in a
40% haircut, and a £100 million gain, on the
£250 million Tier 2 debt issuance. As part of
the capital package, we incurred costs of
£26.0 million. These consisted of fees paid
toour advisors in relation to the debt
restructuring, the acceleration of unamortised
issuance costs, as well as the impacts from
thebreaking of the hedge relationships the
instruments were previously in.
This is offset by the recognition of £20.2 million
of transformation costs, which includes a
£15.0million provision for restructuring and
associated costs. We have benefitted from the
completion of remediation activities which
were settled in 2022.
Expected credit loss expense
31 December 2023
ECL
allowance
£m
Coverage
ratio
%
NPL ratio
%
Retail mortgages 19 0.24% 1.87%
Consumer
lending 108 8.33% 5.94%
Commercial 72 2.13% 4.91%
Total lending 199 1.59% 3.11%
31 December 2022
Retail mortgages 20 0.26% 1.45%
Consumer
lending 75 5.07% 3.38%
Commercial 92 2.21% 4.59%
Total lending 187 1.41% 2.65%
We recognised an expected credit loss
expense of £33.2 million in year 2023 (2022:
£39.9 million), reflecting the challenging
economic environment arising from the
increased cost of living. The decrease from
2022 is due to management actions to
optimise the credit quality of new lending,
combined with releases relating to commercial
customers that we have worked with and
havesecured repayments from. We continue
to maintain management overlays and
adjustments of £23.4 million (2022:
£30.9million) which represents 12% of ECL
stock (31December 2022: 16%). As at
31December 2023, our coverage ratio was
1.59% (2022: 1.41%) and we believe we remain
appropriately provided at this stage in the
economic cycle.
Consumer lending accounted for the majority
of the expected credit loss expense driven by
loan maturation and deteriorated performance
due to macroeconomic factors. The loan
coverage ratio for consumer lending ended
the year at 8.33% compared to 5.07% as at
31December 2022.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Continued
Commercial lending has been more resilient
in2023, with a release of expected credit
losses during the year. The coverage ratio for
commercial lending has decreased slightly to
2.13% as at 31 December 2023, down from
2.21% as at 31 December 2022.
We also saw a release of expected credit
losses in respect of our retail mortgage
portfolio, where credit quality remains high,
leading to a slight decrease in coverage ratio
from 0.26% to 0.24% over the year to
31December 2023.
Looking forwards into 2024, we expect to
continue the rotation of assets away from
consumer unsecured and towards the
commercial sector where we see strategic
opportunity to support SMEs, a vital segment
of the UK economy. The economic
environment and wider outlook remain
challenging and uncertain; however our
processes ensure we continue to maintain
adequate coverage ratios and continue to
actively manage our portfolios.
Balance sheet
Lending
31 December
2023
£m
2022
£m
Change
%
Retail mortgages 7,817 7,649 2%
Consumer
lending 1,297 1,480 (12%)
Commercial 3,382 4,160 (19%)
Gross lending 12,496 13,289 (6%)
ECL allowance (199) (187) 6%
Net lending 12,297 13,102 (6%)
Net loans and advances to customers ended
the year at £12,297 million, down 6% from
£13,102 million as at 31 December 2022, as we
actively managed our RWA capacity reflecting
our capital constraints for the majority of
theyear.
The increased interest rate environment is
ensuring that we are achieving a higher return
on regulatory capital in all areas of lending as
new loans are written at higher yields but with
the same risk-weighting.
Retail mortgages continue to form the largest
component of our lending base at £7,817 million
(31 December 2022: £7,649 million),
representing 63% of lending (31 December
2022: 58%). With the feedback from the PRA
that we should not expect to receive AIRB
approval in 2023, our focus going forward will
be to dominate in niche parts of the mortgage
market where our manual underwriting
capacity is a competitive advantage. This will
likely mean that we seek to compete less for
vanilla mortgages with competitors benefitting
from a materially lower RWA weightage than
either standardised weightages or those
expected under the Basel 3.1 regulations.
The commercial portfolio has decreased
from£4,160 million as at 31 December 2022,
to £3,382 million as at 31 December 2023. The
decrease primarily related to our government-
backed COVID relief loans which continue
torun off following the closure of most
schemes in 2021. As at 31 December 2023
outstanding lending under these schemes
totalled £938 million (31 December 2022:
£1,313 million). Although these loans are
highlycapital efficient due to their
government backing, as these were written
atthe bottom of the interest rate cycle,
theyare relatively low-yielding and we
willcontinue to see the benefit to interest
income as these loans roll-off.
Commercial lending is expected to increase
in2024 as we shift our asset focus to
commercial and specialist lending, especially
in the SME sector which is currently
underserved in the market. This includes
launching a suite of relationship-driven
products to ensure we can meet all of our
customer needs.
In 2023, we launched our new business credit
card and commercial overdraft, which are fully
digital journeys with automated acceptance
and decision scoring. This comes off the back
of our business overdraft in 2022 which
continues to be popular with customers.
The consumer portfolio has also decreased
to£1,297 million (31 December 2022:
£1,480million), driven in part to minimise
exposure to a higher risk segment during this
part of the economic environment, but also
partly reflecting our evolving strategic
priorities where we are looking to prioritise
relationship lending as part of our ambition to
be the best community bank.
Treasury portfolio
Over the year, we have continued to optimise
our treasury portfolio to maximise our risk
adjusted return on regulatory capital,
particularly as rates have risen. We ended the
year with £8,770 million of treasury assets
(31December 2022: £7,870 million), comprising
£4,879 million investment securities and
£3,891 million cash and balances at the Bank
of England (31 December 2022: £5,914 million
and £1,956 million respectively). Our investment
securities remain high quality and liquid,
with75% being either AAA-rated or gilts
(31December 2022: 68%).
Other assets
Property, plant and equipment ended the year
at £723 million, down from £748 million as at
31 December 2022. Depreciation continues
tooutstrip additions, due to no new store
openings taking place in 2023, although we
are continuing to identify sites for future
stores in the North of England. These sites are
likely to be smaller than previously envisaged
and more likely to be in locations that are
most convenient for surrounding businesses.
Freehold and long-leasehold properties total
30 out of our 76 stores. This strategy
continues to provide us with a more cost-
effective way of delivering our store-based
service-led model.
Intangible assets have decreased to
£193million, down from £216 million in 2022,
reflecting a more selective approach to
investments. Our investments in 2023 have
included delivering confirmation of payee
services, improved deposit propositions and
anew mortgage platform.
Deposits
31 December
2023
£m
2022
£m
Change
%
Retail customer
(excluding retail
partnerships) 7, 235 5,797 25%
Retail partnership 1,708 1,949 (12%)
Commercial
customers
(excluding SMEs) 2,898 3,188 (9%)
SMEs 3,782 5,080 (26%)
Total customer
deposits 15,623 16,014 (2%)
Of which:
Demand: current
accounts 5,696 7,888 (28%)
Demand: savings
accounts 7,827 7,501 4%
Fixed term:
savings accounts 2,100 625 236%
We remain focused on being a service-led
deposit-driven bank. We ended the year with
deposits of £15,623 million (31 December
2022: £16,014 million), a decrease of 2% year
on year but up 1% from 30 June 2023.
Deposits have been gradually decreasing
during 2023 due to the increased cost of living
weighing on people’s savings capacity as well
as the increasingly competitive interest rate
environment which has seen customers both
paying down debt and increasingly move
deposits to higher-earning savings accounts.
18
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial review
Continued
Following press speculation surrounding our
capital raise, we saw a time-limited outflow of
deposits. Core deposit flows have since
stabilised to more recent normal ranges and
we have seen a return to growth in these
balances following the successful completion
of the capital raise. The launch of a deposit
gathering promotion in November 2023 saw
us successfully attract new funding albeit at
ahigher cost.
Overall our deposit base continues to remain
diversified with a 57%:43% split between retail
and commercial customers (31 December
2022: 49%:51%).
We expect to continue raising deposits along
with current account growth with planned
store openings in the North of England, as well
as continuing to pursue growth in the Instant
Access and Cash ISA markets.
Wholesale funding
We remain predominantly a deposit funded
organisation, with wholesale funding utilised
where appropriate. Our wholesale funding
continues to be mainly the Term Funding
Scheme with additional incentives for SMEs
(TFSME). During the year we have reduced
our utilisation of the TFSME by £750 million,
reducing our holding to £3,050 million
(31December 2022: £3,800 million) as we
repaid some maturities due in 2024 and 2025
early. Part of this has been funded by our high
levels of liquidity, as well as via the utilisation
of short-term repurchase agreements which
represented a more cost-effective source
offinancing.
Taxation
We recorded a tax charge of £1.0 million
(2022: £2.0 million) in the year. This charge is
primarily due to the offsetting impact of
achieving a statutory profit, against exemptions
in tax law for the gain recognised on the
Tier 2 haircut.
We have unused tax losses of £912 million
(2022: £859 million) for which no deferred tax
asset is being recognised. The current value of
our deferred tax asset is £214 million (2022:
£215 million). There is no time limit on the
utilisation of tax losses and as such the Bank
will recognise a deferred tax asset once
sustainable profitability is achieved.
Liquidity
Our liquidity position remains strong and in
excess of regulatory minimum requirements.
We ended the year with a liquidity coverage
ratio of 332% (31 December 2022: 213%) and a
net stable funding ratio of 145% (31 December
2022: 134%).
We continue to hold large amounts of
high-quality liquid assets totalling £6,656 million
(2022: £4,976 million). This included
£3,642million of cash held at the Bank of
England (2022: £1,761 million).
Capital
2023
£m
2022
£m
Change
%
CET1 capital 985 819 20%
RWAs 7,533 7,990 (6%)
CET1 ratio 13.1% 10.3% 280bps
Total regulator y
capital ratio 15.1% 13.4% 170bps
Total regulator y
capital plus MREL
ratio 22.0% 17.7% 430bps
UK regulatory
leverage ratio 5.3% 4.2% 110bps
We ended the year with CET1, total capital and
total capital plus MREL ratios of 13.1%, 15.1%
and 22.0% respectively (31 December 2022:
10.3%, 13.4% and 17.7%), above regulatory
minima, including buffers (excluding any
confidential buffers, where applicable), of
9.2%, 10.8% and 21.2%.
The capital raise saw us issue £150 million of
new equity and £175 million in new MREL-
eligible debt. As part of the capital package, a
long-time investor, Spaldy Investment Limited,
became our majority shareholder.
In addition to raising new capital, we also
refinanced all of our existing regulatory debt.
This consisted of £350 million of MREL, which
had a call date in November 2024. The
refinanced debt, along with the new MREL
hasa call date of 30 April 2028, providing
additional runway for us to deliver our
strategy. Alongside this, we replaced our
existing £250 million of Tier 2 debt with
£150million of new instruments. The
£100million haircut agreed by bondholders
has led to a one-off gain which has been
reported as a non-underlying income amount
in 2023.
We ended the year with risk-weighted assets
of £7,533 million (31 December 2022:
£7,990million), reflecting the active capital
management we have delivered since the end
of 2022 as well as prudent lending decisions at
this stage in the economic cycle.
At the end of the first half of 2023, we also
completed the implementation of our holding
company marking an important milestone in
meeting our requirements in respect of the
Bank of England’s resolution framework. All of
our regulatory capital and debt capital is now
issued from the new holding company.
Basel 3.1
The PRA has published the first of two
near-final policy statements covering the
implementation of the Basel 3.1 standards for
market risk, credit valuation adjustment risk,
counterparty credit risk, and operational risk,
with remaining elements of the standards
expected to be published in the second
quarter of 2024.
In September 2023, the PRA announced a
delay in implementation of the proposals until
1 July 2025. However, the phase in period for
the output floor was reduced from 5 years to
4.5 years to maintain full implementation by
1January 2030.
Based on our balance sheet and lending mix
as at 31 December 2023 and the current
proposals, our initial assessment of the
impactindicates that there should be no
material change to our capital position on
implementation day. It should be noted that
the rules are still subject to change.
Looking ahead
We enter 2024 with a stronger and longer
dated capital base, putting us in a good
position to deliver on strategy. We have also
started the process of delivering a disciplined
cost reduction programme, which will help to
mitigate some of the near-term headwinds,
notably the increased cost of deposits.
Ensuring we reduce our cost of deposits from
their 2023 exit rate through the generation of
additional core-deposits remains a priority.
Alongside this, a key area of focus will be
rotation of assets from consumer unsecured
towards commercial lending, where we
believe we can generate a better return in the
current environment.
This combination of selective capital
allocation, pricing rigour and cost discipline
iscore to our execution, with these steps
meaning we are on the path to long term
sustainable profitability.
Cristina Alba Ochoa
Interim Chief Financial Officer
16 April 2024
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social
and governance review
Our ambition to be the number one community bank
isbuilt on doing the right thing by our customers,
communities, colleagues, suppliers and the environment.
Our customers,
communities
and colleagues
Page 22
Our planet and
climate-related
disclosures
Page 29
Governance, resilience,
suppliers, data privacy
and security
Page 27
The strong connection between
community banking and ESG
There is a strong synergy between our
ambition to be the number one community
bank, and our approach to ESG. Inherent to
our community banking model is acting
supportively, sustainably and responsibly
towards our customers, our communities,
ourcolleagues and our environment.
Metro Bank has always strived to be a different
kind of bank. We operate at the heart of local
communities, delivering fantastic customer
service. As we have grown, our community-
focused activities have expanded too, and in
parallel to this we have incorporated ESG
priorities into our business.
We embrace diversity and champion
inclusivity; value sustainability and act
responsibly towards the environment; make
apositive difference through the local
colleagues we employ, the local businesses we
work with and the local causes we support.
We simply aim to do the right thing by our
stakeholders. Inshort, a true community
bank.Our support for communities in 2023
has included:
• Easter Egg Appeal between 20 March and
6April distributing eggs to local community
groups.
• Pride events in London and Birmingham.
• Diwali in Leicester (one of the largest Diwali
celebrations outside of India) in October
and November.
• 21 stores participated in Silver Sunday on
1October 2023, a campaign to tackle
loneliness and isolation among older people.
• Armed forces day in June.
• The Morph art trail in central London.
• International Women’s Day in March.
• Hertfordshire County Show and the
Hertfordshire Food and Farming day in July.
2023 ESG governance structure
ESG governance and structure
The Board has oversight of our ESG
strategy and priorities and ESG issues are
regularly considered by ExCo. Our internal
ESG structure comprises an ExCo-level
ESGSteering Committee which coordinates
all our ESG activities and reports into the
Board on an annual basis, plus Working
Groups of subject matter experts that
coordinate progress and activity across
ESGthemes and report into the ESG
Steering Committee every quarter.
The Risk Oversight Committee (ROC) has
oversight of the framework for managing
and reporting the risks from climate change,
as set out in the Enterprise Risk Management
Framework. ROC can escalate climate-
related risk matters to the Board.
The Audit Committee reviews our ESG
update and disclosures for TCFD
requirements as part of its wider role in
reviewing our Annual Report and Accounts.
Non-Executive Director Nick Winsor has an
informal Board role for ESG oversight which
includes engaging with senior management
on ESG matters. The Chief People Officer is
the ExCo member responsible for ESG
strategy and the Chief Risk Officer has SMF
responsibility for climate change risk.
Risk Oversight
Committee
Audit
Committee
Board of Directors
Environment
Working Group
Social
Working Group
Governance
Working Group
Executive
Committee
ESG Steering
Committee
Executive Risk
Committee
20Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
ESG materiality and priority themes
In 2022, we conducted a materiality assessment of our approach towards current and emerging ESG issues to obtain deeper understanding
of our external and internal stakeholders’ views. We used the Global Reporting Initiative approach. Following research and a shortlisting
exercise, we asked stakeholders to rank 19 issues, which we mapped against six overarching priority themes. We take account of the results
in our considerations of ESG issues.
Our customers and communities Our colleagues Data privacy and security
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.
• Financial inclusion, literacy and
education.
• Supporting vulnerable customers.
• Community engagement, investment
andfundraising.
We are committed to an AMAZEING
colleague experience, based on an
inclusive culture.
Topics identified via materiality
assessment:
• Colleague attraction training and
development.
• Colleague engagement, health, safety
andwellbeing.
• Diversity, equality and inclusion.
We continue to assess evolve and
mature our data privacy and cyber
security capabilities
Topics identified via materiality
assessment:
• Data privacy and cyber security.
• Financial crime and fraud.
Our suppliers Governance and resilience Our planet
We work with suppliers who uphold our
values and actively assess and monitor
the controls they put in place.
Topics identified via materiality
assessment:
• Supply chain engagement and
responsible procurement.
• Human rights and modern slavery.
• Anti-bribery and corruption.
Good governance, compliance and risk
management practices make 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.
We are taking the actions required to
make positive changes and reduce our
impact on the environment.
Topics identified via materiality
assessment:
• Climate change.
• Operational environmental efficiency.
• Responsible investment and
stewardship.
• Sustainable product innovation.
21
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
UN SDGs
Our ESG strategy contributes to a
number of the United Nations
Sustainable Development Goals
(UN SDGs) and this is highlighted as
appropriate in the following pages.
Our customers,
communities and
colleagues
stores are specially trained to deliver Money
Zone to children at Key Stage 2 and 3 in local
schools and clubs. We have reached well over
250,000 children with Money Zone to date,
including more than 170 schools and
community groups in 2023. This year we
extended Money Zone to large community
events including to 1,100 children at the
Hertfordshire Food and Farming day in July.
Last year we launched a financial education
programme for young care leavers, and in
2023, we extended it to young people in sixth
forms and colleges and to people serving in
the armed forces.
In 2023, we delivered 16 ‘Tech Zone’
workshops with more than 300 primary
school kids from the most deprived parts of
London, teaching basic coding skills using
micro:bit – tiny computers that have various
sensors and capabilities such as buttons,
LEDs, light sensor, temperature sensor,
microphone, compass, accelerometer,
speaker, radio and pins to connect to other
devices or extensions. As part of this, Metro
Bank built a strong relationship with STEM
Learning and became accredited as a STEM
organisation, in order to facilitate training to
the community. We also created a train the
trainer workshop to educate Metro Bank
colleagues to deliver the programme
inschools.
Education for our colleagues has always
beena critical part of creating FANs in our
communities. In addition to onboarding
1,155new colleagues, this year we have
runthree learning campaigns with subject
experts to develop skills and to foster a
cultureof learning.
Our commitment to community banking
aligns with the ‘S’ of ESG. Itinforms everything
we do and runs through every aspect of our
model and engagement with our colleagues,
customers and communities. By helping our
communities thrive, we believe our business
will too. Responsibility for delivery is shared
across all Metro Bank colleagues, led by our
stores with their physical presence in
communities across the country. In the
following section, we present how our
approach to community banking promotes
Education, Employment, Equality and Equity.
Education
Alignment to
UN SDGs:
We have always championed financial
education in our local communities. Research
from the Money and Pension Service in
summer 2023 found that under half of children
aged seven to 17 have been taught the skills
they need to handle money as adults. Our free
Money Zone financial education programme
recognises this need and colleagues in all our
We believe that by fostering these
key relationships we can generate
wider shared prosperity.
Campaigns focused on keytopics:
• data literacy and protection
• personal development andcareers
• focusing onleadership mindset and skills.
The career campaign alone saw 61%
ofourcolleagues accessing the new modules
and events, with over 3,000 views
onourMetro Bank University (MBU)
internaldigital platform.
250k+
children have attended our Money Zone
education programme
Further developing our technical capabilities,
we extended access to learning resources to
support the majority of our corporate
functions. We have access to over 2,150 new
courses from expert training providers
globally and we have seen 4,729 colleague
interactions (equating to 1,085 learning hours).
Our popular MSc Sustainable and Digital
Banking apprenticeship programme has seen
seven graduates this year, with 19 colleagues
starting in December. We also launched our
Tech Academy, developing skills through
apprenticeships in cyber and IT operations,
and currently we have 137 colleagues
completing apprenticeships.
75% of our senior leaders attended one or
more events hosted by a series of five thought
leaders and industry experts. Topics ranged
from developing a human customer
experience to competition in the banking
sector, to the barriers that women face
returning to work after a career break.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
In 2023, 95 colleagues joined us on our Level 2
and 3 Financial Services Customer Advisor
Apprenticeship Programmes which support
people starting a career in banking – the
programme has achieved an overall
effectiveness rating of ‘good’ from Ofsted.
63% of our apprentices in our stores and
Amaze Direct contact centres come from the
50% most deprived areas of England.
Through the opportunity to share up to 25%
ofour apprenticeship levy, we can support
non-levy paying businesses in our local
communities to recruit apprentices. In 2023,
we focussed on supporting female-led
businesses in the Northants area.
300+
female business leaders attended networking
events across our stores
Metro Bank is a founding signatory to the
Investing in Women Code, and as a
community bank we can be instrumental in
supporting female entrepreneurs. In 2023,
inaddition to our stores’ regular networking
events for local businesses, stores hosted ten
events for more than 300 female business
leaders. We have redeveloped our public
webpage dedicated to supporting women
inbusiness, adding a range of case studies
toinspire future female business leaders,
highlighting the support we can provide, and
including the details of our local ambassadors
for female entrepreneurs.
Employment
Alignment to
UN SDGs:
We are delighted to be named in Newsweek’s
UK top ten Most Loved Workplaces® for the
second year running – the ranking recognises
companies that put respect, caring, and
appreciation for their colleagues at the centre
of their business model. The numerous awards
we’ve won in 2023 include:
• Top ten UK Most Loved Workplaces.
• Top 1% Workplaces Awards: Diversity,
Equity and Inclusion Award and Leader of
the Year Award.
• Global Diversity List 2023: Diversity and
Inclusion Professional and Champion.
• 2023 Inclusive Awards: Inclusive Culture
Initiative Award.
• Elite Women 2023: Best women mortgage
leaders in the UK.
• Women in Finance Awards 2023: Diversity
Lead of the Year.
• MoneyAge Mortgage Awards 2023: Large
Loans Mortgage Lender of the Year.
• British Specialist Lending Awards: Lender:
Head of Sales.
• Mortgage Strategy Awards: Best Large
Loan Lender.
• UK National Contact Centre Awards: Quality
Manager of the Year.
• Credit Strategy Car Finance Awards:
Company Award for Diversity & Inclusion.
• M&A Today, Global Awards 2023: Best
Lender of the Year – UK.
• Forbes Advisor Best of 2023 Awards: Best
Business Credit Card.
• Moneynet Personal Finance Awards 2023:
Best Business Credit Card.
200k
businesses have their current account with us
and more are switching to us everyday
Metro Bank customer case studies also
featured prominently in the British Business
Bank’s Investing in Women Code Annual 2023
Report. Our stores celebrated International
Women’s Day by hosting more than 2,000
people at complimentary networking events
for local businesses.
We’re committed to helping local businesses,
who form such an important part of thriving
communities. We put relationship banking at
the heart of our support for businesses, with
every small business customer enjoying direct
access to a Local Business Manager.
We provide current accounts to more than
200,000 businesses and more are switching
to us every day. Building on the successful
introduction of our enhanced business
overdraft last year, this year we have launched
our enhanced Business Credit Card providing
fast, flexible access to up to £60,000 of credit,
underpinned by an automated and simplified
application process meaning customers can
walk out of their local store with their new
credit card in under 45 minutes. We have also
radically improved our small business lending
products increasing lending amounts up to
£60,000 with a faster journey from application
to decision to receiving funds.
Inspiring the
next generation
In September 2023, we worked with
Phoenix Primary School in Basildon to
deliver three one-hour workshops to
pupils with different ability levels
including children with ADHD and
autism. We adapted our training plans
and sessions to reflect this, including
simplifying our materials to ensure they
were appropriate. As a result of these
successful workshops, we were asked to
run a session at Roehampton Gate
Primary School which specialises in
children with mild to moderate autism
and Asperger’s syndrome.
Environmental, social and governance review
Continued
23
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Equality and equity
Alignment to
UN SDGs:
The current economic environment remains
challenging for our customers and we have
brought together information regarding the
support we can offer into an online hub, along
with money tips and links to specialist
organisations. Recognising this is a concerning
time for some of our mortgage customers,
particularly those approaching the end of their
existing deal, we have signed up to the
Government’s Mortgage Charter to offer
additional support including for customers
struggling to keep up with mortgage payments.
52
of our stores are now Safe Spaces
We are committed to financial inclusion and
offer all our customers market-leading service,
access and support. We have continued our
extensive internal vulnerable customer
programme throughout 2023 with a focus on
bedding-in skills and capability across all
functions so that vulnerability is considered
across all relevant processes and practices.
We are strong supporters of the Armed
Forces Covenant and hold the Gold Award.
We are proud to have been named in the 100
GREAT British Employers of Veterans by the
Ex-Forces in Business Awards. In 2023, we
recruited three ex-services colleagues and in
June we hosted a business insights day in
central London for veterans preparing for
employment outside the military, and a
number of our stores hosted celebrations
forArmed Forces Day in June.
Our new stores planned in the north of
England will create more than 200 roles
directly, with around 30 in place already, and
support a significant number of jobs indirectly
via the many businesses we support in our
local communities.
Our wellbeing programme offers a range of
tools including our Employee Assistance
Programme, plus support through our health
partner Vitality and the Bank Workers Charity.
Colleagues inspire each other with articles and
blogs, which are shared on a weekly basis. To
support the launch of our wellbeing strategy,
we ran a Wellbeing at Work week which saw
400 colleagues attend a webinar for financial
wellbeing and over 100 colleagues booking
Vitality Health checks. This is in addition to
training and awareness sessions and online
support materials. We also offer flexible
working options and introduced a Day 1 right
to request flexibility in May 2023. This
generated a c.400% monthly increase in
flexible working applications.
Progress this year has included:
• Further specialist training for customer-
facing colleagues;
• Further support for victims of financial
abuse, including the roll-out of Safe Spaces
across 52 stores and training for our store
colleagues. Safe Spaces offer a private area
for people to access support safely in
partnership with the UK Says No More
campaign;
• Launch of direct referral processes with
StepChange, PayPlan and GamCare for
customers in financial difficulty to get
specialist support to manage their debt;
• Launch of a dedicated Vulnerable Customer
page on our intermediary website to help
brokers understand how to identify a
vulnerable customer; and
• A new Mortgage Payment Support page for
customers if they are worried about their
finances.
Armed Forces
Business
Insights Day
25 people attended our Armed Forces
Insight Day, where they heard from our
Chief People Officer and Managing
Director of Banking Products, plus a
number of other senior leadership team
members representing a range of
business areas.
Attendees had the opportunity to have
their CVs reviewed by our internal
recruitment team and meet hiring
managers. This led to three attendees
following up and beginning the process
for applying for roles. This process is
continuing in view of the 12-month
timeframe for those leaving the
ArmedForces.
Just a handful of examples of our
support for local good causes: our west
London and Staines stores celebrated
the Sikh New Year festival, Vaisakhi, by
donating to local foodbanks; our local
colleagues conducted extensive litter
clean ups on a nature trail in Croydon
and at St Edeyrns Village in Cardiff; our
Oxford colleagues helped prepare a new
premises for the local Yellow Submarine
charity for people with learning
difficulties and autism; and our
Wolverhampton store donated 180
boxes of banana, apple and blueberry
treats to Birmingham Dogs Home.
Supporting our
local causes
24Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
This year, Metro Bank announced a new
partnership with the England and Wales
Cricket Board (ECB), recognising our shared
commitment to diversity, inclusion, and
making a meaningful impact in our
communities. We’re very proud to be:
• First ever Champion of Women’s
and Girls’ Cricket
• Title Partner of the Women’s Ashes
• Title Partner of the International and
Domestic One Day Series for Women
and Men
• Official Banking Partner of the ECB.
At the heart of the partnership is the Women’s
and Girls’ Fund, co-developed and co-funded
by Metro Bank and the ECB to help transform
grassroots cricket. Our mission is to triple the
number of girls’ teams by 2026, by empowering
more female coaches and volunteers to inspire
girls on and off the pitch.
We’re proud of our culture, and colleagues are
telling us they like working here too. Our Voice
of the Colleague survey saw our best ever
colleague engagement scores this year with
allscores above or equal to the global
benchmark. Our engagement question “How
happy are you working at Metro Bank?”
(eSAT) increased by 3 points compared with
October 2022 (+4 points above benchmark).
We want every colleague to feel included and
valued, and therefore diversity and inclusion
(D&I) has always been an important part of
our AMAZEING culture. Our commitment to
being a D&I leader helps us bring out the best
in our colleagues, attract new talent, thrive as
a business and ultimately create more FANS in
our communities.
In May we launched a free, on-demand
BritishSign Language (BSL) interpreters
service to support deaf customers. The
service is available for in-person visits to
ourstores and for phone calls to our
AmazeDirect customer service team. This
service enhances the existing range of
accessibility options for Metro Bank customers
including Relay UK to help customers with
hearing and speech difficulties communicate
with us over the phone, and the ability to
request certain documents in braille, large
print, or on audio CD.
In line with our AMAZEING values, if things go
wrong we strive to put them right again and
deliver a positive customer experience. We
publish customer complaints data on our
website here: www.metrobankonline.co.uk/
help-and-support/forms/give-us-feedback/
complaints-data/
5k+
hours of colleagues time dedicated to
volunteering in the communities we serve
As a community bank, Metro Bank gives every
colleague a paid day dedicated to volunteering,
we call it a ‘Day to Amaze’: it’s a great way to
support local good causes practically. In 2023,
colleagues dedicated more than 5,000 hours
of their time to volunteering, an increase of
60% compared to 2022, with the number of
colleagues using their Day to Amaze
increasing from last year. Alongside this, our
colleagues and local communities raised
£72,800 for local, national and international
good causes via collections, sponsored
activities and events and via the Magic Money
Machines in our stores.
From grassroots clubs all the way up
to the Metro Bank Women’s Ashes
2023 was a record-breaking season for the
England Women’s cricket team, making the
launch of our partnership even more
impactful. With viewership on the rise too,
our message is travelling further than ever.
In fact, the highest number of people on
record watched the women’s games this
summer – a total of 7.4 million, which is
nearly a quarter of total women’s sport
viewership in the UK.
With our name up in lights for 138 matches
– including the Metro Bank Women’s Ashes
and Metro Bank One Day Series – and two
brand campaigns with a dynamic new look
and feel, the figures are brilliant from a
brand perspective too.
With our brand awareness growing
+5ppt amongst cricket fans, coupled with
a +9ppt increase in brand trust among
female fans, we’re off to a flying start. As
always, our colleagues are also a huge
priority for us, and it’s been fantastic to see
so many attending matches, meeting the
players, and even presenting trophies on
match days.
Our partnership has only just started to
scratch the surface, and with the
momentum in women’s sport growing ever
stronger, this is a real opportunity for us to
make a difference in our communities both
on and off the field.
Environmental, social and governance review
Continued
25
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Gender pay gap
As at April 2023
16.7%
median pay agp
20.5%
mean pay gap
Read more on our gender pay at
metrobankonline.co.uk
Environmental, social and governance review
Continued
Our 5 colleague inclusion networks
Mbody: promotes health and wellbeing in
both mind and body, including those with
both visible and non-visible barriers.
Mbrace: embraces our diverse people and
fosters an environment where everybody
can be themselves.
Mfamily: a network for all those in a family
environment to share experiences and
provide support for those who want or
needit.
Mpride: helps create an environment of
inclusion where everyone can be themselves
and at their very best. Open to all
colleagues who identify themselves as
LGBTQIA+ or consider themselves an ally.
Women on Work (WoW): supports all
colleagues, regardless of gender, who are
interested in engaging, inspiring and
collaborating with female colleagues at
Metro Bank.
pride
WoW
body
family
brace
Our colleague networks have had an impactful
year: our MPride network had 50 colleagues join
Pride marches in Birmingham and London in
the summer, demonstrating solidarity with the
LGBTQ+ community. In September, colleagues
celebrated National Inclusion week with a variety
of events, both in-person and virtual events at
contact centre sites, team huddles at stores
andwebinars in head office. Cross-network
Mentoring Circles were launched with 82
colleagues taking part promoting intersectional
inclusion, and we launched 52Safe Spaces
across our stores in conjunction with a domestic
abuse charity byWoW.
Our Mbrace network hosted their annual
BlackHistory Month event on 12 October where
86colleagues attended in person at our Holborn
office to hear from guest speakers, learn about
mentoring and hear from the Sickle Cell Society.
£5,400 was raised as part of a raffle and auction
for the Sickle Cell Society. Our Mfamily network
championed the achievement of Metro Bank
becoming a Fostering Friendly organisation,
whilst Mbody have dedicated time to educate
our colleagues about disabilities and
neurodiversity.
Gender pay gap
As a community bank, we believe it is important
that our team reflects the diverse communities
we serve; we have a range of initiatives focused
on encouraging and supporting talented women
into leadership and specialist roles, and we are
working hard on initiatives to close the gap. Our
median gender pay gap of 16.7% compares with
a national average gender pay gap of 14.3%
across all industries, calculated by the Office for
National Statistics in November 2023.
Whilst the gender split amongst our colleagues
at Metro Bank is broadly balanced, our gender
pay gap exists mainly because of an imbalance
when we look at diversity by seniority. This means
that we have more colleagues in junior roles than
at senior levels, and within this balance we have
more female colleagues in our junior roles, and
more male colleagues in our senior roles.
% Females in
SLT (Exco -1)
2022 39%
2023 38%
Industry 33%
Female colleagues as
% of the workforce
2022 46%
2023 46%
Industry 47%
Female Directors on
the Board
2022 36%
2023 36%
26Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
We have always had zero-tolerance for bribery
and corruption. We deliver regular training
toall colleagues on our Anti-Bribery and
Corruption Policy and they are encouraged
toraise any concerns about the conduct of
others or the way the business is run, without
fear of unfair treatment under our
Whistleblowing Policy.
We comply with all applicable sanctions
regimes. We also comply with UK anti-money
laundering and anti-terrorist financing
legislation and have an implementation
framework in place. We do not give or receive
improper financial or other benefits in our
business operations, nor do we help facilitate
tax evasion in any way. We do not tolerate any
deliberate breach of financial crime laws and
regulations that apply to our business and the
transactions we undertake, and we continue
to invest in our processes and systems
andmonitoring.
Governance
and resilience
Maintaining a strong governance
framework allows us to operate
effectively.
Alignment to
UN SDGs:
Data privacy and security
Keeping our customers safe from fraud and
scams is naturally one of our highest priorities.
Our ‘scam of the month’ series informs people
how to spot and protect against the latest
tricks used by fraudsters. We joined the BBC
Be Scam Safe awareness week in October. We
are active supporters of the Take Five fraud
awareness campaign and last year we joined
Stop Scams UK’s 159 service, which connects
our FANS safely and securely to our contact
centre if they receive a suspicious call about a
financial matter.
Recognising the ever-evolving nature of
cyberrisk, we run a continuous improvement
programme to ensure that our capability
keeps pace. We constantly monitor for
emerging threats and new attack methods
and regularly conduct simulation exercises
tofine tune our capability. We have a rigorous
and mature vulnerability management
processin place, our comprehensive policies
and minimum standards align to ISO 7001
bestpractice, and we benchmark ourselves
against the National Institute of Standards
andTechnology framework. We are active
members of a number of industry forums
andwe provide regular briefings to colleagues
in addition to annual mandatory cyber
security training.
Safe management of personal data is taken
seriously and remains a priority for us. We
continued to make improvements to our
operations and records management team, to
ensure effective governance of our data, in
particular where records contain special
categories of data.
Our suppliers
It is important to us that we work with
suppliers who uphold our values. We take this
seriously – starting from when we select a
supplier during our procurement processes,
then throughout the entire life-cycle of our
business relationships.
In 2022, we launched our first Supplier Code
of Conduct, setting out the expectations we
have of our suppliers. The next version of our
Code will launch in 2024 and will place more
obligations on our suppliers, for example, to
inform us of their progress towards lowering
carbon emissions.
We are gathering more and more information
on our suppliers’ approach to ESG and we are
doing that proactively through our tendering
and contracting activities. In our quarterly
business reviews with our most important
suppliers, we gather data on, and discuss,
topics such as: ISO 14001 certification, use of
renewable energy, compliance with Modern
Slavery legislation and gender pay gap data.
We regularly review the controls put in place
by our suppliers to prevent and detect data
security breaches, bribery, corruption, modern
slavery, child trafficking, unfair wages,
unacceptable working conditions and labour
rights abuses. We expect our suppliers to
adhere to the UN Guiding Principles on
Business and Human Rights.
We remain committed to using the Financial
Services Supplier Qualification System (FSQS)
for our suppliers to share information with us
and we encourage all our suppliers to become
members. FSQS helps our suppliers by
reducing duplication of effort in responding to
buyer due diligence requests, and benefits us
by sharing resources.
Our biggest ever
Money Zone event
In July, colleagues from our stores in
Hemel Hempstead, St Albans, Enfield,
Luton and Borehamwood joined forces
at the Hertfordshire Agricultural Society
Food and Farming Day to deliver part of
our financial education programme –
Money Zone – to 1,100 eleven year olds
from 26 local schools.
Money Zone is a series of financial
education lessons that we offer to
school children – either virtually or in
store. Money Zone usually comprises of
four sessions – budgeting, saving,
banking and the last session which takes
place in store giving children a look
behind the scenes. Given the time
constraints, the pupils enjoyed an
abridged lesson on the day with an
invitation to take up the full course at
their schools at a later date.
To date, we have delivered our Money
Zone programme to over 250,000
children. Across the UK, adult financial
literacy remains at less than 70 per cent.
As a community bank we are committed
to encouraging children of all ages to
learn more about the finances they will
need to understand as they grow older
and start earning money.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Taxes paid (2023)
Taxes collected (2023)
£m %
1. Irrecoverable VAT
and customs duty 39.2 53.77
2. Employer NICs 23.6 32.37
3. Business rates 8.6 11.80
4. Corporation Tax 0.8 1.10
5. Other taxes 0.7 0.96
£m %
1. PAYE 43.0 64.76
2. Employee NICs 13.0 19.58
3. Net VAT 10.4 15.66
Environmental, social and governance review
Continued
Human rights
As a community bank, we are committed to
maintaining positive relationships with our
stakeholders including conducting our
business in a way that respects human rights.
Our policies and practices reflect this,
including our Whistleblowing Policy which
applies to any information relating to
suspected wrongdoing or dangers, and our
detailed Modern Slavery Policy.
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
remain committed to conducting all our
business professionally, fairly and with
integrity across all our relationships, 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 2023 we:
• Published our seventh Modern Slavery
Statement, approved by the Board and
signed by the CEO (available on our website
at: metrobankonline.co.uk/about-us/
modern-slavery/.
• Delivered the sixth report of the Modern
Slavery Champion to the Board. The report
included the annual review of our Modern
Slavery Policy; an update on progress
against the Modern Slavery Statement and
Action Plan; and an update on our internal
Modern Slavery Working Group.
• As part of our Modern Slavery Policy, we
undertake increased due diligence in
respect of our business and supply chains
on a risk basis.
We continue to leverage the FSQS to support
due diligence on suppliers before contracting
and ongoing during the relationship, on a
riskbasis.
1,440
suppliers engaged as part of our due
diligence process
In 2023, we engaged 1,440 active third
parties. Thirty-eight (2.64%) were either
basedin riskier countries (where the 2023
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 38 suppliers demonstrated adequate
controls to mitigate modern slavery risk.
We continue to support our suppliers in
relation to the risk of modern slavery, to clearly
explain our approach to modern slavery and
our expectations of our suppliers.
All colleagues were required to undertake
modern slavery computer-based training
during 2023.
Political neutrality
Metro Bank is and will remain politically
neutral and it is not our policy to open or close
an account due to the political or personal
beliefs of an individual or organisation.
1
2
3
1
2
3
£66.4m
5
4
£72.9m
Taxation
As a community bank, we recognise the
benefits to society from our full participation
in the tax system. As with everything we do,
we are committed to acting with integrity and
honesty in our tax strategy, policies
andpractices.
During 2023, our total tax contribution was
£139.3 million, made up of £72.9 million taxes
paid and £66.4 million of taxes we collected
on behalf of the UK government. Taxes paid
inthe period were charged to our income
statement or capitalised as part of an asset’s
cost. Taxes collected are generated by our
business activity, including the taxes of
employees and customers collected in the
usual course of business and administered
onbehalf of the UK government.
Further information can be found in our Tax
Strategy document available on our website
at: metrobankonline.co.uk/globalassets/
documents/customer-documents/
intermediaries/2022-tax-strategy.pdf.
ESG ratings
In 2023, we commenced engagement with
specialist ESG rating agencies to ensure our
data and activities are understood and
appropriately reflected in our ratings.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Our planet
We are working to reduce the impact of our
operations on the environment. Climate
change is also a risk to us and the communities
we serve – managing this risk, and helping our
colleagues, suppliers, customers and
communities to do so too is a key part of
being a responsible community bank. As we
grow and expand intonew communities, we
are building environmental considerations into
the plans for our new stores.
In recognition of this, we have committed
totwo headline pledges to reduce our
carbonfootprint:
• To make our operations net zero by 2030.
• To make our operations and value chain net
zero by 2050.
In summer 2023, we submitted a full
disclosure to the Carbon Disclosure Project – a
widely-recognised reviewer of corporate
environmental data. The outcome is expected
in early 2024.
Being good to our planet goes hand
in hand with our ambition to be the
number one community bank.
Scope 2Scope 1
500
4000
3500
3000
2500
2000
1500
1000
Operational emissions road map
t
CO
2
e
2019 2020 2021 2023 20262022 2030
0
Alignment to
UN SDGs:
Offsetting/
sequestration of
residual emissions
to be developed
to reach 2030
net zero
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Since 2020, we have sent zero waste to
landfill. We source supplies from renewable
sources and recycle where possible. We
donate surplus office furniture to local
charities, saving tonnes of material from
landfill in addition to the carbon emissions
thatwould arise from purchasing equivalent
new equipment.
This year, we rolled out a new sustainable pen
made from recycled plastic and designed to
be accessible for everyone, including people
with arthritis, carpal tunnel syndrome, or a
prosthetic limb. Our pen caddies are made
from recycled plastic and can be repurposed
as a plant pot – we even provide strawberry
seeds as a symbol of supporting our
communities grow!
As an ethical community bank, we do not lend
directly to businesses that undertake:
• Metal ore mining, coal mining; peat, oil or
gas extraction.
• Fossil fuel power generation.
• Activities that cause deforestation.
• Arms manufacture or military activities.
In autumn 2022, we completed the transition
to purchasing 100% electricity from renewable
sources across all our stores and offices,
certified by the Renewable Energy Guarantee
of Origin (REGO) scheme. This important
milestone has driven a significant reduction in
our operational emissions and has taken our
market-based Scope 2 emissions to zero. We
do not have any operations based in high
biodiversity habitats.
100%
of electricity used in our stores and offices
comes from renewable sources
To continue the progress towards our
operational net zero pledge, our next steps
are to identify and measure our residual
operational emissions and eliminate them
where possible. The remainder will be offset
by purchasing high quality carbon removals.
Bishopsgate
office furniture
reuse
In June 2023, we vacated our office at
55Bishopsgate in London in advance
ofthe building being redeveloped. All
colleagues were relocated to other
central London locations. In line with
ourcommitments to support the
community, to recycle and reduce
waste, we partnered with Collecteco
todonate the office furniture and
equipment to good causes. £128,000 of
furniture and equipment was donated to
13 causes across London including NHS
trusts, the YMCA, Scouts, schools and
charities. Overall, 31 tonnes were saved
from landfill, and the equivalent of
177,500kg of carbon emissions were
saved, compared to purchasing the
same equipment from new.
We were founded to be a different kind of
bank – a bank with the community at its heart,
built around colleagues delivering fantastic
customer service.
As we have grown, we have incorporated
environmental, social and governance (ESG)
priorities into our business to ensure we
continue to build it in the right way. In doing
this, we are committed to being open and
transparent about what we are doing and why.
This approach has seen us become known as a
bank that embraces diversity and champions
inclusivity; a bank that values sustainability
and acts responsibly towards the environment;
a bank that makes a positive difference
through the local colleagues we employ, the
local businesses we work with and the local
causes we support. A bank that simply aims
todo the right thing by our stakeholders.
The table below sets out our GHG emissions.
2023 2022 2021 2020 2019
Scope 1 emissions 469 179 336 67 319
Scope 2 emissions (location based) 2,705 2,855 3,327 3,799 4,247
Scope 2 emissions (market based) – – 1,194 729 3,256
Scope 3 emissions (core)
1
1,335 1,397 n/a n/a n/a
Scope 3 emissions (all) 111,205 129,363 155,182 190,333 248,979
Total GHG emissions (location based) 114,379 132,397 158,845 194,199 253,545
Total GHG emissions (market based) 111,674 129,542 156,712 n/a n/a
Full-time equivalent colleagues (FTE) 4,281 4,040 4,184 3,850 3,555
Total emissions per FTE 26.1 32.8 38.0 50.4 71.3
1. This measure covers emissions arising from purchased paper (Cat. 1), Fuel and energy related activities (Cat.3), Waste Generated in Operations (Cat.5) and Business Travel
(Cat. 6).
Quoted emissions figures are quoted in tCO
2
e.
30Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Reporting
requirement
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 policy
list on pages 32 to 33 for a description of each policy)
Environmental
matters
Page 29 – Our planet.
Page 35 – Task Force on Climate-related FinancialDisclosures.
• Climate pledges.
• Supplier management.
• Business and commercial lending.
Colleagues
Page 22 – Our colleagues.
Page 26 – Gender pay gap.
Page 62 – Letter from the Designated
Non-Executive Director for Colleague Engagement.
Page 105 – Annual report on remuneration.
• Diversity and inclusion.
• Recruitment and selection.
• Health and safety.
• Whistleblowing.
• Conflicts of interest.
Social matters
Page 22 – Our customers and communities.
Page 27 – Data privacy and security.
Page 27 – Governance and resilience.
Page 29 – Our planet.
• Climate pledges.
• Supplier management.
• Business and commercial lending.
• Vulnerable customers.
• Data protection.
• Anti-tax evasion.
• Anti-money laundering/counter terrorist financing.
• Business continuity.
• Complaints.
Human rights
Page 27 – Our suppliers. • Modern slavery.
• Outsourcing.
• Diversity and inclusion.
Anti-bribery
andcorruption
Page 27 – Governance and resilience.
Page 151 – Financial crime risk.
• Anti-bribery and corruption.
Non-financial information and sustainability information statement
This statement is prepared in compliance with sections 414CA and 414CB of the Companies Act 2006 and explains where you can find further information about how we do the right thing in
relation to our customers, communities, colleagues and the environment. A description of our business model and strategy, as well as the non-financial KPIs relevant to our business can be found
on pages 11 to 15.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Policy list
Key
1
Our customers and communities
3
Data privacy and security
5
Governance and resilience
2
Our colleagues
4
Our suppliers
6
Our planet
Environmental, social and governance review
Continued
Policy Description ESG priorities
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.
2
5
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
5
Anti-Tax Evasion
The policy sets out our zero-tolerance approach to tax evasion.
1
5
Business Continuity
The policy makes sure we are able to continue delivering services to our customers 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.
1
2
3
4
5
Complaints
The policy is in place to ensure 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
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
4
5
Data Management
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
3
5
Data Protection
The Policy is in place to ensure we comply with our data protection obligations and have the adequate level of data protection as
prescribed by the General Data Protection Regulation.
1
2
3
5
Diversity, Equity 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.
1
2
Fraud
The policy sets a consistent approach to the deterrence, detection and prevention of internal and external fraud.
1
2
5
Health and Safety
The policy protects our customers and colleagues. It recognises our statutory duties and responsibilities under the relevant Health and
Safety and Welfare legislation.
1
2
Information Security
The policy sets objectives, expectations, roles and responsibilities and requirements for protecting both our and customer information.
3
5
32Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Environmental, social and governance review
Continued
Policy Description ESG priorities
Lending and Arrears Management
Policies (including Retail, Business
& Commercial Lending)
These policies set 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 ourselves and our customers in pursuit of our goals and how we support
our customers during periods of financial difficulty.
1
Modern Slavery
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
5
Physical Security
The policy protects our customers and colleagues. It defines the measures to protect our premises from security threats and to ensure
the personal safety and security of all customers, colleagues and visitors.
1
2
Procurement and
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
6
Product governance
The policy sets requirements to ensure products and services are developed to address customer needs, have a defined target market,
are designed to deliver good customer outcomes and are understood by customers.
1
5
Records Management
The policy sets out Metro Bank’s objectives and expectations for managing records responsibly and efficiently from creation to disposal,
complying with legal and regulatory obligations.
1
2
3
5
Recruitment and Selection
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.
2
Sanctions
The policy sets the requirements and approach to managing financial sanctions risks in compliance with applicable sanctions regimes
including the prevention, detection and investigation of potential sanctions evasion.
1
5
Technology
The policy sets our approach to the management of technology and associated risks across each of the delivery channels, to support our
strategic objectives and deliver good customer outcomes.
1
2
3
5
Vulnerable Customer
The Vulnerable Customer Policy sets out our approach to identifying and interacting with vulnerable customers to ensure we deliver good
customer outcomes.
1
2
Whistleblowing
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 us.
2
5
33
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Section 172 Statement
Stakeholder engagement is essential to the execution of
our purpose to be the number one community bank.
The Board must act in accordance with the
duties set out in the Companies Act 2006
(‘the Act’). Under section 172 of the Act, 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 success
for the benefit of our members, and in doing
so have regard to the 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 of stakeholders and the
needs of the Bank. More information on the
key decisions made by the Board in the year
and how stakeholders were considered can be
found on page 58.
Our six key stakeholders:
Our customers Our colleagues Our communities Our investors Our regulators Our suppliers
Our business model
depends upon attracting
customers and turning them
into FANS. Our reputation
and creating FANS is at the
core of our values.
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 are proud to be an
integral part of the
communities we serve.
We engage openly and
transparently with our
investors who help us
togrow.
Following our regulators’
principles, rules and
guidance helps us to put
customers at the heart of
everything we do.
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.
S.172 factor Relevant disclosures Pages
(a) the likely consequences of any
decision inthe long-term
• Our purpose and strategy framework.
• Business model.
• Strategic priorities.
• Risk report.
2–3
11–13
3
124–157
(b) the interests of the Company’s
employees
• Non-financial information statement.
• Our colleagues.
• Board activity and stakeholder engagement.
• Letter from the Designated Non-Executive Director for Colleague Engagement.
31
59
57–61
62–63
(c) the need to foster the Company’s
business relationships with suppliers,
customers, andothers
• Board activity and stakeholder engagement.
• Environmental, social and governance review.
• Our suppliers.
57–61
20–33
61
(d) the impact of the Company’s
operations onthe community and
theenvironment
• Board activity and stakeholder engagement.
• Task Force on Climate-related Financial Disclosures.
• Environmental, social and governance review.
57–61
35–43
20–33
(e) the desirability of the Company
maintaining a reputation for high
standards ofbusiness conduct
• Whistleblowing.
• Anti-bribery and corruption.
• Audit Committee report.
• Modern slavery.
74
27 and 151
70–74
27–28
(f) the need to act fairly between
members ofthe Company
• Board activity and stakeholder engagement.
• 2023 AGM.
• Share capital.
57–61
60
120
34Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related
Financial Disclosures
We are committed to reporting on the impact of climate
change on our business in a transparent manner and
taking responsibility for the actions required to drive
positive changes in our approach to climate-related risks
and opportunities.
In compliance with the FCA’s Listing Rules,
theGroup has made disclosures consistent
with the TCFD 2021 Recommendations and
Recommended Disclosures, including the
appropriate annexes and supporting
guidance. Additionally, following the
amendment of sections 414C, 414CA and
414CB of the Companies Act 2006, the
Grouphas indicated in the below table which
of the climate-related disclosures, outlined in
Section 414CB, are addressed by the TCFD
recommended disclosures, alongside the
pages of the 2023 Annual Report and
Accounts where these are located.
Key points Future developments Page
Governance
Describe the Board’s oversight of climate-related risks and opportunities.
• The Board retains oversight for all climate-related risks and opportunities and has
received half-yearly updates on our progress in this regard in 2023.
• The Risk Oversight Committee has oversight of the framework for managing and
reporting on climate-related risks in line with our Enterprise Risk Management
Framework.
• The Board will continue its regular oversight, engagement and challenge on
climate-related strategy and activity.
• Ongoing review of governance framework to ensure continued alignment with
regulation and industry-recognised best practice and ensure that an appropriate
level of focus on climate-related risks and opportunities is in place.
20 and
38
Describe management’s role in assessing and managing climate-related risks and opportunities.
• Overall responsibility for our approach to climate-related risks and opportunity sits
with the CEO and is devolved to relevant members of the Executive Committee.
• Senior Management Function responsibility under the Senior Managers and
Certification Regime sits with the Chief Risk Officer for climate-related risk.
• Our Environmental Working Group, reporting into the ESG Steering Committee,
discusses our approach to monitoring, measuring and mitigating climate-related
risks on a regular basis.
• Focus on enhancing our data and reporting on climate-related risks via key risk
indicators to facilitate improved management assessment of these risks.
• Further embed climate-related considerations within our approach to product
governance to ensure that climate-related risks and opportunities are being
consistently considered within this process.
20 and
38
Strategy
Describe the climate-related risks and opportunities the organisation has identified over the short, medium, and long term.
• Climate-related risks have been identified and assessed as part of a wider review of
top and emerging risks and embedded in the Enterprise Risk Management
Framework.
• Considerations covering risks, our internal operations and our engagement with
stakeholders are embedded in the ESG materiality assessment for the organisation.
• Opportunities to support our customers in achieving their climate-related aspirations
are considered in the strategy review and product development process.
• Continue to evolve our climate-related strategy with new aspirations aligned to our
overall strategy.
• Expand dialogue with customers on climate-related risks and opportunities to
ensure we can best support their transition to a low-carbon economy.
• Enhance data capture and quality to support identification, assessment and
mitigation of climate-related risks and opportunities and evolve risk capabilities,
origination strategy and product suite accordingly.
39–42
35
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Key points Future developments Page
Strategy continued
Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and financial planning.
• The potential impact of climate-related risks and opportunities on our strategy and
financial position continues to be considered on an ongoing basis.
• Further embedding of climate consideration in our strategic and financial planning,
with consideration of the necessary tools and methodologies to support delivery of
the climate-related strategy.
39–42
Describe the resilience of the organisation’s strategy, taking into consideration different climate-related scenarios, including a 2°C or lower scenario.
• Climate-related stress testing is in place and continues to evolve in maturity. There is
an impairment overlay process established to cover climate-related risks.
• Scenario analysis insights are used to inform the Internal Capital Adequacy
Assessment Process and in financial reporting.
• Continued enhancement of our modelling capabilities. 42
Risk management
Describe the organisation’s processes for identifying and assessing climate-related risks.
• Climate change has been embedded as a cause into the Enterprise Risk
Management Framework, together with frameworks, policies and standards for the
relevant principal risks.
• To form a view on materiality and assess impacts across different time horizons, we
assess each principal risk to identify how climate change could manifest.
• Internal modelling capabilities are in place to assess the exposure of our lending
portfolios to climate-related risks.
• Continue to develop methodologies to identify and assess climate-related risks.
• Further development and embedding of climate-related controls.
• Enhancement of climate-related data and monitoring across risk types and
processes.
40–42
Describe the organisation’s processes for managing climate-related risks.
• We have integrated climate-related controls into our credit processes across both
retail and commercial lending, with credit assessments for in-scope commercial
clients including qualitative climate risk considerations.
• We engage closely with our material suppliers to ensure climate-related risks are
identified and appropriate controls put in place.
• Extend climate scenario analysis to additional portfolios.
• Enhance capabilities for EPC data capture to enable regular portfolio monitoring.
40–42
Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management.
• Climate-related risks are fully embedded in our Enterprise Risk Management
Framework and Three Lines of Defence model, with associated governance
structures and defined roles and responsibilities.
• Continue to keep pace with evolving industry requirements around risk
management, reporting and governance.
40–42
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Key points Future developments Page
Metrics and targets
Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process.
• Climate-related metrics across our operations, supply chain and financed emissions
are reported on an annual basis via our climate-related disclosures.
• The properties securing our lending portfolios are assessed for flood and subsidence
risk, as well as EPC distribution.
• Continued review and enhancement of our calculation methodologies for Scope 3
emissions in line with industry best practice. Includes development of roadmap to
enhance PCAF data quality level for financed emissions and engagement with
suppliers to improve Category 1 measurement.
• Development of climate-related key risk indicators for intra-year monitoring.
29–30
and
42–43
Disclose Scope 1, Scope 2, and, if appropriate, Scope 3 greenhouse gas emissions, and the related risks.
• Scope 1, 2 and 3 emissions are disclosed within the wider TCFD disclosure, with full
disclosure across all applicable Scope 3 categories.
• Continued enhancement of emissions calculation methodologies in line with industry
best practices.
30 and
42
Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets.
• We have two overarching net zero targets in place – to achieve net zero emissions
across Scope 1 and Scope 2 by 2030 and across Scope 3 by 2050.
• Continued monitoring of performance against these targets and development of
interim milestones for sub-categories across all Scopes.
29 and
42–43
Short-Term Medium-Term Long-Term
100% of electricity procured from
certified renewable sources
Procurement of certified renewable gas Review of origination strategy, product proposition and asset mix
to support mitigation of financed emissions
No waste delivered to landfill
Procurement of quality carbon credits to offset fugitive
emissions
Ongoing identification of new physical and transition risks
impacting our portfolio through scenario analysis
Vehicle fleet is fully hybrid
Transition vehicle fleet to electric vehicles
Maintained travel emissions below
70% of pre-COVID levels
Inclusion of climate-related KRIs
within Risk Appetite
We have highlighted some key milestones which have been achieved to date and those we believe will help us to meet our 2030 and 2050 Net Zero pledges.
Key Completed
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
This section of our annual report
includes ourclimate-related
financial disclosures, consistent
with the recommendations of the
Task Force on Climate-related
Financial Disclosures, providing an
update on our current progress and
areas of future focus.
Wehave made strong progress during 2023,
successfully embedding enhancements to
ourapproach to the management of climate-
related risks across both our governance
structure and the wider risk management
framework. There remains work to do to
enhance our assessment of 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
capabilities and methodologies mature.
Governance
Board oversight of climate-related risks and
opportunities
The Board has ultimate accountability for all
climate change risk-related matters. During
2023, the Board has been engaged in the
development of our approach, receiving
half-yearly updates on climate risk and an
annual ESG update. The Board continues
toconsider climate-related risks and
opportunities as part of the annual strategic
and financial planning process to ensure our
approach to these matters evolves in line with
emerging developments. The Risk Oversight
Committee has oversight of the framework for
managing and reporting the risks from climate
change, as set out in the Enterprise Risk
Management Framework. The Committee can
escalate any climate-related risk matter to the
Board. 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.
Management’s role in assessing and
managing climate-related risks and
opportunities
Responsibilities for the management of
climate-related risks extend across the
organisation and its ‘Three Lines of Defence’.
As climate riskimpacts all of our principal risks
itrequires integration with existing control
frameworks, policies and strategies.
The accountability for our approach to ESG
sits with the CEO and is devolved to relevant
members of ExCo. The Chief Risk Officer has
Senior Management Function responsibility
under the Senior Managers and Certification
Regime for our approach to managing both
financial and non-financial risks arising from
climate change, including:
• Embedding the consideration of climate-
related risks into the governance structures.
• Incorporating the risks from climate change
into risk management practices.
• Using long-term scenario analysis to inform
strategy setting, risk identification and
assessment.
• Ensuring that climate-related risks are
appropriately disclosed in line with the
recommendations of the TCFD.
Executive Risk Committee
The Executive Risk Committee (ERC) has
delegated authority from ROC for overseeing
our exposures and approach to managing
climate-related risks. In 2023, the Committee
received half-yearly updates on the progress
of our approach to managing climate-related
risks, including assessment of our position
against the requirements of Supervisory
Statement 3/19, the ongoing evolution of our
approach to managing climate-related risks
driven by third-party relationships and
enhancements to the credit-related aspects
ofclimate risk management.
Credit Risk Oversight Committee
The Credit Risk Oversight Committee (CROC)
has specific responsibility for oversight of
climate-related aspects of credit risk including
recommending strategies to adjust the credit
risk portfolio to react to changes 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 (ALCO)
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. Where appropriate, this includes
the impact of climate change on aspects
under its remit.
Environment Working Group
The Environment Working Group continued to
bring together key stakeholders from across
the first and second lines of defence in 2023
to support work to help embed climate risk
into the ERMF and support our wider climate-
related goals and ambitions.
The Environment Working Group is
accountable for delivering our net zero
strategy and objectives across three strategic
focus areas:
• Managing the impact of climate change on
the business.
• Supporting our customers’ transition to a
low-carbon economy.
• Reducing the impact that the business has
on the environment.
The Environment Working Group has
focusedon building out the foundations of
amulti-year roadmap across core business
areas and risk management disciplines. It will
continue to update as our analysis of risks and
opportunities from climate change evolve.
This will help toaccelerate progress and
prioritisation, particularly in relation to our
climate changeresponse.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Strategy
While the changes associated with the
transition to a lower-carbon economy
poserisks, they also present significant
opportunities for organisations focused on
climate change mitigation and adaptation
solutions. In line with our ambition to be the
number one community bank, we have an
important role to play in facilitating the
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 our
customers along the journey as they make the
transition towards a low-carbon economy, and
to continuing to build our own capabilities by
identifying and managing the potential impact
of climate change on the business, as well as
exploring ways to reduce 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 using scenario analysis.
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 and climate risk is no different in this
regard. Climate risk does however require us
to address risks that may manifest over a
significantly greater 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 have identified a number of factors arising
from climate change which we monitor over
the short, medium and long term. Our initial
focus has been to identify and assess risks
tothe business. We have continued to
progressively embed climate risk into our key
risk processes throughout 2023, developing
control processes across our lending activity
and internal operations. We continue to
develop our own internal climate scenario
analysis and stress testing capability in line
with emerging industry methodologies and
have used outputs from initial methodology
developments to formulate an initial impact
assessment to inform considerations in
developing our strategic response. The risks
we face in the medium term primarily relate
totransition risks, predominantly arising
fromdeveloping regulatory and legislative
expectations. For example, 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.
Physical risks represent a longer-term risk
(primarily from changes in climate patterns
impacting the physical property securing our
mortgage portfolio) and the most material
risks are expected to crystallise over the
longterm. Changes in extreme variability in
weather patterns are forecast to 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.
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.
In 2024, 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. 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. At present we do not believe
risk arising from climate change to have had
material impact on the financial statements.
Operations
We continue to make positive progress in
reducing the impact of our direct operations
on the environment. We have maintained our
position of generating no market-based
Scope2 emissions by continuing to procure
100% renewable electricity with full backing
by Renewal Energy Guarantee of Origin
(REGO) certificates. We have continued to
reduce waste as far as possible and
maximiserecycling rates (see the case study
on the move from our Bishopsgate office for a
great example of how we’re truly living this
ethos!). We continue to deliver zero waste to
landfills, which we have achieved consistently
since 2020.
These actions have helped us to achieve an
overall reduction of 90% across our Scope 1
and 2 emissions from the 2019 baseline, and
this keeps us strongly positioned to meet our
stated commitment of being net zero across
Scope 1 and 2 by 2030. We have identified
what continues to drive our remaining Scope 1
and 2 emissions and have identified the
necessary actions required to eliminate
them.Once these steps have been taken,
wewill determine the level of residual
emissions generated and deliver our full net
zero pledge through the purchase of high-
quality carbon removals.
39
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk Management
Identification and assessment
We classify climate-related risks as either
physical risks or transition risks. We are
exposed to both 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 climate
change.
2) The operation of our own infrastructure,
business and premises which may
beexposed to both transition and
physicalrisks.
3) Through a deteriorated perception of our
brand 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, short,
medium and long-term horizons are being
applied to the consideration of impacts. This
assessment has been included in the 2023
Internal Capital Adequacy Assessment
Process (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.
Mortgages
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 is situated on a flood plain,
borrowing is only permitted where a suitable insurance policy is in
place. Specific requirements are in place in relation to lending to
buy-to-let properties which have an Energy Performance
Certificate (EPC) rating below E. In accordance with the Minimum
Energy Efficiency Standards Regulations, all buy-to-let properties
must have a minimum EPC rating of E.
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.
We continue 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 and 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 additional
credit risk assessment requirements for customers operating in
carbon-intensive industries. Our Commercial Lending Policy also
outlines the prohibited and restricted industries where we have
either no or limited appetite to lend.
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 Carbon Disclosure
Project, Sustainability Accounting Standards Board or TCFD.
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 transition risk.
Task Force on Climate-related Financial Disclosures
Continued
Credit risk
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 customers.
Medium term to long term.
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Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Climate change risk has been considered as part of the 2023 ICAAP. This includes a
qualitative assessment of the potential financial implications of climate-related risk,
namely transition and physical risks. The ICAAP is a key planning process 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 is not considered to have a material impact
over the planning horizon at this time. Consideration of climate risk will continue to be
further 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 testing is used to inform the understanding of how capital management may be
impacted.
Climate risk and broader ESG considerations are now reflected in our treasury portfolio
investment strategy, with implications for securities that can be included in the Liquidity
Pool. The 2023 Internal Liquidity Adequacy Assessment Process (ILAAP) outlined the
potential funding and liquidity risks that may arise as a result of physical risks or
transition risks.
The impacts of climate change will continue to be assessed within our prudential
statements, namely the ICAAP and ILAAP.
Climate change is embedded as a cause within the Enterprise Risk Management
Framework and our principal risks are assessed through a climate lens. All loss events
are recorded in our 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 continue to take steps to embed climate change considerations into our
procurement and supply chain management processes, including exploring different
methods to collect environmental performance data from third parties. More broadly,
the Operational Resilience programme outlines the requirements (including
requirements of suppliers) to respond to business disruption.
We will continue to identify, manage and disclose material climate-related risks and
their impacts on our strategy and financial planning, in line with the TCFD framework.
Capital and liquidity risk
Risk examples Time horizon
• Our capital position is indirectly subject to climate risk
through Bank-wide exposures across all risk types.
• Longer-term climate change risks may adversely
impact our 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.
Medium term to long term.
Operational risk
Physical risk examples Time horizon
Business interruptions due to extreme weather events
and damage to facilities. Disruptions in supply chain.
Medium term.
Transition risk examples
Increased operating costs for facilities and higher
capital expenditures for resiliency and carbon reduction
measures capitalexpenditures for resiliency and carbon
reductionmeasures.
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Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Our Risk Appetite Statement includes a
qualitative statement in relation to climate risk.
In support of this appetite, complementary
quantitative key risk indicators are being
developed and will be assessed with a view
tointegrating them into risk appetite metrics,
where appropriate. 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 integrated climate
risk considerations into both the Business and
Commercial Lending Policy and the Collateral
Management Policy to aid the embedding,
management and monitoring of climate
change risk as a cause to our credit risks.
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. Throughout 2023, we
have continued to use the analysis from the
Biennial Exploratory Scenario work conducted
in 2021, leveraging the results of that analysis
in the corresponding period and using this to
inform a PMO which is incorporated within our
IFRS 9 ECL calculation. In addition, a Climate
Risk scenario was formally assessed as part of
the 2023 ICAAP, reviewing the potential
impact of an extreme weather event causing
prolonged physical damage to our stores and
a breakdown in the transport infrastructure
servicing the stores. Outcomes from these
pieces of analysis have indicated that 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 help to identify
areas where we could best support customers’
transition to improved energy efficiency or
reduction in exposure to physical risks.
Metrics and targets
Our climate change metrics are anchored to
our commitment 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 will continue to work
on developing further metrics in line with
evolving industry practices.
Our emissions data for 2023 is disclosed in the
below table, outlining year-on-year changes as
well as overall progress from our 2019 baseline.
Task Force on Climate-related Financial Disclosures
Continued
Emissions summary by Scope and Category
Emission Scope Category 2023 % change PY 2022
Scope 1 Fuels (transport)
20 -13 23
Gas
71 18 60
Fugitive
378 294 96
Total
469 162 179
Scope 2 Electricity (market)
0 – 0
Total Scope 1 & 2
469 162 179
% change from 2019 baseline
-90 – –
Scope 3 Cat 1: Purchased goods & services
54,986 -17 65,933
Cat 2: Capital goods
2,155 -69 7,057
Cat 3: Fuel & energy activities
903 -11 1,015
Cat 4: Upstream transportation
371 -22 477
Cat 5: Waste
9 0 9
Cat 6: Business travel
423 23 343
Cat 7: Employee commuting
4,495 -1 4,550
Cat 9: Downstream transportation
114 -3 117
Cat 15: Investments
47,749 -4 49,862
Total Scope 3
111,205 -14 129,363
% change from 2019 baseline
-55 – -48
Total GHG emissions
111,674 -14 129,542
% change from 2019 baseline
-56 – -48
Quoted emissions figures are quoted in tCO
2
e
For Scope 3 emissions, categories 8 and 10-14 are assessed not to apply to our operations at this time and are therefore excluded from our analysis
42Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Task Force on Climate-related Financial Disclosures
Continued
Operational emissions
Greenhouse gas reporting is undertaken in
line with our obligations under the Companies
Act 2006 (Strategic Report and Directors’
Report) Regulations 2013, and the 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.
We report GHG emissions in accordance with
the operational control approach, The only
material data limitation in the emission data
relates to employee commuting, where data
for all individuals was not available; to account
for this, average population values were used
to perform the calculation.
We have seen an increase in our Scope 1
emissions this year as detailed in the table
above, primarily driven by an increase in
refrigerant and coolant leaks (known as
fugitive emissions). By their nature, these will
be subject to variance year on year and as we
progress towards our 2030 commitment we
will seek to offset these fugitive emissions via
high-quality carbon credits. Overall, we have
achieved a reduction of 90% in Scope 1 and 2
emissions from our baseline year of 2019 and
are well positioned to achieve our 2030 net
zero commitment for Scopes 1 and 2. We
continue to procure 100% renewable-backed
electricity across our operations and therefore
produce no market-based emissions from our
electricity procurement.
We recognise that the climate impact of
ouroperations goes beyond carbon emissions
from fuel consumption and electricity and
thatwe have a responsibility to understand
and address emissions across our wider
valuechain. Therefore, we have measured
ourScope 3 emissions from our own
operations in 2023 as set out in the table
above. To enhance our reporting, we have
broken down our Scope 3 emissions into
theirunderlying categories.
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 continued to see a reduction in emissions
from these sources both year on year and
from our baseline in 2019. We have also seen
concurrent reductions in paper usage. These
reductions can be reasonably attributed in
part to our continued operation of a hybrid
working model.
Financed emissions
We remain fully committed to our pledge to
make our financing activity and value chain
net zero by 2050 to achieve alignment with
the 2015 Paris Agreement.
Financed emissions are absolute GHG
emissions that we finance through our lending
and investment activity. We continue to
develop the data and technology required to
enhance the accuracy of our assessment and
management of our carbon-related assets
andexposures.
For 2023, we have calculated financed
emissions from our residential mortgage
portfolio (both organic and acquired) and
residential and commercial buy-to-let
portfolios. PCAF guidance has been followed
when determining the attribution factor
associated with the lending book, based on
outstanding amount and property value at
origination. To support calculation of the
emissions arising from the portfolio of
properties, typical annual energy consumption
data for the average UK property was
obtained from UK Government statistical
databases, as were emissions conversion
factors for gas and electricity usage.
The use of EPC data has informed our
understanding of the impact of transition risk
on our mortgage portfolio. EPC ratings of the
mortgage portfolio are monitored to provide a
view on the energy efficiency of the housing
stock securing our lending. The table below
shows a summary of EPC ratings on our
mortgage book as at the start of 2023,
covering both residential and professional
buy-to-let. Approximately 75% of mortgaged
properties in the portfolios have been
matched to an EPC rating, with the most
common EPC rating in our mortgage book
being D, which is slightly lower than the UK
average. Approximately 39% of the book
currently rated EPC C or better on an
interpolated basis, which represents a 3%
improvement over the previous year.
EPC rating
% of
properties
A 0
B 11
C 28
D 42
<E 19
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 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 Negligible Low Medium High
Residential Rivers and sea 94.4% 3.1% 1.9% 0.6%
Surface water 86.7% 8.9% 2.2% 2.2%
Commercial Rivers and sea 93.3% 4.4% 2.0% 0.3%
Surface water 83.4% 11.7% 2.1% 2.8%
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Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk overview summary
We operate a straightforward community banking
strategy and business model, carefully managing
risk as we serve our customers through both
physical and digital channels.
Approach to risk management
Our risk management framework underpins
our ability to deliver, ensuring risks are
carefully considered when making decisions
and are managed within acceptable limits on
an ongoing basis. The framework establishes
the risk management responsibilities of all
colleagues, which are embedded within our
AMAZEING values, formalises our risk appetite
and sets out the tools and techniques used to
operate safely within it.
Further information on our risk management
framework can be found on page 125.
Risk environment in 2023
During 2023, there has been particular
focus on overseeing the management of our
capital risk, culminating with the successful
completion of the refinancing activity in
November, which restored capital ratios to
above regulatory minima, including buffers
(excluding any confidential buffers, where
applicable). Management of liquidity risk was
also heightened following increased customer
deposit outflows in October as a result of
speculative media reports on the strength of
our capital position and negotiations.
Our strong levels of liquidity and prudent
approach meant these outflows were
manageable and by year end we had returned
to broadly the same deposit levels as we
reported for the third quarter. Whilst some
deposits came at an increased cost, we
continue to demonstrate strong liquidity and
funding regulatory ratios. Focus has also
remained on assessing and managing the
impact of the changing macroeconomic
environment and the effect of this on credit
risk, including supporting our customers and
ensuring appropriate levels of credit provisions.
Key areas of focus across non-financial risk
have been the implementation of the new
Consumer Duty requirements, ongoing
assessment and improvements in operational
resilience and continued strengthening of
financial crime controls. Through the year, we
have continued to enhance our risk data and
systems, introduced new and updated tooling
and focused on their application to further
mature and streamline risk management
activities. Our Policy Governance Framework
has been refined with a focus on usability and
we have enhanced reporting to governance
committees and the Board.
Further information on our operating
environment can be found on pages 6 to 7.
Principal risk exposures
On an ongoing basis, we assess our risks
against risk appetite, including those that
could result in events or circumstances that
might threaten our business model, future
performance, solvency or liquidity, and
reputation. We consider the potential impact
and likelihood of internal and external risk
events and circumstances, and the timescale
over which they may occur.
We identify, define and assess a range of
principal risks to which we are exposed. These
are the high-level risks we face, for which risk
appetite is set and monitored via key risk
indicators. They are consistent with those set
out in last year’s annual report and comprise:
• Credit risk.
• Capital risk.
• Liquidity and Funding risk.
• Market risk.
• Financial Crime risk.
• Operational risk.
• Conduct risk.
• Regulatory risk.
• Legal risk.
• Model risk.
• Strategic risk.
Further details on all of our principal risks,
including our risk appetite, exposure and
response to each can be found on pages 130
to 157.
Amongst these, certain risks have been
considered most material over the course
ofthe year. Our capital risk position has
improved following the successful refinancing
in late 2023, but oversight remains heightened
as we continue to closely monitor the
implementation of our strategy and our
financial performance. Credit risk has been
subject to continued close scrutiny in light of
the challenging macroeconomic environment
and management of financial crime risk
remains a priority, aligned to regulatory focus.
Strategic risk including reputational risk has
also been subject to more active management
in light of the risks prior to, and following, the
capital restructuring and associated media
speculation. This risk is anticipated to stabilise
and improve in line with our planned return to
sustained profitability. Further details on these
four risks are set out on pages 45 and 46.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk overview summary
Continued
Principal risks
Principal risk Exposure Response Outlook
Strategic risk
Strategic risk could arise as the result of an insufficiently
defined, flawed, or poorly implemented strategy.
Successful management of strategic risk requires a plan
that is responsive to the rapidly evolving external
environment in which we operate. Furthermore, our
strategy needs to meet the expectations of our
stakeholders, including our customers, regulators
andinvestors.
During 2023, we remained focused on the execution of
our strategy, with the return to profitability in the first half
of the year demonstrating the strengths of our community
banking strategy. The second half of the year saw a
combination of increased capital requirements together
with a setback in our ambition to achieve AIRB for
residential mortgages. These factors put pressure on our
capital position and restrained the levels to which we
were able to grow capital organically.
In challenging market conditions, we were successful in
delivering a £925 million capital package which included
the raising of new capital as well as the refinancing of our
existing regulatory debt. Externally, some negative
sentiment was generated prior to and following this
activity with short-term impacts on deposits.
We continue to oversee the development and
execution of our strategy on an ongoing basis through
regular in-depth management reviews of business
performance and change delivery, oversight of
strategic risks through risk governance and regular
updates presented to the Board. We actively manage
any potential reputational risks to the bank, including
monitoring media coverage to understand
stakeholder perceptions and potential impacts and
ensure our corporate announcements are clear,
informative and a fair reflection of who we are and
what we do. The Board undertakes an annual review
of the strategy and Long Term Plan, which is
supported by a risk assessment reviewed at the Risk
Oversight Committee. During 2023, we have
continued to strengthen our cost management
discipline, including prioritisation and delivery of
technology change.
We continue to see a high level of volatility in the
external environment. The risk of further negative
sentiment is expected to remain for the near term, but
we are confident that we have developed a strategy
for 2024 that serves our customers, sets us on a path
to sustained profitability and supports our ambition to
be the number one community bank. As we begin to
see the success of our revised strategy, we expect this
risk to recede.
Monitoring of performance will remain heightened
with close Board oversight of the efficacy of the
strategy and its implementation. This will be
supported by ongoing risk assessment to support
active management of the evolving risk profile, with
oversight from the Risk Oversight Committee.
Capital risk
Capital risk exposures arise from the depletion of our
capital resources which may result from:
• Increased RWAs.
• Losses.
• Changes to regulatory minima or other regulatory
rules.
Our capital risk management approach is therefore
focused on ensuring we can maintain appropriate
levelsof capital to both meet regulatory minima and
support our objectives, both under normal and
stressedconditions.
Our capital risk mitigation is focused on three key
components:
• A return to sustainable profitability that will allow us
to generate organic capital growth.
• The continued optimisation of our balance sheet to
ensure we are utilising our capital stack efficiently.
• Continuing to assess the raising of capital, as and
when market conditions and opportunities allow.
Following the capital raise we enter 2024 with a
stronger and longer-dated capital base, putting us in
agood position to deliver on strategy and achieve
sustainable profitability in the years ahead. Our
activeP&L management, including disciplined cost
reduction, will help to mitigate the near-term
headwinds from the increased cost of deposits and
funding for the Bank. Capital risk will continue to be
subject to heightened monitoring and active
management.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk overview summary
Continued
Principal risks continued
Principal risk Exposure Response Outlook
Credit risk
During 2023, the macroeconomic environment in the UK
has been impacted by high inflation, increased interest
rates and subdued economic growth. This has impacted
upon the cost of living for our customers and in turn,
affordability and property valuations. There have been
decreases observed in the residential property price
indices, although the overall reduction has been relatively
muted to date.
The rate of inflation has reduced significantly over the
year, but remained above the central bank target rate at
year end. As a result, whilst the Bank of England base
rate has remained higher than prior years, mortgage
rates have started to decrease and there is an
expectation that this will continue in 2024.
We have observed some crystallisation of the economic
deterioration on customer positions and through this,
onto ECL. As affordability for customers has come under
pressure from higher interest rates, we have observed an
increase in arrears rates for the mortgage portfolio from
a low base. Against this, whilst the economic outlook
remains on the downside, forecasts have improved over
the course of 2023, and this has resulted in a positive
impact on the ECL position.
We have an appetite and credit criteria appropriate
for managing lending through an economic cycle.
We have made limited updates to our credit criteria
and risk exposure where appropriate during 2023.
We have continued to enhance our credit risk
framework and associated policies in the current
macroeconomic environment: reporting, analysis,
and forecasting have been enhanced, particularly
around arrears and impairments, to inform strategic
decision-making and operational management.
We work with our customers who are in arrears, have
payment shortfalls or are in financial difficulties to
obtain the most appropriate outcome for both the
Bank and the customer. The primary objectives of our
policy are to ensure that appropriate mechanisms and
tools are in place to support customers during periods
of financial difficulty and to minimise the duration of
the difficulty and the consequence, costs and other
impacts arising.
The macroeconomic outlook has improved during the
course of 2023, although risks remain as central banks
manage the course of interest rates, and geopolitical
instability continues from conflicts in both Ukraine and
the Middle East.
We remain alert to the ongoing impact of the
resetting of interest rates after a period of historically
lower rates. We anticipate that the impact of this will
continue throughout 2024 as customers transfer
fromolder fixed rate mortgage products, and we
haveappropriate mechanisms in place to support
customers and manage the associated risks.
We utilise macroeconomic scenarios provided by
Moody’s Analytics in the assessment of provisions.
The use of an independent supplier for the provision
of scenarios helps to ensure that the estimates are
unbiased. The macroeconomic scenarios are assessed
and reviewed monthly to ensure appropriateness and
relevance to the ECL calculation.
Financial crime risk
We may be exposed to financial crime risk if we do not
effectively identify and appropriately mitigate the risks
ofcriminals using our products and services for financial
crime. Financial crime risks include money laundering,
sanctions violations, bribery and corruption, facilitation
oftax evasion and terrorist financing.
Failure to prevent financial crime may result in harm to
our customers, ourselves and third parties. In addition,
non-compliance with regulatory and legal requirements
may result in enforcement action such as regulatory fines,
restrictions, or suspension of business or cost of
mandatory corrective action, which will have an adverse
effect on us from a financial and reputational perspective.
We are committed to safeguarding both ourselves
and our customers from financial crime. We continue
to invest in our financial crime control framework to
ensure compliance with current as well as newly issued
legal and regulatory requirements. We have invested
in an ongoing financial crime change capability
todeliver these improvements as well as support
withthe embedding of previously implemented
controls. In 2023, this saw us deliver an ongoing due
diligence capability.
We continue to identify emerging trends and
typologies through conducting horizon scanning
activity, through information obtained from
investigative and intelligence teams and through
attending key industry forums (or associations) such
as those hosted by UK Finance. As required, we
continue to update our control framework to ensure
emerging risks are identified and mitigated.
Recognising the evolving landscape of financial crime
risk against the backdrop of increasing regulatory
focus, we continue to invest in our financial crime
control environment to prevent financial crime and
remain aligned to our legal and regulatory
requirements. The FCA is currently undertaking
enquiries regarding our financial crime systems and
controls. We continue to engage and co-operate fully
with the FCA in relation to these matters, and the
FCA’s enquiries remain ongoing.
46Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk overview summary
Continued
 
 
 
 
S
t
r
a
t
e
g
i
c
F
i
n
a
n
c
i
a
l
 
C
o
m
p
l
i
a
n
c
e
 
 
O
p
e
r
a
t
i
o
n
a
l
 
 
 
 
 
 
C
r
e
d
i
t
Impact
New entrants
and increased
competition
Maintenance of
strong culture and
brand advantage
Evolving
customer
expectations
and needs
Insufficient
progress
on ESG
agenda
Impact of AI
Talent
retention
Geo-economic
conflict
Prolonged
macroeconomic
deterioration
and impact of
high interest
rates
Emerging risks
We proactively identify a range of evolving
threats, which cannot yet be reliably
quantified, but which have the potential to
cause significant loss or harm to the Bank.
These are actively monitored and regularly
reported through the Bank’s governance
structures with preparatory actions taken in
response where necessary.
Emerging risks are grouped by risk themes,
which equate to the Bank’s principal risks.
Time horizons for their potential emergence
ascrystallised risks are considered alongside
an estimate of the potential impact should
they crystallise.
A range of methods are used to identify
emerging risks including internal working
groups, scenario analysis and consulting with
external experts, to ensure an external
perspective is incorporated. There continues
to be increased focus on assessing and
understanding how different individual risks
and threats are correlated with each other,
including via scenario analysis.
Key
Inner ring: <12 months
Centre ring: 1 to 3 years
Outer ring: 3+ years
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk overview summary
Continued
Emerging risks and time horizon
Emerging risk Response Principal risks Crystallising time
horizon
Maintenance of strong culture
and brand advantage
• Clearly defined organisational strategy and reinforcement of AMAZEING values.
• Continued focus on exceptional customer service.
• Ongoing commitment to the physical store model, serving customers in their communities.
• Strategic <12 months
Geo-economic conflict • Ongoing investment in sanctions capability and active monitoring.
• Resilience planning, including for supply chain disruption.
• Business continuity planning and exercising.
• Operational
• Financial crime
<12 months
Talent retention • Active management and targeted interventions in volume and high-competition roles.
• Differentiated offering with emphasis on growth plans and unique culture.
• Operational
• Conduct
• Strategic
<12 months
Prolonged macroeconomic
deterioration and impact of high
interest rate environment
• Close and active monitoring of customers in arrears/distress.
• Application of Consumer Duty principals to deliver good customer outcomes.
• Elevated fraud and financial crime monitoring.
• Credit
• Conduct
• Operational
1 to 3 years
Impact of Artificial Intelligence
(AI)
• Continued investment in technology and data capability.
• Safe and staged introduction of AI/machine learning use cases (internal efficiencies, customer
opportunities).
• Close monitoring and response to evolving regulatory expectations with a focus on delivering
good customer outcomes.
• Operational
• Strategic
• Regulatory
1 to 3 years
Evolving customer expectations
and needs
• Rebalancing of capability across channel offerings, with investment in digital capabilities.
• Evolved product and service offerings within target growth sectors.
• Operational
• Conduct
• Strategic
1 to 3 years
ESG agenda • Definition of authentic ESG strategy and integration into business metrics.
• Satisfying regulatory requirements and reporting transparency.
• Credit
• Operational
• Strategic
1 to 3 years
New entrants and increased
competition
• Investment in digital capabilities alongside physical presence.
• Clear definition and communication of purpose amongst sectors we serve.
• Strategic 3+ years
48
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Viability statement
Assessment of principal and emerging risks
The Directors undertook a robust assessment of all the
principal and emerging risks we face, to understand those
that presented the greatest risks to going concern
andviability.
See pages 124 to 157 for our principal risks
Risks to going concern and viability
The principal risks that were felt posed the greatest risk to
going concern and viability were:
• Operational failure (Operational risk).
• A lack of liquidity (Liquidity and Funding risk).
• Insufficient capital (Capital risk).
Risk management and internal controls
The Directors undertook an assessment of our approach to
risk management and the effectiveness of our internal
control systems to ensure these remained appropriate and
didn’t require any additional consideration in respect of
assessing going concern and viability.
Assessment of prospects
Strategic planning process
Our strategic planning process consists of our Long Term
Plan which covers a five-year period from the year end and
is central to the assessment of prospects. It is reviewed
annually by the Board with the first four years forming the
viability assessment period.
Board review of the Long Term Plan
• Determination of whether the assumptions underpinning the Long Term Plan remain appropriate.
• Consideration of whether the plan continues to take appropriate account of the external environment.
See pages 6 to 7 for information on our operating environment
Assessment of viability
Although our Long Term Plan reflects the Directors’ best estimate of the future prospects of the business, they have also tested the potential impact by examining our
sensitivity to a ‘severe but plausible’ downside. This has been undertaken via the creation of a scenario that reflects additional downside risks.
Severe but plausible stress
Directors considered a scenario that led to increased ECL,
deposit outflows, reduced fee income, increased costs and
the removal of our ability to raise incremental regulatory
capital. Under this scenario we retained sufficient liquidity.
With respect to capital we fell below regulatory minima
atatotal capital plus MREL level.
Scenario outcome and mitigating actions
The Directors considered the actions that could reasonably
be deployed to mitigate the capital risk and concluded that
these were both plausible and did not in and of themselves
constitute any additional risk. Mitigating actions could
include balance sheet optimisation through slowing growth
or exiting portfolios, or through cost reduction, or through
raising additional long term debt dependent on market
conditions. Accounting for these actions we would remain
above minima although we would need to operate in our
capital buffers for a period of time.
Routine stress testing
In addition to the specific scenario, we perform routine
stress testing (including reverse stress tests) for both
management and regulatory purposes including as part
ofthe ICAAP and ILAAP. Directors review these
assessments to understand the likelihood of such events
occurring and what mitigating actions could be taken.
Viability Statement
The Directors confirm that they have a reasonable expectation that we will be able to
continue in operation and meet our liabilities as they fall due over the four year assessment
period to 31 December 2027.
Going concern
The Directors consider it appropriate to prepare the financial statements on the going
concern basis.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Viability statement
Continued
Approach and horizon period
Our approach to assessing going concern and
viability is set out on page 49.
Our approach starts with the consideration
ofthe principal risks we face. Of our principal
risks it was felt that only operational failure
(Operational risk), a lack of liquidity (Liquidity
and Funding risk), or insufficient capital
(Capital risk) could directly lead to us not
being able to continue in our current form if
they were to occur (although a failure of our
other principal risks could lead to one of
theseevents).
Alongside this the Directors considered our
approach to risk management and the
effectiveness of our internal control systems
to understand if there were any other
considerations that should form part of the
assessment. This included consideration of
allmaterial controls, including financial,
operational and compliance controls. As
described in the corporate governance and
risk reports, our risk management and internal
control systems are monitored and evaluated
on an ongoing basis at the Risk Oversight
Committee, Audit Committee and Board.
Although underpinned by a wide variety
ofsupport, central to the assessment was
ourLong Term Plan. The Long Term
Planrepresents our best forecast estimate
covering the period from 1 January 2024 to
31December 2028, the first year of which
reflects our 2024 budget. Although the plan
covers five years the Directors have assessed
prospects and viability for the four years
through to 31 December 2027. This is felt
appropriate as it 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 then focused
on reviewing the plan against the principal
risks identified above that could impede our
ability to remain viable over the four-year
horizon period.
Assessment of prospects
The Directors have an obligation in
accordance with provision 31 of the Code to
confirm that they believe that we will be able
to continue in operation, and to meet our
liabilities as they fall due. Our prospects are
assessed primarily through our strategic
planning process (our Long Term Plan) as set
out to the left. The Board participates fully in
the annual process and is responsible for
signing off the plan and in doing so considers
whether the plan continues to take appropriate
account of the external environment (see
Operating environment on pages 6 to 7 for
further details). The latest updates to the Long
Term Plan (covering the period 2024 to 2028)
were formally approved by the Board in
February 2024.
Our purpose and strategy framework which
incorporates our business model and strategic
priorities (see pages 11 to 13) are central to an
understanding of our prospects. The nature of
our activities is long-term and our business
model has remained unchanged since we
were founded.
Delivering on our strategic priorities is key to
achieving our forecasts in the Long Term Plan.
The Directors have reviewed the assumptions
underpinning our plan and have determined
they are appropriate.
Assessment of viability
Although our Long Term Plan reflects the
Directors’ best estimate of the future
prospects of the business, they have also
tested the potential impact by examining
oursensitivity to a ‘severe but plausible’
downside. This has been undertaken via the
creation of a scenario that reflects additional
downside risks.
Assessment of going concern
In line with the work undertaken in respect
ofviability the Directors also undertook an
assessment of going concern, which they
consider to cover a period of at least 15
months from the date of approval of the
financial statements.
Consistent with their approach to considering
viability, the Directors assessed whether we
continued to maintain sufficient liquidity and
capital for the period of assessment. Given this
assessment, combined with the fact that the
Directors do not intend to liquidate or to cease
our operations, they concluded that there
wasa reasonable expectation that we have
adequate resources to continue as a going
concern. They have also concluded that there
are no material uncertainties that could cast
significant doubt over this assessment.
Viability statement
Based on their assessment of prospects and
viability above, the Directors confirm that they
have a reasonable expectation that we will be
able to continue in operation and meet our
liabilities as they fall due over the four-year
assessment period to 31 December 2027.
Going concern statement
The Directors also consider it appropriate to
prepare the financial statements on the going
concern basis, as explained further in the Basis
of preparation paragraph in note 1 to the
financial statements.
This Strategic Report, including pages 1 to 50,
was approved by the Board and signed on its
behalf by:
Daniel Frumkin
Chief Executive Officer
16 April 2024
50
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Metro Bank Holdings PLC Annual Report and Accounts 2023
In this section
52 Corporate governance introduction
54 Board of Directors
56 2023 governance at a glance
57 Board activities and stakeholder engagement
59 Stakeholder engagement
62 Letter from the Designated Non-Executive Director for
Colleague Engagement
64 Board leadership and company purpose
66 Board roles and responsibilities
67 Board effectiveness
70 Group Audit Committee report
75 Group Risk Oversight Committee report
78 Group Nomination Committee report
82 Group People and Remuneration Committee report
86 Remuneration at a glance
91 Remuneration for colleagues below Board level
94 Directors’ remuneration policy
105 Annual report on remuneration
120 Directors' report
Governance
Governance Additional informationStrategic report Financial statements 51Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Corporate governance introduction
I am pleased to set out Metro Bank’s corporate
governance report on behalf of the Board.
Thepurpose of this section is to explain
howwe, as a Board, considered and made
decisions that were in the best interests of
shareholders, customers, colleagues and
allother stakeholders in 2023. The Board
remains committed to adhering to the highest
standards of corporate governance and this
isreflected in the decisions we take, the
transparency of the standards we set, our
culture and how we communicate with
ourstakeholders.
In 2023, the Board continued to focus on
theBank’s transformation journey delivered
by our ExCo and centred on our five
strategicpriorities.
In May 2023, we completed the implementation
of our holding company. This marked an
important milestone in meeting the
requirements of the Bank of England’s
resolution framework. Following a robust
implementation process, the new structure
isfully embedded and operating well.
The October 2023 announcement of our
£925million capital package was a defining
moment for the Bank. The Board considered
very carefully all stakeholders when making
the decision to recommend the capital
package and, although some investors were
unable to participate, the Board agreed that
the package demonstrated the best possible
outcome for all stakeholders.
In November 2023, we announced that
potential cost savings of £50million per year
had been identified. In making decisions to
implement these cost savings, the Board
considered very carefully the impacts on all
ofits stakeholders.
Whilst we remain committed to providing
services to our communities through our
stores, we made the decision to reduce store
opening hours in early 2024. Increasingly, our
customers are choosing to bank with us in
other ways, and Online Banking and the
MetroBank App are available 24 hours a day.
We also made the difficult decision to make
changes to our organisational structure,
resulting in a reduction of roles in the Bank.
Whilst we remain focused on colleague
engagement and wellbeing, the Board agreed
this was a necessary step to support the
long-term sustainability of the Bank and was
the best decision for all stakeholders.
The Board continued to review and monitor
progress against the Bank’s ESG strategy and
priorities and was heartened to see all the
initiatives successfully launched during the
year. The Board will continue to keep the
Bank’s ESG strategy under close review as
itisa key enabler of the Bank’s objective
tobecome the best community bank.
Moreinformation on ESG can be found on
pages 20–33.
Robert Sharpe
Chair
The Board remains committed to adhering
to the highest standards of corporate
governance, which isreflected in the
decisions we take.
Our focus remains on delivering value for all
stakeholders through unrelenting focus on
ourstrategy.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Governance Additional informationStrategic report Financial statements 52Risk report 52
Metro Bank Holdings PLC Annual Report and Accounts 2023
Corporate governance introduction
Continued
During the year, the Board approved a new
partnership with the England and Wales
Cricket Board (ECB). The Board believes
thisisan important step in our community
banking offering and is delighted that the
Bank will beable to support a number of
initiatives including the Women’s and Girls’
Fund. More information on the Bank’s
partnership with the ECB can be found on
page 25.
I am proud of what we achieved during the
year. Moving forward, the Board is focused
onhow the Bank can deliver sustainable
profitability and growth for our stakeholders
whilst continuing to navigate an uncertain
economic environment.
Leadership
On 31December 2023, Anne Grim, Ian
Henderson and Monique Melis stepped down
from the Board. On behalf of the Board, I
would like to take this opportunity to thank
Anne, Ian and Monique for their contributions
to the Bank.
In January 2024, James Hopkinson stepped
down as CFO and Executive Director. Cristina
Alba Ochoa has been appointed as Interim
CFO (subject to regulatory approval) until the
new permanent CFO, Marc Page, joins the
Bank later in 2024.
Prior to the departure of Ian, Anne and
Monique on 31December 2023, the
percentage of females on the Board was
36% – just below the recommended 40%.
The Board has retained its ethnic diversity
onthe Board and the Senior Independent
Director (SID) is female.
We recognise the benefits of having a
balanced and diverse Board thatrepresents
the views, experiences andbackgrounds
ofour customers and colleagues. We are
committed to increasing the diversity of our
Board over time and inline with our Board
succession plan.
There were a number of changes to the
membership of the ExCo in 2023 which
resulted in the following changes: Richard
Saulet was appointed Chief Commercial
Officer; Aisling Kane was appointed Managing
Director, Retail & Business Banking; and Faisal
Hussain was appointed COO. Andy Veares
was promoted to Managing Director,
Corporate and Commercial in early 2024.
TheNomination Committee is delighted that
the strong pipeline and succession planning
wehave in place for our senior leaders
isbearing fruit.
The changes made to ExCo, as well as the
appointment of Cristina Alba Ochoa as Interim
CFO, reflect our continuing commitment to
creating astrong, experienced and diverse
leadership team.
As part of the agenda for 2023, the Board
received regular updates on culture, including
current and future initiatives to define,
measure and sustain culture at the Bank.
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 the
Board provides oversight of the Bank and
discharges our governance duties.
In line with Code requirements, the Board’s
effectiveness and performance was assessed
through an externally facilitated evaluation
which commenced in 2023. I am pleased to
report that the Board continues to operate
effectively, despite the challenges faced
during 2023. Like all boards, there are areas
where our performance and value to
stakeholders can be enhanced and these are
outlined on page 68. Drivers of the Board’s
effectiveness which were highlighted in the
outputs of the 2023 Board effectiveness
review include: the wide range of skills,
experience and behaviours around the
Boardroom table; the Board’s open, inclusive,
positive, collegiate and collaborative culture;
and insightful Directors who are interested in
and proud of the Bank and what it stands for,
and who care about its future and its
commitment to its stakeholders.
I would like to thank our shareholders for their
overwhelming support throughout the year —
all resolutions at our AGM on 26April and the
General Meetings held on 26April and
27November respectively were duly passed.
Future priorities
As we move forwards, both the Board and
management still fundamentally believe that
to be successful we must continue tooffer
both physical and digital services andwe
know the value this creates for our customers
and our communities. The Bank remains
committed to the community banking model,
with our store presence being the differentiator
for our customers. We remain one of the
highest rated high street banks for overall
service quality for personal customers, the
best bank for service in-store for personal and
business customers, and joint top for service
in-store for personal customers in the
Competition and Markets Authority’s Service
Quality Survey in February 2024.
We continue to invest further in creating
products and services that meet the needs
ofour diverse customer base and create
aneven better consumer experience for
ourcustomers. Looking forwards to 2024,
Iremain positive about the future of the
Bank.As a Board, our focus will be on
continuing to provide effective oversight
ofmanagement as they deliver our strategic
priorities of revenue, balance sheet
optimisation, cost, infrastructure
andcommunication.
Robert Sharpe
Chair
16 April 2024
53
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Board of Directors
As at the date of publication
Robert has over 45 years’ experience in retail banking and is
currently Chair at Pollen Street Limited and Hampshire Trust Bank
plc. He has had an extensive number of boardappointments both in
the UK and the Middle East including Chairman of Bank of Ireland
UK plc, Non-Executive Director at Aldermore Bank plc, George
Wimpy plc, Barclays Bank UK Retirement Fund, Vaultex Limited,
LSL Properties plc, RIAS plc and several independent Non-
Executive Director roles at banks in Qatar, UAE, Oman and Turkey.
Robert was previously Chief Executive Officer at West Bromwich
Building Society, a role he took to chart and implement its rescue
plan. Prior to this, he was Chief Executive Officer at Portman
Building Society and Bank of Ireland’s consumer business in the UK.
Paul is an experienced Chief Executive Officer, Chair and Non-
Executive Director with diverse international media and service-led
experience with an emphasis on people, innovation, data and
culture. Paul is the former Chief Executive Officer and Chair of the
NEC Group in Birmingham and successfully steered the NEC on a
journey from public sector ownership to a £307million management
buyout in 2015, and then an £800m acquisition of the NEC Group by
Blackstone in 2018. In addition, Paul is the Chair of BOXPARK, Chair
of Student Energy Group, sits on the Board of the West Midlands
Growth Company Limited and the British Allied Trades Federation,
is a patron of Marie Curie and sits on the Advisory Board of Bowel
Cancer UK Heads Together. Paul is Deputy Lieutenant of West
Midlands Lieutenancy, representing the King in the region, and was
awarded a CBE for services to the economy in the New Year's
Honours List 2020.
Catherine’s Non-Executive Director and Remuneration Committee
Chair roles include QBE Underwriting Limited and QBE UK Limited,
one of the world’s leading international insurers and FNZ (UK)
Limited. Catherine has previously held a Non-Executive Director role
at the Cabinet Office and was Chair of Additive Flow Limited. She
has been a Trustee of Cancer Research UK and Chatham House.
Catherine has extensive experience in organisational transformation
in financial services and a wide range of experience in leadership
and operations. Her previous executive 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.
Paul Thandi CBE
Independent Non-Executive
Director
Robert Sharpe
Chair
Catherine Brown
Senior Independent
Non-Executive Director
Daniel is responsible for leading the Bank – with a focus on driving
long-term sustainable 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.
Daniel Frumkin
Chief Executive Officer
Appointed to the Board:
1January 2020
Appointed to the Board:
1October 2018
Appointed to the Board:
1January 2019
Appointed to the Board:
1November 2020
Key to committees
Audit
Nomination
People & Remuneration
Risk Oversight
Governance Additional informationStrategic report Financial statements 54Risk report 54
Metro Bank Holdings PLC Annual Report and Accounts 2023
Board of Directors
Continued
Dorita is the President of JGB Financial Holding Company and a
member of the Board of Directors and the Audit Committee of
Banco GNB Paraguay. Dorita co-led the launch of Lulo Bank, the
first fully digitalised bank in Colombia. She brings significant
experience in banking, including digital banking and marketing,
aswell as strategic planning and stakeholder engagement to her
Non-Executive Director role. Prior to these roles, Dorita founded the
Dori Gilinski Gallery and Libros Para Niños, a non-profit organisation
that connects UK volunteers with Latin American schools and
charities. Dorita is a graduate of the University of Oxford and holds
an MBA from Harvard Business School. Dorita is a shareholder-
nominated Non-Executive Director, nominated by her father
JaimeGilinski Bacal, a major shareholder of Metro Bank, through
hisSpaldy Investments Limited vehicle.
Dorita Gilinski
Shareholder-Nominated
Non-Executive Director
Clare joined Metro Bank as Company Secretary in July 2023 and
leads the Bank’s company secretarial function and ensures it
continues to meet its statutory and regulatory obligations. Clare
joined Metro Bank after more than 15 years at the Bank of Ireland
where she held a number of senior risk governance roles, latterly
UKCompany Secretary. Clare holds a BA Hons in Russian & Soviet
Studies from the University of Manchester.
Clare
Gilligan
Company
Secretary
Appointed:
31July 2023
Appointed to the Board:
26September 2022
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 is currently a Non-Executive
Director of FICS Group Holdings Limited, Frasers Group Financial
Services Limited, Remitly Europe Limited and Studio Retail Group
plc. 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.
Michael
Torpey
Independent
Non-Executive
Director
Nick is Non-Executive Director of Schroder Oriental Income Limited,
Chair of its Nomination and Remuneration Committee and a
member of its Audit and Risk, and Management Engagement
committees. He is also Senior Independent Director of the States
of Jersey Development Company, Chair of its Remuneration and
Nomination Committee and a member of the Audit and Risk
Committee; and a Non-Executive Director for Bankers Without
Boundaries Connect Singapore PTE Ltd. Nick has more than
36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 UK.
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.
Nicholas Winsor MBE
Independent Non-Executive
Director, Designated
Non-Executive Director for
Colleague Engagement, and
Consumer Duty Champion
Appointed to the Board:
1September 2019
Appointed to the Board:
20April 2020
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Metro Bank Holdings PLC Annual Report and Accounts 2023
2023 governance at a glance
Highlights
New company structure
In May, we completed the
implementation of our holding
company, marking an important
milestone in meeting our
requirements in respect of the Bank
of England’s resolution framework.
Capital package
In November 2023, we announced
the successful completion of a
£925million capital package.
2023 Board changes
On 31December 2023, Anne Grim,
Ian Henderson and Monique Melis
stepped down from the Board. In
January 2024, James Hopkinson
stepped down as CFO and
Executive Director. Cristina Alba
Ochoa has been appointed as
Interim CFO until Marc Page joins
the Bank later in the year as CFO
and Executive Director.
2023 Board and Committee attendance
Standard
Board
8 meetings
Additional
Board
5
18 meetings
Audit
7 meetings
ROC
8 meetings
PRem
4 meetings
Nom
3 meetings
Robert Sharpe
8 18 3
Daniel Frumkin
1
7 18
James Hopkinson
8 18
Catherine Brown
8 14 8 4 3
Monique Melis
2
7 12 7 3
Paul Thandi
3
7 16 4 3
Michael Torpey
8 17 7 8
Nick Winsor
8 17 8
Ian Henderson
4
8 15 6 8
Anne Grim
8 18 4
Dorita Gilinski
8 15
1. Daniel Frumkin was unable to attend one standard Board meeting for personal reasons.
2. Monique Melis was unable to attend one standard Board meeting for personal reasons.
3. Paul Thandi was unable to attend one standard Board meeting for personal reasons.
4. Ian Henderson was unable to attend one Audit Committee meeting for personal reasons.
5. Directors missed additional Board meetings due to prior commitments where meetings
were called at short notice.
Board gender diversity
As at 31December 2023
Board independence*
As at 31 December 2023
Board tenure
As at 31December 2023
2
0-2 years
2
5+ years
64%
Male
36%
Female
70%
Independent
Directors
30%
Non-
Independent
Directors
7
2-4 years
*Excluding the Chair.
Compliance with the UK Corporate
Governance Code
Good corporate governance is essential to our
ambition to become the UK’s best community
bank. The Bank was fully compliant with the
requirements of the UK Corporate
Governance Code (the 'Code') in 2023.
The details where key content on compliance
with the Code can be found in thisreport
isbelow.
Board leadership and company purpose
Corporate governance
introduction
Section 172 statement
Board of Directors
2023 governance at a glance
Strategic priorities
Business model
52
34
54
56
3
11
Division of responsibilities
Board roles and responsibilities
Board and Board
Committee attendance
Board independence
66
56
56
Composition, succession and evaluation
Board of Directors
Board effectiveness
Group Nomination Committee
Report
54
67
78
Audit, risk and internal controls
Group Audit Committee Report
Risk Report
70
124
Remuneration
Group People and Remuneration
Committee Report
Annual Report on Remuneration
82
105
Governance Additional informationStrategic report Financial statements 56Risk report 56
Metro Bank Holdings PLC Annual Report and Accounts 2023
Board activities and stakeholder engagement
Stakeholders
Our customers
Our colleagues
The communities
we serve
Our suppliers
Our regulators
Our investors
Strategic priorities
Costs
Revenue
Infrastructure
Balance sheet
Communication
Key Board activity
Stakeholders
considered
Strategic
priorities
New holding
company
In May, we completed the implementation of our holding company, marking
animportant milestone in meeting the requirements of the Bank of England’s
resolution framework. This was a complicated process which the Board kept
under careful review. It was pleasing to receive a high level of support from
ourshareholders at the Court and General Meetings in April. Following a
robust implementation process, the new structure is fully embedded and
working well.
   
Capital
package
The announcement in October of our £925million capital package was a
defining moment for the Bank. We carefully considered all stakeholders when
making the decision to recommend the capital package and, although some
investors were unable to participate, the Board felt that the package
demonstrated the best possible outcome for all stakeholders.
     
Cost
reduction
In November, we announced that potential cost savings of £50million per year
had been identified. In making decisions to implement these cost savings, the
Board considered very carefully the impacts on all of its stakeholders.
Whilst we remain committed to providing services to our communities through
our stores, we made the decision to reduce store opening hours from early
2024 onwards. Increasingly, our customers are choosing to bank with us in
other ways, and Online Banking and the Metro Bank App are available 24 hours
a day.
We also made changes to our organisational structure, resulting in a reduction
of roles in the Bank. Whilst we remain focused on colleague engagement and
wellbeing, the Board agreed this was a necessary step to support the long-
term sustainability of the Bank and was the best decision for all stakeholders.
     
ESG The Board continued to keep the Bank’s ESG strategy and priorities under
review and was heartened to see all the initiatives successfully launched during
the year. The Board will keep the Bank’s ESG strategy under close review as it
is a key enabler of the Bank’s objective to become the best community bank.
More information on ESG can be found on pages 20-33.
       
ECB
partnership
During the year, the Board approved a new partnership with the England and
Wales Cricket Board (ECB). The Board believes this is an important step in our
community banking offering and is pleased that the Bank will be able to
support a number of initiatives including the Women’s and Girls’ Fund. More
information on the Bank’s partnership with the ECB can be found on page 25.
 
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Board activities and stakeholder engagement
Continued
Board activities
The Board has a forward plan for its meetings, which
includes regular updates from the ExCo and on financial,
strategic, risk management, people and culture, 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 Board
agenda items. The Company Secretary, or her delegate,
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 Board Committee reports on the proceedings
ofthe previous Board Committee meeting at the next
Board meeting. Approved Board Committee minutes,
including Disclosure Committee minutes, are included in
the Board papers.
The ExCo, senior management and advisors are invited
to attend Board and Board Committee meetings to
present, contribute to discussion, and advise members of
the Board or Board Committees on particular matters. The
involvement of the ExCo and senior management inBoard
and Board 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.
The Board meets periodically without the Executive
Directors present to ensure any concerns can be
discussed.
Furthermore, it enables the Board to scrutinise and
challenge management on the delivery of strategic
objectives. The Chair, assisted by the Company Secretary
and her team, is responsible for ensuring that the
Directors receive accurate and timely information. The
Company Secretary and her team compile the Board
and Board Committee papers, which are circulated to
Directors in advance of meetings. The Company Secretary
and her team ensure that feedback onBoard papers is
relayed to senior management. The Company Secretary
prepares minutes of each meeting and is responsible
forfollowing up on any action items.
Feb
• Reviewed and approved the Bank's Long Term Plan.
• Approved the risk appetite for the Bank ensuring that we
can maximise returns in a safe and sustainable way.
• Directors' duties refresher.
Apr
• Approval of the partnership with the England and Wales
Cricket Board (ECB).
• Welcomed shareholders to our AGM and held a General
Meeting and Court Meeting to give shareholders the
opportunity to vote on the insertion of a new holding
company into the Group.
Jun
• Following support from our shareholders, insertion of
the holding company into the Group.
Oct
• Secured £925m capital package and recommended to
investors for approval.
Dec
• Announced the resignation of Anne Grim, Ian Henderson
and Monique Melis from the Board.
Aug
• H1 2023 results
Jan
2023
• Annual review of the Bank's Resolution Readiness.
• Overview of the 2022 internal evaluation outcomes
and review of the actions.
Mar
• 2022 year-end results
• Approval of the Prospectus and Scheme Document
published in relation to the new holding company.
May
• Q1 2023 results
• Consumer Duty training.
Key announcements, decisions
and Board activity
Jul
• Following recommendation from the Group Nomination
Committee, reviewed and approved the appointment
of Clare Gilligan as Company Secretary.
Sep
• Held our annual away days to agree our vision of the
Bank’s strategic objectives for 2024.
Nov
• Q3 2023 results
• Published Prospectus and Circular in relation to the
capital package and held General Meeting at which
all resolutions were approved.
Governance Additional informationStrategic report Financial statements 58Risk report 58
Metro Bank Holdings PLC Annual Report and Accounts 2023
Stakeholder engagement
Our colleagues
We understand that our colleagues are what makes the Bank different. We want every
colleague to be a fan of Metro Bank, feel supported and invested in, so that they can make
FANS of our customers.
What matters most to them
• Flexible and hybrid working practices.
• Engaged and motivated colleagues.
• Development and career opportunities.
• Fair pay, reward and opportunity to make a difference.
• Culture of inclusion and wellbeing.
How we engage
• Engagement representatives across the business.
• Have your say cafés and colleague meetings with leaders.
• Revolution Update hosted by the ExCo team.
• Voice of the Colleague surveys.
• Remuneration working groups.
• Opportunities to engage with ExCo and Board members.
• A programme was piloted for our senior leaders to build greater customer awareness,
including direct involvement with stores and contact centres to develop a deeper
understanding of what our customers want and need from their Bank.
• Face-to-face and virtual opportunities to meet and provide feedback to our DNED,
NicholasWinsor.
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 go through to Zest Den – a panel of senior leaders and ExCo. The winning
ideas at this stage are then taken forward by colleagues for implementation.
We engage with colleagues through our colleague inclusion network groups, our Voice of the
Colleague engagement representatives and our Senior Leadership Team forum.
The Board reviews Voice of the Colleague survey results and receives updates on people
andculture through the year. More information on how we engaged with our colleagues is on
page 62.
2023 outcomes and highlights
• Engagement score of 78, four points above global benchmark.
• New panel format Revolution Update with the opportunity to join in person or virtually.
• 'Thank You’ week to recognise the work that our colleagues have done throughout the year.
• Online ‘Yam Jams’ Q&As with senior leadership.
Our customers
Our diverse range of customers all have their own individual needs, but what binds them
together is the desire for AMAZEING service and a range of banking services. We remain one
of the highest rated high street banks for overall service quality for personal customers, the
best bank for service in-store for business customers and joint top for service in-store for
personal customers in the CMA's Service Quality Survey in February 2024.
What matters most to them
• 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.
The Board recognises the importance of continuing to invest in our digital channels. During the
year, we enhanced self-serve options online and via our App. We launched Confirmation of
Payee to our customers to give them confidence that they have the correct payment details
before making a payment. Customers using our App can now receive push notifications when
they near their credit limit, supporting customers in managing their money. We have also
introduced Aida, our chatbot, to support our customers with general enquiries, like how to
make a payment via the App.
We have also delivered virtual queueing for customers visiting our stores, enhancing the
customer experience with an SMS service, so customers can continue with their day before
sitting down with a colleague.
We have continued our programme of launching new products and services for our SME
community. As part of this, we launched a new business credit card journey to improve the
accessibility of this product to our customers.
2023 outcomes and highlights
• Investment into our digital infrastructure – all to heighten the consumer experience.
• Launched Confirmation of Payee to our customers.
• Introduced Aida, our chatbot, to support our customers with general enquiries.
• Delivered virtual queueing for customers visiting our stores.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Stakeholder engagement
Continued
Our investors
It is important to us that we engage with our investors to keep them up to date on our
performance, strategy updates, share our vision for the future and understand their views and
focus areas. We engage openly and transparently with our investors, who are helping us to
grow and shape the Bank for the future.
What matters most to them
• Successful delivery of the strategic plan.
• The path to sustained profitability.
• Ability to maintain cost discipline and leverage the cost base for revenue growth.
• Capital management and ability to lend more to our customers.
How we engage
• 2023 AGM, General meetings and Annual Report and Accounts.
• Quarterly trading updates and investor presentation at half/full year.
• Investor roadshows and conferences.
• Proxy adviser and institutional investor meetings.
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 views, the market and
latest trends. The Board appointed a shareholder-nominated NED in 2022, with the purpose of
further enhancing the existing rigorous Board discussions to ensure that shareholder views are
considered as part of Board decision-making.
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.
2023 outcomes and highlights
• Capital raise and debt refinancing completed with strong shareholder support, 92% voting in
favour at the GM.
• All resolutions at the 2023 AGM passed with 91% or more votes in favour.
Our 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 our regulators. The financial services
regulatory landscape continues to evolve, and the Board ensures the Bank’s strategic priorities
are in line with regulatory requirements and new initiatives. For example, Consumer Duty,
evolving capital standards and corporate reforms are all areas in which the Bank will engage
with our regulators in the year ahead.
What matters most to them
• Compliance with relevant laws and regulations.
• Governance and accountability.
• Transparent and constructive engagement and communication.
How we engage
• Annual PRA presentation to the Board.
• Regular meetings between our regulators and members of the Board and ExCo.
We aim to maintain our positive relationship with regulators through an approach of early and
regular engagement, particularly on areas of critical importance. The FCA and PRA receive
copies of our Board papers.
We have engaged constructively with our regulators during 2023 with respect to key initiatives
and will continue this engagement across upcoming changes to the regulatory landscape in
2024 and beyond. The CRO reports regularly to the Risk Oversight Committee and the Board
on material matters of regulatory engagement including an assessment of the status of our
regulatory relationships.
Governance Additional informationStrategic report Financial statements 60Risk report 60
Metro Bank Holdings PLC Annual Report and Accounts 2023
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.
• Supplier Code of Conduct.
• Regular senior level engagement with key suppliers.
• Dedicated relationship manager with the Bank.
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 Group 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 2023 and 31December 2023, our average invoice payment turnaround was 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.
The Board understands the risks posed by our suppliers and ensures 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 work closely with our suppliers, meeting regularly at senior level with key suppliers.
We have continued to embed ESG considerations in conversations with suppliers, driving
meaningful engagement with their ESG teams, and have taken the first steps toward
supplier-specific emissions reporting.
We also further bolstered our oversight of supplier risks and controls, with a particular focus on
our top tier material engagements.
2023 outcomes and highlights
• First supplier-specific emissions reporting.
• Enhanced oversight of material supplier risks and controls.
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 number one 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 number one 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. In 2023, we expanded our financial education programmes to include young adults
aged 16 to 18 in schools and colleges and people serving in the armed forces.
• Networking and community events.
• Days to AMAZE volunteering.
• Fundraising for charities.
• Our stores celebrated International Women’s Day by hosting more than 2,000 people at
complimentary networking events for local businesses.
The Board understands how important it is to have a physical presence in our communities. In
deciding where to build a new store, we take into account where we can reach the most people
and businesses so that we can continue to offer convenient banking at a time that suits our
customers, and we will be looking at opportunities to open more stores in the North of England
in 2024.
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.
2023 outcomes and highlights
• Joined the UK SAYS NO MORE campaign to end domestic violence and made 52 of our
stores official ‘Safe Spaces’ for those in need.
• 15,000 children completed Money Zone.
• Attended Herts County Show where we were a headline sponsor to the event, which
welcomed over 35,000 people, and provided financial education to over 1,000 children.
• Marched alongside our communities in the London, Birmingham, Cardiff and Oxford Pride
Parades.
• Metro Bank is the ECB's first-ever Champion of Women's and Girls' Cricket. A new Women's
and Girls' Fund – made up of equal contributions from the ECB and Metro Bank – is at the
heart of the partnership. The Fund will accelerate cricket's progress towards becoming a
more inclusive sport, through community team programmes to attract and retain women
and girls.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Letter from the Designated Non-Executive
Director for Colleague Engagement
The Board continues to be of the opinion that
appointing a DNED is the most appropriate
engagement mechanism for the Bank to
ensure there is effective two-way engagement
between colleagues and the Board.
The Board recognises that the DNED role
doesn’t replace existing engagement
channels. The ExCo already plays a key role
incommunicating Board decisions to
colleagues and we have a number of
established networks and forums which help
us to understand the views of our diverse
colleague population. The Bank also seeks
colleague views through other mechanisms
including the Voice of the Colleague (VOC)
surveys and feedback via our internal social
media channel, Yammer. My role is to provide
an additional point of connection between the
Board and the workforce and escalate their
views to the Board as a whole in order to
inform effective decision-making.
I formally report on engagement activities
andthe feedback I have gathered to the Board
throughout the year. I also provide a report
tothe Group People and Remuneration
Committee each year on the outcome of my
engagement ahead of its year-end decisions
to ensure theviews of colleagues aretaken
into consideration.
Our colleagues are key to our success and
weare proud of the culture we have at
MetroBank, which we recognise as one of the
main reasons that colleagues want to work
here. The Board plays an active role in defining
andmonitoring culture, particularly in an
environment of change, and we will keep this
under close review during 2024.
Nicholas Winsor
Designated Non-Executive Director for Colleague Engagement
Our colleagues are key to our success and we are
proud of the culture we have at Metro Bank. The
Board continues to welcome the views of colleagues
and I look forward to having more opportunities next
year to engage with them to learn what more we can
do to serve our communities.
The Board continues to have the opinion that appointing
aDNED is the most appropriate engagement mechanism
for the Bank to ensure there is effective two-way
engagement between colleagues and the Board.
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). During my time on the
Board, I have been privileged to meet so many
wonderful colleagues and this was a great
opportunity toengage in person, and digitally,
with colleagues and deliver their feedback to
my fellow Board members.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Governance Additional informationStrategic report Financial statements 62Risk report 62
Metro Bank Holdings PLC Annual Report and Accounts 2023
Letter from the Designated Non-Executive Director
for Colleague Engagement
Continued
2023 DNED engagement activities
and feedback
It has been a busy year for the Bank with
manychanges and, as ever, we have taken
colleagues into consideration in every decision
we have made as a Board. Throughout 2023,
I had many formal and informal engagements
with our colleagues. These included visiting
colleagues across different sites, attendance
at department leadership events and hosting
‘Natter with Nick’ sessions. These events
provided valuable insights into how colleagues
were experiencing the work environment and,
most importantly, the leadership and culture
of the Bank. It was great to understand from
colleagues what leadership can do to enhance
their experience.
As can be seen in the VOC results, colleagues
love the culture at the Bank and in particular,
the collaborative and open relationships
between teams.
Colleagues raised that they would benefit
from certain system upgrades and this was
taken into account when the Board was
agreeing on prioritisation of investments.
During the year, the Board considered and
approved changes to the organisational
structure which resulted in a number of
colleagues being made redundant. It was
important to the Board that colleague
wellbeing was a priority during this time
anditwas pleasing to see the number of
resources made available to colleagues.
Colleagues fed back that they value what
localleaders are doing to support colleague
wellbeing, along with the additional wellbeing
support tools that the Bank offers. To build on
this, the Wellbeing hub was relaunched to
provide easy access to all the resources and
tools needed to support colleague wellbeing
which remains a focus for theBoard as the
Bank continues on its transformation journey.
Their views are paramount to ensuring that
the Board does allit can to support colleagues
during this time of change. Alongside this,
Iregularly log into Yammer, aninternal social
media tool for colleagues toshare information,
ideas and socialise. Theplatform is self-
moderating, rather than top-down, and is used
as a solutions tool when colleagues have a
question. This helps me to have an overview of
the bump ups raised by colleagues and means
I can raise issues at Board if necessary, based
on the conversations I see.
The Bank also has a platform called
‘Recognise’ that allows colleagues to call out
each other’s achievements and it was great to
continue to see colleagues celebrating one
another’s successes during the year.
Looking forwards
The Board recognises that the role of DNED
will continue to evolve, particularly as a result
of changing working practices, as new areas
of colleague focus are identified, and as fresh
opportunities for engagement arise. I look
forward to championing the views of
colleagues as the Bank goes through another
year of change and I am pleased to already
have an interesting schedule of engagement
opportunities with colleagues in 2024.
The Board continues to welcome all of our
colleagues’ views, recognising the benefit of
acolleague base that is the bedrock of our
business model, ensuring we can deliver over
and above for our customers, the communities
we serve and for each other.
I look forward to meeting even more of our
AMAZEING colleagues in the future.
Nicholas Winsor
Independent Non-Executive Director
16 April 2024
Summary of key activities undertaken by the DNED during 2023
2023 Colleague contact
Colleague
insight
Formal/informal
reporting
Q1
(Jan to
Mar)
• Attended Inclusion Chairs Meeting.
• Visited Cheapside store with Interim
Director of Colleague Experience and
Inclusion.
• Met with People team and Senior
Leadership Team colleagues at
Holborn Office.
• DNED update
toBoard.
• DNED letter
published in
2022 Annual
Report.
Q2
(Apr to
Jun)
• Hosted ‘Natter with Nick’ virtual event
(selection of colleagues from across
the business).
• Visited AMAZE Direct Slough site and
Slough store.
• Attended Pride Month virtual event
– Mpride’s guide to Pride.
• Attended Pride Month virtual event –
The importance of LGBTQ+ allyship.
• Voice
ofthe
Colleague
Survey.
• DNED update
toBoard.
Q3
(Jul to
Sept)
• Attended Inclusion Chairs Meeting.
• Attended ‘In conversation with
England stars Nat Sciver-Brunt,
Tammy Beaumont, and Clare Connor’.
• Attended Revolution Update.
Q4
(Oct to
Dec)
• Attended Inclusion Chairs Meeting.
• Visited Manchester and Liverpool
stores.
• Attended Chief Information Officer
Senior Leadership Team All-hands
Communications meeting.
• Voice
ofthe
Colleague
Survey.
• DNED update
toBoard.
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Board leadership and company purpose
Matters reserved for the Board
The Board is responsible for setting and
managing the Bank’s strategic direction.
TheBoard has a formally documented
schedule of matters that are reserved for
approval. This includes decisions concerning
the Bank’s strategic aims and long-term
objectives, the structure and capital of the
Group, financial reporting and internal
controls, risk management, and various
statutory and regulatory matters. The Board is
also responsible for effective communication
withthe Bank’s shareholders, its culture,
purpose and values and any changes to the
Board or Board Committee membership or
structure, and has authority to recommend
the Directors’ Remuneration Policy to
its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the Board Committees.
Board Committees
The Board delegates specific responsibilities
to each of its Committees: Group Audit, Group
Risk Oversight, Group Nomination, and Group
People and Remuneration. All Committees are
chaired byan independent Non-Executive
Director, except the Nomination Committee,
which ischaired by the Chair of the Board. All
committees comprise independent Non-
Executive Directors, except the People and
Remuneration Committee, where the Chair of
the Board (who was independent on
appointment) is also a member. In accordance
with the UK Corporate Governance Code, all
members of the Group Audit Committee are
independent Non-Executive Directors.
Each of the Committees has established
Terms of Reference setting out its duties,
authority, and reporting responsibilities,
copies of which are available on our website:
(metrobankonline.co.uk)
Board leadership and company purpose
Role of the Board
The Board is accountable to our stakeholders
for setting the strategy to promote the
long-term success of the Bank. The Board is
responsible for the oversight of the Executive
Committee, governance, internal controls,
riskmanagement, strategy, and the overall
performance of the Bank. The interests of our
stakeholders are always at the forefront of the
Board’s agenda.
Composition of the Board
As at the date of this report, the Board
consists of the Non-Executive Chair, the CEO,
four independent Non-Executive Directors
and a shareholder-nominated Non-Executive
Director. 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 54-55 and information on the
responsibilities of the Board can be found
onpage 66.
The Terms of Reference of each Board
Committee are reviewed regularly to ensure
they remain appropriate and reflect any
changes in legislation, regulations, or best
practice. These documents are also reviewed
formally every year by the relevant Board
Committee, then approved by the Board,
along with a self-assessment of how each
Board and Board Committee discharged their
duties during the year. The composition of
each Board Committee can be found within
individual Committee reports.
The Board also delegates the review of the
Bank’s disclosure obligations to its Disclosure
Committee, formed of the CEO, CFO,
Company Secretary and General Counsel.
TheDisclosure Committee also has Terms
ofReference approved by the Board, which
set out its duties and authority under the
listing rules.
Reports for each Committee can be found
onpages:
Audit Committee Report 70
Risk Oversight Committee Report 75
Nomination Committee Report 78
People and Remuneration Committee
Report 82
Governance framework
Executive
Committees
CEO
Group Risk
Oversight
Committee
Group People
and
Remuneration
Committee
Disclosure
Committee
Group
Nomination
Committee
Group Audit
Committee
Board
The Board’s core role is to promote the long-term success of the Bank
for the benefit of its shareholders. Alongside the operating company
board, this requires us to:
• 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.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Board leadership and company purpose
Continued
Effectiveness
A clear record of the time commitments of
each Non-Executive Director is maintained
and reviewed annually by the Group
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 Bank’s business to be
effective in their roles. Each Director has
committed to dedicate as much time as is
necessary to the Bank in line with the time
commitment expectation set out inthe
Non-Executive Directors’ letters of
appointment. Directors are expected to
attend all meetings of the Board, and the
Board Committees on which they serve. If
Directors are unable to attend a meeting,
theircomments on matters being considered
at the meeting are discussed in advance with
the Chair and/or Company Secretary, so
thattheir contribution can be included in the
wider discussion.
A full report on the 2023 external Board
effectiveness review is on page 68.
Board skills
As part of succession planning, the Group
Nomination Committee maintains and reviews
a clear record of the skillset of each Director.
The Group Nomination Committee review
allows the Board to determine that each
Non-Executive Director has the skills and
experience to constructively challenge
strategy and scrutinise performance.
Independent Directors
The Board is satisfied that, as at 31 December
2023, seven NEDs and the Chair were
independent.
Directors’ continuing professional
development
The Company Secretary ensures that all
Directors are kept aware of changes in
relevant legislation and regulations. In 2023,
the Board and Board Committees received
training sessions on listed company obligations
and Consumer Duty. 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 Board
Committees on which they serve. The
Company Secretary provides the Board with
relevant legislation and regulatory updates
ona regular basis as necessary.
Induction of new Directors
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 part of the Group Nomination
Committee’s selection process and again on
appointment for a thorough briefing on all
relevant aspects of the Bank. They also meet
other Directors, the Company Secretary,
ExCo and our advisors for briefings on their
responsibilities as Directors and on our
business, finances, risks, strategy, procedures
and the markets where the Bank operates.
Directors receive an electronic induction
packupon their appointment, which includes
relevant Board materials, Bank policies
andcorporate and financial information.
NewDirectors also receive listed company
director responsibilities training from the
Bank’s legal advisors.
External appointments
The Board reviews the external appointments
of new Non-Executive Directors before they
are appointed to the Board. The Board also
authorises additional external appointments
that Non-Executive Directors may wish to take
up, following due consideration of conflicts,
regulatory requirements and assurances
provided that the Non-Executive Director
would still be able to devote sufficient time
totheir Bank duties. The external time
commitments of our Non-Executive Directors
are reviewed on an annual basis by the Group
Nomination Committee.
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 Bank. Any appointment
is subject to prior approval by the Board.
During the year ended 31 December 2023,
none of the Bank’s Executive Directors held
directorships in any other quoted company.
Board culture
The Board places significant emphasis
andimportance on sustaining the Bank’s
unique culture.
During the year, the Board received regular
reports about colleague, communities and
customer-related activities across the business
to support its understanding of howculture is
embedded within the Bank. Presentations
from ExCo members and relevant senior
management colleagues to theBoard during
the year have provided culture-related data
from across the Bank. TheBoard’s activities
and examples of key decisions taken during
the year are set out on page 58. See page 59
regarding how the Board engages with its
different stakeholders.
Colleague engagement
The Board has appointed a Designated
Non-Executive Director for Colleague
Engagement to engage with colleague
representatives throughout the Bank. The
Board has approved Terms of Reference
setting out the duties, authority and reporting
responsibilities required for this role. The
Designated Non-Executive Director for
Colleague Engagement reports to the Board
biannually on the progress of workforce
engagement, initiatives, and activities. This
provides the Board with in-depth insight into
how the culture is embedded across our
different business areas and functions, and
any issues that need to be addressed. In
addition, the views of the Bank’s colleagues
are measured through a biannual anonymous
Voice of the Colleague survey, which gives our
colleagues the opportunity to give feedback
and express their views on a variety of topics
including their own remuneration, culture,
leadership and policies and practices. An
analysis of the results of employee surveys is
presented to the Board. See pages 59 and
62-63 for more information regarding
colleague engagement.
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Board roles and responsibilities
The composition of the Board Committees can be found at the beginning of each Committee report.
1. The Interim CFO does not sit on the Board.
2. Subject to regulatory approval.
Role Name Responsibilities
Chair Robert Sharpe The Chair leads the Board and is responsible for its
effectiveness and governance. The Chair sets the tone for the
Bank, including overseeing the development of culture and
standards in relation to the conduct of business and the
behaviour of colleagues. The Chair sets the Board agenda and
ensures that sufficient time is allocated to important matters, in
particular those relating to our strategic direction. They report
to the Board and are 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 Chair is also responsible for ensuring that there are strong
links between the Board, ExCo and shareholders.
CEO Daniel Frumkin The Chief Executive Officer (CEO) is responsible for the day-to-
day management of the Bank’s operations, for recommending
the strategic direction and for implementing the strategic
direction agreed by the Board. The CEO is supported by the
Executive Leadership Team. The CEO directly reports to the
Chair and to the Board and is responsible for providing the
Board with appropriate information and updates.
CFO James
Hopkinson
(resigned
12January
2024)
The Chief Financial Officer (CFO) is responsible for planning,
implementing, managing and controlling all financial-related
activities of the Bank, both day-to-day and long-term
management. The CFO is responsible for managing the Bank’s
financial position, including allocation and maintenance of
capital, funding and liquidity. They are also responsible for
producing and ensuring the integrity of the Bank’s financial
information and regulatory reporting. The CFO has oversight of
the Finance, Treasury, Strategy and Corporate Transformation
and Investor Relations functions of the Bank.
On 12 January 2024, the Board announced that James
Hopkinson would step down with immediate effect. An interim
CFO
1
, Cristina Alba Ochoa was appointed on 15 January 2024.
Marc Page will join as permanent CFO in September 2024
2
.
Company
Secretary
Clare Gilligan The Company Secretary is responsible for advising and
supporting the Chair and the Board on good corporate
governance and best boardroom practice.
SID Monique Melis
(resigned
31December
2023)
Catherine
Brown
(appointed
1January 2024
2
)
The Senior Independent Director’s role is to act as a sounding
board for the Chair and to serve as an intermediary for
Directors when necessary. The SID supports the Chair in the
delivery of their objectives and is available to shareholders to
hear their views and address any concerns they may have that
have not been resolved through normal channels. 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.
Role Name Responsibilities
DNED for
Colleague
Engagement
Nicholas Winsor The Designated Non-Executive Director for Colleague
Engagement (DNED) is responsible for bringing the views
and experiences of our colleagues into the Boardroom.
Working with the Board and particularly management, the
DNED takes reasonable steps to evaluate the impacts of
Board proposals and developments on colleagues. The
DNED engages with management regarding colleague
engagement and steps taken to address colleague concerns
arising out of business-as-usual activities. Colleagues’ views on
remuneration concerns, including colleague views on executive
remuneration as appropriate are reported to the People and
Remuneration Committee by the DNED. The DNED reports
regularly to the Board on activities undertaken and feedback
received, as well as presenting the annual update for
inclusion in the Annual Report and Accounts.
Consumer
Duty
Champion
Catherine Brown
(until
26February
2024)
Nicholas Winsor
(from
27February
2024)
The Consumer Duty Champion supports the Chair and CEO
in ensuring that Consumer Duty and customer outcomes are
raised regularly in all relevant discussions, and that the Board
is challenging management on how it is embedding the Duty
and focusing on consumer outcomes. The Consumer Duty
Champion will consider and challenge management on the
quality of product reviews, the effectiveness of fair value
assessments, communication standards and testing, the
ability to meet customer needs (including those considered
vulnerable) through the support the Bank provides, the
prioritisation of delivering customer outcomes when
considering this alongside other internal and external
challenges, and how effectively management embeds
Consumer Duty into our culture and governance.
Independent
NEDs
Catherine Brown
Paul Thandi
Michael Torpey
Nicholas Winsor
The role of the Non-Executive Director (NED) is to
constructively challenge management on matters such as the
strategic direction of the Bank. Each NED brings specific
experience and knowledge to the Board and its Committees.
The NEDs have a broad and complementary set of technical
skills, educational and professional experience, personalities,
cultures and perspectives. Their contributions provide
independent views on matters of strategy, performance, risk,
conduct and culture.
Shareholder-
nominated
NED
Dorita
Gilinski
The shareholder-nominated NED’s role is to assist the Board
in ensuring that shareholder views are considered in Board
decision-making and that there is a shareholder voice in the
Boardroom.
66Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Board effectiveness
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 managing risk is further
detailed on page 124. The Group Risk
Oversight Committee reviews the
effectiveness of the Risk function and risk
management processes on the Board’s behalf,
and its approach can be found in the ROC
Report on page 75. 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Group Audit Committee for the review of
the effectiveness of internal control systems.
Moredetail can be found in the Group Audit
Committee Report on page 70.
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 the ROC and the Audit Committee as
well as updates from the CRO and CIA. The
Board also approves the Internal Audit Plan on
the recommendation of 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 the
Directors’ conflicts of interest. The Company’s
Articles of Association provide for the Board
to authorise any actual or potential conflicts of
interest. The Board will only approve a conflict
of interest if it believes that it would not have
an impact on the Director’s ability to carry out
their duties and responsibilities to the Company.
Prior to a new Director being appointed,
potential conflicts of interest are disclosed and
assessed to ensure that there are no matters
which would prevent the incoming Director
from taking the appointment. During their
tenure, Directors are asked to consult with
theCompany Secretary and the Board Chair
before taking up any external appointment
orresponsibilities that may be an actual or
potential conflict of interest. Prior to taking
upexternal appointments, the Board needs
toprovide approval so that the Board can
consider whether the appointment could
constitute an actual or potential conflict
ofinterest. Each Directors’ conflicts of
interestare considered by the Nomination
Committee annually.
Independent professional advice
Directors are permitted to take independent
professional advice at the Company’s expense
if required to enable them to fulfil their duties.
In addition, they have access to the advice and
services of the Company Secretary, who is
responsible for advice on corporate
governance matters to the Board.
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 receive 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. We also have a Relationship
Agreement with our majority shareholder,
Spaldy Investments Limited. The agreement
sets out that Spaldy Investments Limited can
appoint up to three shareholder-nominated
NEDs to the Board for such time as it has and
retains an interest that is equal to or greater
than 30%. Full details of the Relationship
Agreement can be found on our website
metrobankonline.co.uk/investor-relations/.
All newly appointed Directors must stand for
election by shareholders at the Annual
General Meeting 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
2024 Annual General Meeting. 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.
Colleague engagement
For information on how the Directors have
engaged with colleagues, had regard for
colleague interests and how this has affected
the principal decisions taken by the Company
during the financial year, see page 59.
Other stakeholder engagement
For further information on how the Directors
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57–61.
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, telephone calls, presentations,
webcasts and online content.
Investor meetings are undertaken by the
Chair, CEO and CFO, supported by the
Director of Investor Relations. Institutional
investors have the opportunity to meet with
the Chair, Senior Independent Director and
other Non-Executive Directors to discuss any
areas of concern. In addition, the Board
Committee Chairs seek engagement with
shareholders on significant matters related to
the areas of their responsibility.
The Board has one Non-Executive Director
nominated to the Board by the Company’s
majority shareholder, Spaldy Investments
Limited. This reflects the strong relationships
the Bank has with its shareholders,
shareholder nominated directors bring a
shareholder perspective to Board discussions
so that shareholder views are considered as
part of the Board decision-making process.
Details of major interests in the Bank's shares
can be found on page 121.
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.
67
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Board effectiveness
Continued
2023 external Board evaluation
The Board commissioned an externally
facilitated Board evaluation in 2023 in line
with the Code requirement to carry out an
external review once every three years. After a
thorough selection process, the Chair and SID
recommended the appointment of Ian White
to deliver the external Board evaluation. Ian
does not have any other connection with the
Company or individual directors. The Directors
were pleased with Ian White’s approach and
are grateful for his work undertaken through
2023 and into 2024.
Process and approach
The approach and process for the Board
evaluation was agreed with the Chair and
SID, and included director and colleague
interviews as well as Board and Committee
meeting observation. See page 69 for more
details of the process.
The report highlighted the following:
• The Board is led by a highly respected and
seasoned Chair who leads the Bank in an
inclusive manner.
• The Board is engaged with an inclusive,
positive, collegiate and collaborative culture.
• There is effective delegation to Board
committees which are clearly connected
with the Board.
• The NEDs provide a wide range of skills,
experience and behaviours to the Board.
• Relationships between NEDs and the wider
Executive are professional and positive.
Recommendations from the review, for which
there are actions for the Board to take forward
to ensure continued effectiveness include:
• The Board should implement a mechanism
to regularly review major decisions in terms
of process and outcomes, including a review
of the major decisions made in 2023.
• While there is challenge at Board meetings,
there could be more on matters proposed
by Executives.
• The papers presented to the Board are
improving but the quality and length of
papers should be kept under review, as
should the timing of papers sent to the
Board.
• Succession planning should be a high
priority for the Board, particularly following
the changes to the membership of the
Board at the end of 2023, at both executive
and non-executive levels. The Board should
also ensure a continued focus on diversity.
The Board has in place plans for the
implementation of the recommendations
to enhance its effectiveness. These
recommendations will form the basis of
the next internal evaluation where progress
will be assessed, and further actions agreed
if necessary.
Although work started in 2023, the evaluation
did not complete until early 2024. Despite this
delay, the Bank will look to complete its next
external evaluation again in 2026 in keeping
with the Code’s three-year cycle.
Progress on actions from the 2022 internal evaluation
Board
Agreed actions Progress
Provide for additional focus
on marketing and consumer
strategy, product and store
performance, the investment
programme underpinning
the strategy, and culture on
the Board's agenda.
The Board dedicated time on the Board agenda in 2023 to
focus on these topics, particularly at the Board's strategy away
day in 2023.
Consider Board composition
and skills as the Bank's
priorities change.
The Board's composition and skills were regularly reviewed
by the Nomination Committee throughout 2023. This will
continue into 2024 following the recent changes to the Board.
Look for opportunities to
refine papers presented to
the Board.
Board papers, and the information contained within these
papers, are continually reviewed to assist with Board
effectiveness and a new Board paper template was designed
and implemented in 2023.
68Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Board effectiveness
Continued
2023 external Board evaluation process
Scope of review agreed with the Chair,
Company Secretary and SID – this included
the Chair and SID setting out what they
wanted to achieve from this review.
Evaluation questionnaire – each of the
Directors completed an anonymous online
questionnaire. This provided some themes and
context to the evaluator ahead of the main
parts of the evaluation.
Individual interviews – interviews were
conducted with each Board member,
selected members of senior management,
the Company Secretariat and a range of
colleagues from across the Bank.
Briefing with Chair and SID – the
draft report was provided to the Chair
and the SID for review and discussion
prior to the report being presented to
the Board.
Board presentation – the report was
tabled for Board review and discussion
inFebruary 2024, with the external
evaluator facilitating the discussion.
Recommendations – the Board will
agreeand oversee progress against an
action plan to address the evaluation
recommendations and assess progress
against these regularly.
Documentation review – the external evaluator
reviewed the Board’s governance documentation,
as well as Board packs and recent shareholder
communications.
Board and Committee meeting observations–
theexternal evaluation included external
evaluator attendance at meetings to observe
how Directors interacted with each other during
Board and Committee meetings, as well as to
assess the tone and culture set by the Board in
its meetings.
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2023 highlights
• Assessed going concern and viability.
• Reviewed key accounting judgements.
• Reviewed the impact of the Group’s implementation of a
new holding company on financial and tax accounting.
• Reviewed advice received and accounting for the capital
package announced in October 2023 and made
recommendations to the Board to assist in the review of
the relevant documentation.
• Had oversight of regulatory reporting.
• Reviewed the Bank’s published financial information.
• Reviewed internal audit reports and regular updates
from the Chief Internal Auditor.
• Monitored the Group's tax position.
• Recommended to the Board the appointment of the
new Chief Internal Auditor.
Dear shareholders
I am pleased to present the Group Audit Committee
(the‘Committee’) report for the year ended 31December
2023. This report aims to provide a comprehensive picture of
the work we have undertaken as a Committee during the year.
Ian Henderson and Monique Melis stepped down from the
Committee on their departure from the Board on 31December
2023. Catherine Brown and Nicholas Winsor joined the
Committee ahead of the 2023 year end audit cycle. On behalf
of the Committee, I would like to thank Ian and Monique for
their valued contributions during their tenure.
During the year we also said goodbye to Chit Ghee Yeoh as the
Bank's Chief Internal Auditor. I would like to thank Chit Ghee
for her invaluable input to the Committee. We welcomed Kathy
Newman as the new Chief Internal Auditor and I look forward
to continuing to work with Kathy as we move into a new year.
It was a busy year for the Bank and the Committee had
oversight of the accounting impacts of both the insertion of
anew holding company and the execution of a £925million
capital package.
Whilst monitoring some big changes for the Bank, the
Committee’s core duties remained unchanged; reviewing the
integrity and quality of the Group’s published financial
information; reviewing the strength and effectiveness of the
Bank's regulatory reporting framework; supporting the Bank’s
governance framework; and maintaining focus on evaluating
the effectiveness of the Group'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.
Committee composition and attendance for 2023
Members
Meetings
attended
Meetings held during
Director’s tenure
Michael Torpey (Chair) 7 7
Ian Henderson
1
7 7
Monique Melis
1
7 7
1. Ian Henderson and Monique Melis stood down from the Committee on
31December 2023. Catherine Brown and Nick Winsor were appointed to
the Committee on 31December 2023.
In addition to the Committee Chair, Michael Torpey, there were two
members of the Committee in 2023: Ian Henderson and Monique Melis.
Both were independent NEDs with a range of relevant business
experience. Michael has recent and relevant financial experience and
the Committee as a whole has competence in the banking sector. For
further details of members' skills and experience, please refer to their
biographies on pages 54–55.
The Committee meets at least four times a year at appropriate times in
the reporting and audit cycle, and otherwise as required.
Regular attendees at the Committee include the Chief Internal Auditor,
CRO, CFO, CEO, Board Chair and senior members of the Finance team,
representatives from the External Auditor and the Deputy Company
Secretary, who is the Committee Secretary. The Committee Chair also
sits on the ROC and works closely with its Chair. The ROC Chair also sits
on the Committee.
The Committee’s core duties remain unchanged; reviewing the integrity and quality of the
Group’s published financial information; reviewing the strength and effectiveness of the
Bank's regulatory reporting framework; supporting the Bank’s governance framework;
and maintaining focus on evaluating the effectiveness of the Group's control environment.
Michael Torpey
Group Audit Committee Chair
Metro Bank Holdings PLC Annual Report and Accounts 2023
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The Group Audit Committee in brief
• The Committee is accountable to the Board and
will assist the Board in fulfilling its oversight
responsibilities by reviewing and monitoring the
financial reporting process, the system of internal
control, theinternal and external audit processes,
and the Bank’s process for monitoring compliance
with laws and regulations andthe code of conduct.
• A key role of the Committee is toreview the
integrity of the financial reporting for the Bank.
This includes:
• Monitoring the integrity of the
financialstatements and formal announcements
relating to the Bank’sfinancial performance.
• Reviewing and reporting to the
Boardonsignificant financial issues
andmaterialjudgements.
• Reviewing and challenging accounting policies,
methods used to account for significant and
unusual transactions, clarity and completeness of
disclosure.
• The Committee is responsible for overseeing the
regulatory reporting framework to ensure it is
strong andeffective.
• The Committee is responsible for advising on
whether the Annual Report andAccounts is fair,
balanced and understandable.
Group Audit Committee report
Continued
One of the Committee’s main responsibilities is to inform the
Board whether we believe the 2023 Annual Report and
Accounts is fair, balanced, and understandable, and that it
contains all of the information essential for shareholders to
evaluate the Group’s position, performance, business model
and strategy.
To form our opinion we scrutinise the work undertaken by
theFinancial and Regulatory Reporting Assurance team,
whoprovide details on the process undertaken to ensure a
balanced disclosure of developments throughout the year.
We make sure that management’s disclosures reflect the
supporting facts, we urge them to explain and justify their
interpretation and, if required, re-present the data. The
External Auditor, PricewaterhouseCoopers LLP (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 159-166.
During the year, the Committee paid close attention to the
financial position presented by management as we faced
turbulent economic conditions and ensured robust oversight
ofthe areas of judgement andestimation in the Group’s results.
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 continued to provide close
oversight on key regulatory reporting matters including
oversight of the Bank’s committees for regulatory reporting
and interpretation.
The Committee is kept abreast of UK audit and corporate
governance reforms to ensure we are implementing any
necessary or desirable changes to our audit and governance
frameworks. The Committee will also oversee the
implementation of the changes from the Global Internal
Audit Standards which must be in place by January 2025.
Committee evaluation
During the year, the Committee has continually reflected on its
effectiveness, considered how it discharged its duties as set
out in its Terms of Reference, and reviewed and recommended
changes to this document to the Board for approval. The
Committee was satisfied that it addressed all of its duties
during 2023 and is well placed to deliver on the same in 2024.
During 2023, an external Board effectiveness evaluation to
assess the Committee's performance commenced. The
evaluation concluded that the Committee and Committee
Chair are performing well with members constructively
challenging executives during meetings. However, while the
Committee has a clearly defined role, the Committee could be
better connected with the Board. This is an area that the
Committee will work on during 2024.
Outlook for 2024
As the Bank continues into 2024, the Committee will continue
to focus on management’s approach to key accounting
estimates and judgements, the Bank's capital and liquidity
position and the impact of strategic changes on the Group’s
risk and control framework, remaining abreast of any updates
to corporate governance reforms and providing continued
oversight of financial reporting.
Michael Torpey
Group Audit Committee Chair
16 April 2024
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Continued
Significant financial
reporting areas
Review, challenge and conclusion by the Committee
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.
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 49 to 50.
Implementation of new
holding company
In May 2023, the Group completed the implementation of its new holding company. The Committee undertook a review of management's assessment in relation to the
accounting arrangements for the implementation of the new structure. Notable areas of the review included :
• The consideration of the reserves movements both to facilitate the insertion of the new company but to also create distributable reserves within both Metro Bank PLC
and Metro Bank Holdings PLC.
• The financial classification of the internal MREL assets within the stand-alone financial statements for Metro Bank Holdings PLC. The Committee agreed with
management's assessment that these instruments failed the 'solely payments of principal and interest' test under IFRS 9 and as such were required to be held at fair
value through profit and loss.
Capital package The Committee reviewed the accounting treatment in relation to the £925 million capital package, approved by investors in November 2023. Specific consideration was
given by the Committee to the judgements relating to the refinancing of the Group's existing debt and specifically whether this constituted a substantial modification.
The Committee agreed with management's conclusion that the refinancing should be treated as a substantial modification and therefore the old debt should be fully
derecognised with the replacement debt treated as a new issuance.
Measurement of the
ECLallowance
The Committee regularly reviewed management’s assessment of the adequacy of the allowance for ECL. The review included governance arrangements over
provisioning and models, the use of post-model adjustment and overlays and a benchmark of the Group’s ECL against its peers, as well as reviewing the components
of the calculation (including SICR, definition of default, macroeconomic scenarios and scenario weightings).
The Committee agreed with management’s assessment that the measurement of the ECL allowance remained both a critical accounting estimate and judgement.
Further details are set out on pages 172 and 204-205.
Deferred tax assets The Committee considered whether a deferred tax asset should be recognised in relation to the Group’s unused tax losses (which were written off in 2019) as
at 31December 2023. The Committee agreed with management’s assessment that the criteria for re-recognising these had not been met.
Impairment review The Committee has kept impairment indicators in relation to the Group’s property, plant, equipment, intangible assets and subsidiary investments under review during
the year. Management ran an impairment assessment as required by IAS 36 ‘Impairment of Assets’ 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.
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 230-234.
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Continued
Fair, balanced and understandable
In line with the Code, the Committee
considered whether the 2023 Annual Report
and Accounts is ‘fair, balanced and
understandable and provides the information
necessary for shareholders to assess the
Group’s position and performance, business
model and strategy’. The Committee is
satisfied that the 2023 Annual Report and
Accounts meets this requirement and, in
particular, that there are appropriate
disclosures for relevant developments in the
year. The process which enabled the
Committee to reach this conclusion included:
• The compilation of the 2023 Annual Report
and Accounts 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.
• A formal review and challenge by the
Committee of the draft 2023 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 2027.
Internal Audit
Internal Audit is a critical component of the
Group’s governance, risk management and
control functions, providing independent
assurance over key controls. The Committee:
• Monitored the objectivity and competence
of the Internal Audit function, and the
adequacy of Internal Audit resources and
skills and were satisfied that Internal Audit
had adequate resources available during
theyear.
• Assessed the effectiveness of the Internal
Audit function throughout the year,
including an internal evaluation process that
involved a range of stakeholders.
• Monitored the delivery of the 2023 Internal
Audit Plan, through reports provided by the
Chief Internal Auditor, and discussed areas
of significance identified in audits with
management.
• Recommended the 2024 Internal Audit Plan
to the Board for approval.
• Approved changes to the Internal Audit
Methodology.
• Recommended to the Board the
appointment of the new Chief Internal
Auditor.
The Committee Chair also met regularly
withthe Chief Internal Auditor and made
sureshe had access to the Board if needed.
Asa new Chief Internal Auditor was appointed
during the year, the Chair was involved in
herrecruitment and induction to ensure a
smooth handover.
The 2024 Internal Audit Plan focuses on areas
that present the greatest risk to the Bank and
are of regulatory importance. The Committee
will monitor the resources available to Internal
Audit to make sure they can effectively deliver
the 2024 Internal Audit Plan.
Systems of internal control and
riskmanagement
Details of the Bank’s risk management
framework are provided on pages 125–126.
In considering the effectiveness of internal
controls, the Committee received and
discussed reports from Internal Audit andthe
External Auditor. In addition, management
was invited to discuss significant issues raised
by Internal Audit. Management action plans to
resolve the issues raised were monitored by
the Committee. The Committee also
challenged management where appropriate
on the timeframe of the delivery of these
actions. In conjunction with ROC, the
Committee reviewed and approved the
statements in the Annual Report concerning
internal controls and risk management.
Financial risk management processes
andcontrols are in place and the effectiveness
of these controls is assessed on an ongoing
basis. The internal controls framework
encompasses all key controls, including those
relating to: financial reporting processes;
preparation of consolidated Group accounts;
formulation of the Group’s strategic plans,
budgets and forecasts; accounting policies
and levels of delegated authority.
Assurance work within Finance is carried out
by the Financial and Regulatory Reporting
Assurance team. The team’s remit is to ensure
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. Assurance provided during
2023 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 been proactively involved in preparing
the Bank for compliance with the revised
Corporate Governance Code, specifically the
internal controls-related elements which will
become effective from 1January 2026. The
team has provided regular written updates to
the Committee throughout 2023.
Regulatory reporting framework
The Committee has continued to focus
onensuring that a strong and effective
regulatory reporting framework remains
embedded within the Group.
The Committee has oversight of the Bank's
Regulatory Reporting Committee and
Regulatory Interpretation Committee,
committees designed to further enhance
theBank’s governance and control of
regulatory reporting.
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. During the year we:
• Reviewed and approved the scope of the
2023 External Audit Plan in advance of the
annual audit.
• Reviewed and approved the audit
engagement terms and proposed audit fee.
• Reviewed and approved in advance
non-audit services provided by the External
Auditor.
• Considered the continued independence
and objectivity of the External Auditor.
• Reviewed and discussed the reports
provided by the External Auditor and the
quality of work undertaken.
• Met regularly with the External Auditor
without management present.
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Continued
The Committee is 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 provided insights in
relation to the financial assessment of the
business throughout the year and their
insights have been appropriately investigative
and valuable, and their expertise welcomed.
The Committee confirms that PwC continues
to be effective. The Committee has
recommended the reappointment of PwC
asthe Bank’s External Auditors to the
Board,and the Board has recommended the
reappointment to shareholders for the next
financial year at the 2024 AGM.
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 reports PwC
presented 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 External 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 2023,
the Board approved the Committee’s
recommendation to put a resolution to
shareholders at the 2023 AGM to reappoint
PwC, which shareholders approved.
In line with the FRC’s Revised Ethical Standard
2019, the lead audit partner for the Bank
rotates every five years. Jon Holloway has led
the Bank’s external audit since the start of the
2021 financial year. The Committee maintained
a good rapport with Jon and the PwC team
throughout 2023.
Non-audit services
The Committee carefully monitors the level
ofnon-audit services provided by PwC
andconsidered and approved the Bank’s
Non-Audit Services Policy during the year.
During 2023, 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. 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.
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 176.
The FRC’s Ethical Standard sets out a specific
list of permitted non-audit services for UK
incorporated public interest entities and the
Committee was satisfied that the Non-Audit
Services Policy aligns to the ethical standard
concerning auditor independence, and that
the Bank complied with its policy during 2023.
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 2023, 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 reviewof the
adequacy and security of whistleblowing
systems and controls and reviews these at
least annually. 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 Chair of
the Committee is the Bank’s Whistleblowing
Champion. The policy outlines the Bank’s
whistleblowing process which enables
colleagues to raise concerns about possible
improprieties in financial reporting, other
operational matters or inappropriate personal
behaviours in the workplace.
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The Bank’s ambition to be the number one community bank
continues and in support of this the Committee received
regular updates on customer outcomes, with particular focus
on arrears management and vulnerable customers.
Throughout the year, the Committee considered carefully
credit risk and the Bank’s ability to support customers through
the challenging macroeconomic environment. Regular updates
were presented to the Committee on arrears management
along with deep dives on the performance of business areas
including retail mortgages, invoice finance, consumer lending,
commercial lending and private banking.
The Committee also provided oversight of the implementation
and embedding of the Consumer Duty and this will continue
in2024. Oversight of financial crime risk continued to be
apriority during 2023. The Bank continues to deliver
enhancements to its financial crime control framework which
will be monitored closely by the Committee in 2024.
The Committee considered operational resilience throughout
the year and received updates on technology and third-party
risks alongside approving the Bank’s annual Operational
Resilience Self-Assessment.
At the centre of the Bank’s community banking strategy are
our people. People risks and culture were considered
throughout the year by the Committee and, in addition, the
CPO presented an in-depth annual update.
The Committee continues to focus on the Bank’s management
of climate-related risks and received updates on enhancements
made to credit policies, measures taken to reduce carbon
emissions and improved levels of disclosure in line with the
Task Force on Climate-related Financial Disclosures (TCFD)
and the Carbon Disclosure Project (CDP).
Dear shareholders
I am pleased to present the Group Risk Oversight Committee
Report for the year ended 31 December 2023. It was a busy
year for the Committee, during which it provided oversight of
the implementation of Metro Bank Holdings PLC and the
capital raise in October alongside its usual activities relating to
oversight of key risks and internal controls and monitoring top
and emerging risks.
Ian Henderson stepped down from the Board on 31 December
2023 and I have replaced him as Committee Chair. I have been
a member of the Committee since May 2019 and look forward
to chairing the Committee through the next phase of the
Bank's growth. My fellow Committee members and I would like
to thank Ian for his leadership of the Committee.
During the year, the Committee continued to monitor closely
the Bank's capital and liquidity and recommended the ICAAP
and ILAAP to the Board for approval. Regulatory capital
management has been a focus for the Committee and the
Bank's capital strength will continue to be monitored regularly
following the successful completion of the capital raise and
debt refinancing.
Catherine Brown
Group Risk Oversight Committee Chair
Committee composition and attendance for 2023
Members
Meetings
attended
Meetings held during
Director’s tenure
Ian Henderson (Chair)
1
8 8
Catherine Brown
2
8 8
Michael Torpey 8 8
Nick Winsor 8 8
1. Ian Henderson stepped down from the Committee on 31 December 2023.
2. Catherine Brown was appointed ROC Chair from 1 January 2024.
In 2023, in addition to the Committee Chair, Ian Henderson, there were
three members of the Group Risk Oversight Committee: Catherine
Brown, Michael Torpey and Nicholas Winsor. NEDs who were not ROC
members were also permitted to attend meetings. The Board Chair,
CEO, CFO, Chief Internal Auditor and CRO had standing invitations to
attend as guests, unless the Chair of the Committee asked them to
excuse themselves from a particular meeting or discussion.
Other Directors and colleagues attended as guests by invitation of the
Chair to present and report on relevant topics. The Company Secretary
and her team acted as Secretary to the Committee.
The Committee met regularly throughout the year in accordance with
its Terms of Reference.
2023 highlights
• Oversight of the Bank’s capital and liquidity position.
• Ongoing review of the changing macroeconomic
environment and the effect of this on credit risk.
• Review and endorsement of the ICAAP and ILAAP.
• Review and endorsement of the Bank’s Resolvability
Assessment Framework.
The Bank’s ambition to be the number one community bank
continues and in support of this, the Committee received regular
updates on customer outcomes, with particular focus on arrears
management and vulnerable customers.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Continued
As we go into 2024, the Committee will focus
on the Principal Risks as fully discussed in the
Risk Report on page 124 and supporting the
Bank as it embarks on the next phase in
itsgrowth.
Evaluation
In line with best practice, an external
committee effectiveness evaluation was
conducted in 2023. The outcome of the
evaluation concluded that the Committee
members utilise their previous experiences to
effectively challenge executives and the
Committee effectively prioritises the
important matters at each meeting. In 2024,
management will work to continue to reduce
the length of the papers for each meeting.
Outlook for 2024
The Committee will continue to have oversight
of the Bank’s risk governance and
management in a changing macroeconomic
environment with a focus on the following key
risk categories:
• Strategy and business performance.
• Reputational.
• Capital.
• Liquidity and funding.
• Conduct (customer outcomes, including
Consumer Duty requirements).
• Credit.
• Operational resilience.
• Fraud.
• Financial crime.
• People.
• Third party.
The following sections explain the role of the
Committee and summarise the main areas of
oversight for each of the Bank’s key risks.
Catherine Brown
Group Risk Oversight Committee Chair
16 April 2024
Key policy documents considered by the Group Risk
Oversight Committee in 2023
• Pillar 3 Disclosure Policy.
• Operational Risk Management Framework.
• Conduct Risk Framework.
• Credit Risk Management Framework.
• Enterprise Risk Management Framework.
• Policy Governance Framework.
• Prudential Risk Management Framework.
Policies reviewed and recommended to the Board:
• Anti-Bribery and Corruption Policy.
• Anti-Tax Evasion Policy.
• Capital Management Policy.
• Liquidity Policy.
• Sanctions Policy.
• Conflicts of Interest Policy.
• Anti-Money Laundering and Combating Terrorist
Financing Policy.
Group Risk Oversight Committee inbrief
• The Committee is a 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. Accountable to the
Board, 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
strategy.
• Provides leadership, oversight and direction
regarding the Bank’s risk governance and
management. It is charged with helping the
Board 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,
Resolvability Assessment Framework and major
risk policies.
• Oversees risk management procedures and
reviews risk reports on key business areas.
• 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.
• 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.
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Continued
Oversight of the Bank’s key risks
Regulatory, Conduct and
Legal risk
The Committee is updated
regularly on legal and regulatory
developments and changes that
could impact the Bank together
with measures taken to monitor
and mitigate regulatory risk. 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 the
management of manages
expressions of dissatisfaction,
claims and litigation, and on the
ongoing compliance assurance
work performed by the second
line of defence.
Model risk
Given the use of models to
support a broad range of business
and risk management activities,
the Committee provides oversight
of the effectiveness of the Model
Risk Management Framework.
This includes review of escalated
findings in relation to specific
modelling activities and exposure
against model risk appetite.
Strategic risk
The Committee regularly
considers a comprehensive risk
review of the bank’s strategy and
Long Term Plan and receives
updates on the management of
risk within other key strategic
initiatives as part of the monthly
risk report.
Deep dives and in-depth
reviews
The Committee received in-depth
reviews on areas of emerging risk
and regulatory interest
throughout the year covering:
• Cyber, information security and
IT resilience.
• Vulnerable customer outcomes.
• Outcomes for customers in
arrears.
• People and culture.
• Operational resilience.
• Financial crime.
• Climate risk.
• Consumer Duty.
Credit 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
significant customer or loan has
deteriorated. The Committee
regularly reviews the performance
of the loan portfolio including
assessing the impacts of a
changing macroeconomic
environment and ensures that
lending remains within risk
appetite and policy exceptions
are monitored.
Bank risk report
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, issues
under management, the Bank's
performance against risk appetite,
regulatory engagement, an
overview of operational incidents
and credit portfolio insights.
Financial crime risk
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. In addition to
the ongoing review, quarterly
updates are escalated through
the Bank's governance to the
Committee to enable effective
oversight of control enhancement
activity.
Capital, Market, Liquidity and
funding risk
The Treasurer provides a
summary of relevant Treasury
matters at each ROC meeting,
including balance sheet
performance and each of the
principal prudential risks including
liquidity and funding, capital and
market risks. The Treasurer also
submits the ICAAP, ILAAP,
Recovery Plan, and relevant
Treasury policies for approval and
notes the minutes of the Asset
and Liability Committee, which is
the primary executive forum for
in-depth discussion on Treasury
and prudential risk matters. The
Treasurer provides a report to the
Committee summarising ALCO
activities, which includes high-
level management information on
liquidity, funding, capital and
market risks. In addition, the
ALCO report includes updates on
relevant regulatory matters.
The Committee also receives a
regular update from the second
line risk team on prudential risk,
prudential risk appetite
performance and model risk.
During the year, ROC reviewed
and recommended to the Board
for approval the ICAAP, ILAAP,
Resolvability Assessment
Framework and relevant policies.
Operational risk
The Committee receives reports
concerning risk appetite and risk
assessments for overall
operational risk and the
underlying operational risk
categories including people, data,
information security and systems
availability, operational resilience,
fraud, and the risk of poorly
executed changes. Summaries of
the material incidents which occur
during the year and the related
root cause analysis are presented
to demonstrate how the Bank
captures learnings and takes
action to prevent or mitigate any
potential recurrences. The
Committee also receives reports
from management on emerging
non-financial risks and how these
risks are monitored and, where
appropriate, mitigated.
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Robert Sharpe
Group Nomination Committee Chair
Group Nomination Committee report
Committee composition and attendance for 2023
Members
Meetings attended
Robert Sharpe (Chair) 3/3
Catherine Brown 3/3
Monique Melis
1
3/3
Paul Thandi 3/3
1. Monique Melis resigned from the Board and Nomination Committee as of
31 December 2023.
2023 highlights
• The Committee had oversight of the external search
process for the Company Secretary position and
recommended Clare Gilligan to the Board for approval.
• The Committee considered executive succession with a
view to ensuring a robust and diverse pipeline for senior
roles within the organisation and assessing the
development plans for individuals.
• The Committee discussed non-executive succession
planning to ensure the Board has the appropriate mix of
skills, knowledge, experience, independence and
diversity, having given due consideration to the length of
service of Board members.
• The Committee reviewed the Board skills matrix and
updated this to include ESG-related skills.
• The Committee reviewed the Board’s diversity against
targets in the Board Diversity Policy and assessed the
objectives against the market to ensure they remain
appropriate.
In 2023, in addition to the Committee Chair, Robert Sharpe, there were
three members of the Committee — Catherine Brown, Monique Melis
and Paul Thandi. On 31 December 2023, Monique Melis stepped down
from the Board. On behalf of the Committee, I would like to thank
Monique for her contribution to the Committee. The CEO and the Chief
People Officer attend meetings by invitation. The Chief People Officer
provides support tothe Committee Chair and Committee as needed
and the Company Secretary or their delegate acts as Secretary to the
Committee. Following each meeting, the Chair provides an update to
the Board. The Committee minutes are also tabled for noting at Board,
asare papers that require a Board decision or are of particular interest
to the Board such as the Board Diversity Policy and succession plans.
Dear shareholders
I am pleased to present the Group Nomination Committee (the
'Committee') Report. This was a pivotal year for the Bankand
the end of 2023 saw a number of changes to the membership
of the Board following completion of the capital raise. 2023
was largely a year of transition for the Board and Iam pleased
with the work that the Committee has undertaken to support
the Board throughout the year.
In line with the continuously evolving landscape in which we
operate, the Committee has continued to focus on diversity at
all levels of the Bank, including our Board, Board Committees
and the Executive Leadership Team. The Financial Conduct
Authority introduced a new listing rule that requires the Bank
to provide a statement on new diversity targets, so the
Committee considered how this impacts the succession
planning for the Bank and our broader diversity and inclusion
initiatives. Inclusion at all levels of the Bank underpins our
mission to become the UK’s number one community bank and
the Committee remains committed to ensuring the Board and
Executive Committee have the right mix of skills, experience
and diversity. The Committee also reviewed the membership
and composition of our Board Committees and reflected on
the time commitments of each Non-Executive Director to
ensure they can carry out their respective responsibilities to
the Bank.
The Committee reviewed and recommended to the Board for
approval the appointment of our new Company Secretary,
Clare Gilligan, who joined the Bank on 31 July 2023. I look
forward to continuing to work with her in maintaining strong
corporate governance throughout the Bank.
Our colleagues are our greatest asset. Attracting,
developing and retaining strong and diverse talent
through effective succession planning remains a core
focus of the Committee.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Group Nomination Committee report
Continued
Non-Executive and Executive Director succession was another
key focus for the Committee in 2023. During the year, the
Committee enhanced its review of executive succession
planning by looking in further detail at the pipeline for senior
roles within the organisation and assessing the development
plans for these individuals. It is important for the Committee
tounderstand how our talented colleagues are developing in
their careers and where the Bank would need to look externally
for any recruitment needs that the business may require in the
future. In light of Board and ExCo changes, the Committee’s
focus in 2024 will be to refresh Non-Executive Director and
Executive succession planning.
The Committee was a part of the external Board effectiveness
evaluation that took place during 2023. The feedback received
was largely positive with members considering that the
Committee meetings are effective with well-structured
agendas. The Committee could improve with ensuring that the
whole Board feels a part of the succession planning process
and this will be a focus for the Committee in 2024.
Outlook for 2024
In 2024, the Committee will focus on the changes to the
membership to the Board and ExCo, which will require
refreshed succession plans and talent pipelines. This refresh
will also include a review of the skills required for the Board
and senior management to deliver the Bank's strategy.
I look forward to overseeing the work of theCommittee in
2024, ensuring this supports the next steps of the Bank’s
strategyand growth.
Robert Sharpe
Group Nomination Committee Chair
16 April 2024
The Group Nomination Committee inbrief
• The Nomination Committee comprises only Non-Executive
Directors, the majority of whom are deemed to be independent, in
accordance with the requirements of the UK Corporate Governance
Code. The Committee Chair is also the Board Chair who was
independent on appointment.
• The Nomination Committee leads the process for identifying and
making recommendations to the Board for new Board appointments
andBoard Committee memberships. Its dutiesinclude:
• Reviewing the structure, size and composition (including the
balance of skills, knowledge, experience, independence, diversity
and critical skills) of the Board as a whole and making
recommendations to the Board asrequired.
• Considering succession planning for members of the Board,
including the length of service of members and the need to
regularly refresh Board membership, taking into account the
Bank’s strategic priorities, market trends, regulatory
requirements, 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 Board skills matrix against the skills
required by the Bank as part of its strategy.
• Reviewing the terms of appointment for Board members,
including expected time commitments for NEDs to ensure these
reflect current Board priorities and workloads, and to ensure that
NEDs can dedicate sufficient time to their role taking
responsibility for identifying and nominating candidates to fill
Board vacancies as and when they arise, for the approval of
theBoard.
• Reviewing the Board Diversity Policy and recommending any
changes to the Board.
• Considering Board candidates on merit, against objective criteria,
with due regard for the benefits of diversity and taking care that
appointees have time available to devote to the position.
• Reviewing the results of the Board performance evaluation
process relating to Board composition and succession planning.
• Reviewing the talent and progression of colleagues for succession
to ExCo.
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Group Nomination Committee report
Continued
Board Composition
The Committee is responsible for keeping the
composition, structure and size of the Bank’s
Board and its Committees under review and
providing the Board with any recommendations
for changes as deemed appropriate. The
Committee ensures that the appointed
Directors have the skills, knowledge and
experience required by the Bank to provide
effective challenge and oversight of the
delivery of the Bank’s strategic objectives,
andto ensure there is a strong pipeline for the
Executive Committee and senior management
positions. In 2023, the Committee assessed
the composition of the Board and concluded
that the Board has the skills, leadership and
ability to devote sufficient time to provide the
necessary oversight and proper challenge to
the Executive Directors, ExCo and senior
management. The Committee also considered
the skills that the Board may need to meet the
Bank’s future needs, as well as keeping the
length of tenure of Non-Executive Directors
under review, to ensure efficient succession.
The Bank announced that with effect from
1January 2024, and subject to regulatory
approval, Catherine Brown would become
theBank's Senior Independent Director and
Chair of the Risk Oversight Committee.
TheBank also announced that with effect
from 1January 2024, and subject to regulatory
approval, Paul Thandi would become Chair
of the People and Remuneration Committee.
IanHenderson, Anne Grim and Monique Melis
stepped down from the Board on 31 December
2023. Following the changes to the Board
composition, the Board (excluding the Chair)
now comprises five Non-Executive Directors,
four of whom are independent, and one
Executive Director.
There were no Board appointments in 2023.
The process for appointments to the Board is
set out in the Committee’s Terms of Reference.
The Committee recognises the importance of
ensuring a transparent and fair process for
interviewing, assessing and appointing new
candidates to the Board. The Committee
recognises the requirement for a diverse list
ofcandidates and remains fully committed
toimproving the diversity of the Board and
Board Committees over the long term. In light
of the strategic developments and revised
Board composition, a key focus in 2024 is
establishing a strong succession plan for the
NEDs and Executive Directors.
Committee activities during the year
The roles and responsibilities of the
Committee are detailed in its Terms of
Reference which are available on the Bank’s
website: www.metrobankonline.co.uk/
investor-relations/terms-of-reference/.
In 2023, the Committee met three times. The
Company Secretary acts as a Secretary to the
Committee and other colleagues, such as the
CEO, CFO, Chief People Officer and external
advisors may be invited to attend all or part of
any meeting when appropriate.
The activities of the Committee during the
year included the following:
• Approval for the reappointment of Nick
Winsor as a Designated Non-Executive
Director for Colleague Engagement (DNED)
and review of DNED Terms of Reference.
• Review of Board and Executive Succession
plans in May and November 2023, which
included consideration of the Board’s
collective skills, experience, independence
and diversity in reference to the Bank’s
strategic priorities, market trends and
regulatory requirements.
• Review of Directors’ external Board
appointments. The Committee was satisfied
that each Director had the capacity to meet
their commitments to the Bank.
• Assessment of how the Committee
discharged its duties during the year.
• Monitoring Directors’ actual and potential
conflicts of interest. The Board has formal
procedures to appropriately manage any
actual or potential conflict of interest
identified and monitors each Director’s
independence. In accordance with the
Company’s Articles of Association, the
Board reviews, and authorises as
appropriate, situations where a Director
hasan interest that conflicts, or may
possibly conflict.
• Review of Director induction plans.
• Review of the Board Diversity Policy and the
progress made against the objectives set in
the Policy. The Committee also considered
additional diversity metrics to broaden
existing diversity monitoring and
assessment.
• Review and recommendation to the Board
of the Nomination Committee Report for
inclusion in the 2022 Annual Report
andAccounts.
Board Diversity Policy and
diversitystatistics
The Board Diversity Policy (the Policy) sets
out the Board’s approach to diversity and
inclusion. The Committee is responsible for
monitoring progress towards the Board’s
diversity objectives, as set out in the Policy.
The Policy acknowledges that a diverse
Boardappointed on merit, with a broad
rangeof skills, backgrounds, knowledge and
experience, is more effective. The measurable
objectives for achieving Board diversity are
reviewed and discussed by the Committee
atleast annually. In November 2023, the
Committee approved the inclusion of
additional Board diversity metrics to measure
cognitive and international diversity which will
also be monitored and reviewed annually.
On gender diversity, the Board is committed
to improving female representation on the
Board to 40%. Throughout 2023, female
representation on the Board was 36%.
Following Anne Grim, Ian Henderson, James
Hopkinson and Monique Melis’ resignations,
female representation on the Board is 29%,
below the FCA target of 40%. We recognise
that to date, the Bank has not met the FCA
target of 40% female Board representation.
In2024, the Committee will continue to review
Board diversity, recommending any changes
as required.
The position of Senior Independent Director
in2023 was held by Monique Melis until
31December 2023, with Catherine Brown
appointed as SID from 1January 2024 (subject
to regulatory approval).
A summary of the objectives of the Board
Diversity Policy and the progress made
against these is listed in the table on the
following page.
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Board Diversity Policy objectives
Metro Bank Holdings PLC Annual Report and Accounts 2023
Group Nomination Committee report
Continued
Objectives Status
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.
There were no Board appointments in 2023.
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, insights and challenge needed
to support good decision-making.
There were no Board appointments in 2023. The
appointment process, as laid out in the Committee’s
Terms of Reference, requires the Committee to put
together a diverse list of candidates for any vacant
Board role.
To improve the female representation on the Board to
40% as per the FCA’s Policy Statement PS22/3.
Throughout 2023, female representation on the Board
was 36%. Following Anne Grim, Monique Melis, Ian
Henderson and James Hopkinson’s resignations, female
representation on the Board is 29%, below the FCA
target of 40%. We recognise that to date, the Bank
hasnot met the FCA target of 40% female Board
representation. In 2024, the Committee will review
theBoard's diversity and recommend any changes
asrequired.
Ensuring that at least one of the senior Board positions
(Chair, Chief Executive Officer, Chief Financial Officer, or
Senior Independent Director) should be held by a female.
Monique Melis was the SID until 31 December 2023,
with Catherine Brown being appointed as SID on
1January 2024, subject to regulatory approval. We are
therefore meeting this objective in the Policy and the
Listing Rules and Disclosure Guidance and
Transparency Rule 9.8.6(9)(a).
Ensuring the Board’s ethnic diversity meets and
maintains a minimum of one Director from an ethnic
minority background.
As at the date of publication of this report, we have two
Directors from an ethnic minority background
appointed to the Board. We are therefore meeting
Listing Rules and Disclosure Guidance and Transparency
Rule 9.8 .6(9)(a).
Ensuring that the diversity of the Board’s committees is
considered for all committee appointments.
The Committee reviews committee memberships and
considers that the membership of each of the Board
committees are sufficiently diverse.
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 23–26 in the ESG report.
Reporting annually on the outcome of the Board
evaluation including the composition, structure and
diversity of the Board.
A disclosure on the external Board evaluation
undertaken in 2023 is set out on pages 68–69.
Disclosures required under Listing Rule 9.8.6 as at 31 December 2023
a) Table for reporting on gender identity or sex
Number
of Board
members
Percentage of
the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID and Chair)
Number in
executive
management
1
Percentage of
executive
management
1
Men 7 64% 3 6 50%
Women 4 36% 1 6 50%
b) Table for reporting on ethnic background
Number
of Board
members
Percentage
of the Board
Number of
senior positions
on the Board
(CEO, CFO,
SID and Chair)
Number of
executive
management
1
Percentage
of executive
management
1
White British
or other White
(including
minority-white
groups) 9 82% 4 11 92%
Mixed/Multiple
Ethnic Groups 1 9% 0 0 0%
Asian/Asian British 1 9% 0 1 8%
Black/African/
Caribbean/ Black
British 0 0% 0 0 0%
Other ethnic
group, including
Arab 0 0% 0 0 0%
Not specified/
prefer not to say 0 0% 0 0 0%
1. Per the definition within the Listing Rules, executive management within the Bank is ExCo
including the Company Secretary.
The data was collected by asking each member of the Board and Executive
Committee to indicate their gender and ethnicity according to the categories
presented in the table.
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Group People and Remuneration
Committee report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Committee composition and attendance for 2023
Members
Meetings
attended
Meetings held during
directors’ tenure
Paul Thandi
(Chair, effective 1 January 2024)
1
5 6
Catherine Brown (former Chair) 6 6
Anne Grim
2
6 6
1. Due to a prior arrangement, Paul Thandi did not attend the Committee
meeting on 25 July 2023, which had been scheduled at short notice.
2. Anne Grim stepped down as a Non-Executive Director on 31 December
2023 and is no longer a Committee member.
2023 highlights
• Oversaw a detailed review of the Bank’s identification
process for Material Risk Takers.
• Completed a review of its remuneration advisers.
• Discussed the implications on remuneration of the
establishment of the new holding company in Q2 2023
and the Capital Raise in Q4 2023. Approved new share
plan arrangements for the new holding company.
• Undertook reviews on all employee remuneration
matters including pensions and other benefits.
• Reviewed progress made by the Bank on its talent
management and DEI strategies.
Paul Thandi was appointed as Chair of the Committee, effective
1January 2024 subject to regulatory approval, which was received on
the 23 February 2024. The Committee consists of two other members,
Catherine Brown (the former Committee Chair) and Robert Sharpe, the
Board Chair. The CEO, the Chief People Officer and Director of Reward
& Performance attend meetings by invitation, along with the
Committee’s appointed independent advisers.
Paul Thandi
Group People and Remuneration Committee Chair
Dear shareholders
I am pleased to present the Group People and Remuneration
Committee (the ‘Committee’) Report, my first as Committee chair.
Having been a member of the Committee since 2019, I have
taken over as Chair from Catherine Brown, who had been
theCommittee Chair since April 2019. I would like to thank
Catherine for the significant contribution she has made to
theCommittee as Chair and for working with me through
acomprehensive handover process.
At the end of 2023, we had a further change to the
Committee’s membership as Anne Grim stepped down as a
Non-Executive Director. Anne contributed to the performance
of the Committee over several years including the formulation
of the existing Remuneration Policy approved by shareholders
in 2021. Robert Sharpe has been appointed as a member of
theCommittee for 2024, and I welcome his perspective on
Committee matters.
Our approach to Executive Directors’ Remuneration
in2023
The Executive Directors’ remuneration comprises a salary,
market appropriate benefits, pension provisions and variable
remuneration which in 2023 was delivered through an annual
bonus with deferral and an award under our Long Term
Incentive Plan (LTIP).
The Committee believes it is right to reward strong
performance by the Bank’s executive team, balanced with the
interests of all of our stakeholders. This includes considering
investor expectations, so that the interests of the executives
are aligned to the interests of our shareholders, and our
continued compliance with the regulatory requirements, which
the Bank must observe as a proportionality Level 2 firm.
2023 variable remuneration
2023 was a pivotal year for the Bank. Whilst there were strong
outcomes in relation to delivering operational changes whilst
maintaining the focus on our customers and our colleagues,
the Bank nevertheless had to undertake a refinancing (Capital
Raise) in November 2023 which raised additional capital the
Bank required to operate sustainably in 2024 and beyond.
Thismeant that choices were required, which led to significant
reductions in the cost base and colleague levels within the
Bank. As such, against this backdrop, the formulaic outcome
under the 2023 balanced scorecard which drives the annual
bonus outturn was 37.8% recognising the mixed performance.
However, given the context, management asked the Committee
to exercise its discretion to reduce this outcome tozero for
executive directors and for those that had been executive
committee members during the year. The Committee
acceptedthis recommendation, notwithstanding the broader
achievements by the Bank and its colleagues in 2023. A zero
bonus payout was considered appropriate for the executive
population as the Bank continued to focus on returning to
profitability and maintaining its capital position.
The Committee’s focus remains on attracting and
retainingkey talent to support delivery of our long
termplan and ensuring a remuneration policy which
meetsthe expectations of our stakeholders.
Metro Bank Holdings PLC Annual Report and Accounts 2023
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Continued
and will continue to be predominantly based
on Financial Performance with the remainder
being based on Risk and Regulatory;
Customer and People metrics. The balance
ofthe bonus (i.e. up to 20% of the bonus) will
be based on individual metrics linked to the
strategy and culture of the Bank. An overview
of the metrics for 2024 are provided on page
88. Aportion of any payout will continue to be
deferred, in line with regulatory requirements,
which required at least 60% of variable
remuneration (annual bonus and any long-
term incentive) in respect of a financial year to
be deferred with a vesting period of at least
three years, increasing to up to seven years
where required by regulation.
Three changes are proposed to the policy in
relation to the LTIP. First, we have added
flexibility under the individual limit to allow
higher awards above the current limit of100%
of salary, up to 200% of salary, in exceptional
circumstances. Such flexibility would only be
used after careful consideration, looking at the
package as a whole and may be helpful in a
recruitment situation. Second, the share price
used to determine the award value may be
discounted by the expected dividend yield to
recognise the value of potential dividends
foregone on the share awards. Third and
finally, currently Committee discretion can
only be applied to reduce the value of an
award on vesting. In line with normal market
practice and the UK Corporate Governance
Code, under the new policy there is also
flexibility to use discretion to increase the
value of an award on vesting. Any such
discretion would only be used after very
careful consideration.
Share ownership requirements
The share ownership requirements will remain
unchanged with Executive Directors subject
toa minimum shareholding requirement
equivalent to 200% of salary, which will
continue to apply for two years post cessation
of employment.
2024 Implementation under the
2024Policy
Salary adjustments
As a reminder, we indicated in the 2023
reportthat the Committee had reviewed
Daniel Frumkin’s salary and agreed a salary
increase from £769,600 to £925,000 and that
the increase would take effect from 1January
2024. The increase has therefore been
implemented and no further increase aspart
of the 2023/24 annual review has been applied.
The budget for salary increases this year
hasbeen used to continue to support our
customer facing and junior colleagues,
enhancing pay ahead of the real Living Wage
whilst continuing our fair pay approach.
Inresponse, the Committee has approved a
budget that results in a 6.2% increase across
our eligible colleague population effective
from April 2024, with the budget prioritised
for our junior colleagues.
2024 Annual Bonus
Our new approach to variable reward focuses
on growth and the long-term sustainable
success of the business.
As noted above, the 2024 annual bonus will
bestructured in line with a market typical
approach. As such, the balanced scorecard
will determine 80% of the bonus with the
remaining 20% being based on individual
strategic and cultural objectives. The
Corporate Scorecard will continue to be
based60% on financial measures, with
thebalance of 40% reflecting social and
governance measures which underpin
ourESG commitments.
More information on the balanced scorecard
outcomes and assessment of individual
performance is set out on pages 107-108.
There were no payouts under the LTIP in
respect of performance to 2023 given the
2021 Awards were granted with a four year
performance period to 31 December 2024.
Outlook for 2024
The 2024 Directors’ Remuneration Policy
The principal components of remuneration
under the 2024 Policy remain consistent with
the existing Policy which are salary, pension
and benefits, along with an annual bonus with
the structure being aligned with best practice,
and a long-term incentive plan aligned with
the future business strategy.
This approach will initially apply to the CEO
asthe only current Executive Director and
potentially to any new Executive Director
asand when appointed to the Board.
Fixed pay:
The current Policy on fixed pay is largely
unchanged and as such will consist of salary,
market competitive benefits and pension.
Thepension policy has been updated in line
with current practice and will therefore limit
the pension contribution for Executive
Directors (or cash in lieu thereof) in line with
the rates applicable to the workforce, at 8%
ofsalary currently.
Variable Reward:
Variable reward will be awarded through an
annual and bonus and the LTIP.
The opportunity under the annual bonus
remains at 100% of salary. The structure is
being updated to reflect governance, best
practice and shareholder feedback. As such,
the bonus will no longer be determined based
on business and individual multipliers, but
instead the balanced scorecard and individual
metrics will determine distinct portions of the
annual bonus. The balanced scorecard will
determine at least 80% of the annual bonus
Our aim is to build a sustainably profitable
business to support our customers and
communities. With this in mind, the 60%
financial measures in the scorecard will reflect
the Bank’s progress in delivering the financial
outcomes of its strategy. Within the remaining
40%, managing our risk levels within our risk
appetite and maintaining positive relationships
with our regulators remain important aspects,
weighted at 20%. Customer satisfaction
remains central to the success of the Bank
andremains weighted at 10%. Our colleagues
matter to us and we wanted to reflect this
inour scorecard. We have enhanced our
measures for colleague satisfaction and
diversity with a weighting of 10%. The
Committee is aware of investor sentiment
forESG measures to be relevant to strategy,
measurable and quantifiable.
A summary of the metrics and weightings is
provided on page 115 and full retrospective
disclosure of the targets and performance
against them will be set out in the 2024
Annual Report. A portion of the bonus will be
deferred in line with regulatory requirements.
2024 LTIP awards
The CEO may participate in the LTIP. The
performance conditions have been aligned to
the strategic plan and are stretching. The LTIP
measures for 2024 are Total Shareholder
Return, Statutory Return on Tangible Equity
and Cost: income ratio. More information on
the weightings and measures can be found on
page 116.
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Group People and Remuneration Committee report
Continued
Review of wider People Agenda
The remit of the Committee also includes
oversight of people-related matters. During
2023, the Committee continued to focus on
colleague engagement through the voice
ofthe colleague survey, strong executive
andleadership succession planning and
effective overview of people risks thereby
gaining agreater understanding of the
working environment experienced by the
Bank’s colleagues, providing the Committee
reassurance that the Bank continues to move
in the right direction towards a more diverse
and inclusive organisation with appropriate
talent development and succession in place.
We also undertook a detailed review of the
Bank’s approach to material risk takers (MRTs),
the consequence of which was an increase in
the number of MRTs by nearly 31%.
Board changes
A number of Board changes are mentioned
elsewhere in the Annual Report and Accounts;
I will summarise them here in the context of
reporting on the implications for remuneration.
James Hopkinson stepped down as an
Executive Director on 12 January 2024.
Details of the termination arrangements were
outlined initially in the remuneration statement
posted on the Bank’s website on 21 February
2024. The Committee determined that these
termination arrangements were fair and
reasonable, consistent with the Directors’
Remuneration Policy and in line with his
contractual entitlements.
On 29 February 2024, it was announced
thatMarc Page would be appointed CFO
andbecome an Executive Director later
intheyear. His remuneration will be in
accordance with the Remuneration Policy
approved by the shareholders and was set
outin an announcement to the London Stock
Exchange on 29 February 2024. Marc Page
will receive an annual salary of £500,000, a
pension entitlement of 8% of salary and other
standard benefits per the Policy. His variable
remuneration opportunity will be consistent
with the proposed Remuneration Policy. On
appointment, Marc Page will be granted
deferred cash and share awards (valued in
aggregate at approximately £204,000) to
replace, like-for-like, unvested Barclays Bank
awards that are forfeited as a result of him
joining Metro Bank. The awards to be granted
match the vesting and retention period
attached to the awards being forfeited. In
addition, to acknowledge that Marc Page will
lose his expected bonus awards from Barclays
Bank for the 2023 performance year, a ‘lost
opportunity’ bonus award of £210,000 will
bemade on hire, or as soon as reasonably
practicable, thereafter. This award will be
delivered in a mixture of cash and shares, with
40% deferred in shares for up to five years.
Concluding remarks
At the 2024 AGM there will be several
remuneration-related resolutions for
shareholder approval as summarised below:
1. Approval of the Directors’ Remuneration
Report (excluding the 2024 Policy section)
– an advisory vote on how we have
implemented the current Policy in 2023 and
how we propose to implement the 2024
Policy in 2024.
2. The 2024 Directors’ Remuneration Policy–
the new Policy which will be subject to
abinding vote.
3. The removal of the bonus cap – the
regulatory bonus cap limiting variable
remuneration to two times fixed
remuneration has been removed from
thefinancial services regulations applicable
to UK banks. As such, in line with the 2024
Policy proposals, the Bank is proposing to
remove the cap applicable to Metro Bank.
The CEO’s remuneration will, in any case,
besubject to the limits set out in the
2024Policy.
4. Amendments to DVRP and LTIP plan
rules– the Committee has also reviewed the
DVRP and LTIP plan rules and has proposed
minor amendments to provide the
commercial flexibility required to operate
the Group Remuneration Policies going
forward. Full details of the changes are set
out in the Notice to the Meeting.
I hope that you understand the rationale set
out for the proposed changes and will support
the resolutions at the forthcoming AGM.
Should you have any comments or questions,
if you can direct correspondence through the
Group Company Secretary (email:
companysecretary@metrobank.plc.uk), Iwill
be happy to provide further details.
Paul Thandi
People and Remuneration Committee Chair
16 April 2024
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Committee performance evaluation
The Committee was evaluated as part of the
Bank’s wider external Board evaluation. The
evaluation concluded that the Committee was
working well with clear presentations and
effective and constructive challenge from the
Committee members. There were no material
issues that needed to be addressed. For
further details on the external Board
evaluation, please see page 68.
Advice to the Committee
The Committee seeks advice from
independent external advisers as appropriate.
Aon McLagan were appointed as the
Committee’s independent advisers on
executive remuneration in October 2021.
During 2023, the Committee undertook a
competitive tender process for the role of its
independent adviser. As a result of this
exercise, the Committeeappointed Korn Ferry,
effective October 2023, asitsnew adviser.
Neither Aon McLagan nor Korn Ferry had
other connections to the Bank or any of its
Directors. The Committee is satisfied with the
support provided by Korn Ferry to date. The
fees paid for services provided by Aon
McLagan and Korn Ferry to the Committee in
2023 were respectively £20,442 (2022:
£51,410) and £18,531 . Fees were determined
on a time and expenses basis. The Committee
is satisfied that the advice it receives is
objective and independent, and that there are
no conflicts of interest resulting from Korn
Ferry’s appointment, from inside and outside
the Group. Internal support was provided by
the Chief People Officer, the Director of
Reward & Performance, and other senior
leadership as appropriate. No individual was
present when matters relating to their own
remuneration werediscussed.
Group People and Remuneration Committee report
Continued
The Group People and Remuneration Committee in brief
The Committee leads the process for reviewing the remuneration
practices of the Bank and approving the executive remuneration
structure and outcomes. It also has oversight of other activities of the
Bank’s People function, such as the Bank’s D&I strategy and talent
development. Its duties include to:
• determine the Directors’ Remuneration Policy (the ‘Policy’) and
recommend its approval to the Bank’s Board and then the Bank’s
shareholders;
• review and have regard to the pay and employment conditions across
the Company and the alignment of incentives and rewards with the
Bank’s culture;
• engage with the Bank’s Colleagues on remuneration matters through
the Board’s DNED;
• approve the design of, and determine the targets for, any
performance-related reward schemes operated by the Bank and
approve the total annual payments under such schemes;
• oversee the Bank’s D&I strategy;
• exercise independent judgement and discretion when authorising
any remuneration outcomes;
• oversee the Bank’s Senior Managers and Certification Regime,
including appropriate competencies and Material Risk Takers and
Certified Roles;
• seek advice from the CRO and Chair of the Risk Oversight Committee
on risk adjustment as it applies to executive remuneration; and
• engage with the Bank’s shareholders, and other stakeholders, on the
Bank’s remuneration decisions.
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Remuneration at a glance
2023 total remuneration
Executive Directors’ remuneration in 2023
As a result of the Company’s full year 2023 performance (against financial, ESG and strategic measures), the Balanced Scorecard outcome largely reflects the challenges the Bank faced in the run
up to the capital raise, which acted as headwind on the financial results. On the non-financial measures, the Bank performed more robustly, despite the operating environment. The formulaic
outcome under the 2023 Balanced Scorecard which underpins the annual bonus outturn was 37.8%. However, given the backdrop of 2023, management asked the Committee to exercise its
discretion to reduce this outcome to zero for executive directors and for those who had been executive committee members during 2023. The 2023 total remuneration outcome is shown below
and more details on the progress against individual performance measures is shown on pages 107 and 108.
Pay for performance at a glance
0.0%
Financial
Risk and Regulatory
Customer
People and community
0.0%
0.0%
20.0%
7.0%
10.8%
Threshold Target Maximum
2023 weighted outcome
Actual performance Range from threshold to maximum
Total
37.8%
Underlying earnings
Deposit growth
Organic MREL growth
Cost of risk and relationship with regulator
Net promoter score and expressions of dissatisfaction
Diversity, colleague engagement and financial literacy programme reach
The following table shows the 2023 balanced scorecard outcomes used to inform annual bonus outcomes. The formulaic outcome was 37.8%, the Committee accepted Management’s
recommendation that no discretion be applied to adjust the outcome.
2023 variable remuneration outcomes
Daniel Frumkin James Hopkinson
2023 variable remuneration outcomes
2023 annual bonus (% of salary) 0.00% 0.00%
LTIP vesting (as % of maximum) n/a n/a
Total single figure of remuneration (£’000s) £834,507 £541,900
No bonuses were awarded for the 2023 performance year.
There were no long-term incentive plan vestings for either executive director.
Daniel Frumkin
Chief Executive Officer
£834,507
James Hopkinson
Chief Financial Officer
£541,900
Fixed remuneration Annual bonus – retained shares Annual bonus – deferred shares
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Remuneration at a glance
Continued
Executive Directors’ remuneration in 2024
When remuneration is delivered
2024 2025 2026 2027 2028 2029 2030 2031
Fixed remuneration
Salary
Benefits
Pension
Variable remuneration
Annual bonus
LTIP
The table below summarises how it is proposed that the remuneration policy will apply for Executive Directors in 2024.
Implementation in 2024
• Daniel Frumkin – £925,000.
• Marc Page – £500,000.
• Private healthcare cover.
• Life assurance and other standard benefits.
• Pension contribution and or allowance 8%.
• Bonus maximum of 100% of salary.
• Bonus measures 60% financial, 40% ESG and orother priorities.
• LTIP maximum of 100% of salary.
• LTIP measures 40% TSR, 30% ROTE, 30% cost: income ratio.
• In aggregate, at least 60% of variable remuneration deferred for between three and seven years.
• Any shares subject to further 12-month mandatory retention after each vesting date.
Perf. period
Performance period
Part of bonus deferred for up to seven years in shares and cash.
Malus and clawback provisions apply
Shares vesting between three and seven years
Malus and clawback provisions apply
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Aligning our remuneration approach to business strategy and stakeholder interests
Our service is what makes us special. Putting customers first is, and always will be, the key to our success. Through our dedicated colleagues, we build long-lasting and personal relationships with
our customers and our communities, giving them the banking they need.
Our remuneration approach is aligned to our strategy, thereby incentivising, as appropriate, great customer service and the creation of long-term value for all of our stakeholders. The following
table provides a summary of how our variable remuneration framework in 2024 is aligned with our business strategy and the results that it delivers.
The Committee believes that its executive remuneration policies and practices support the Bank’s strategy and promote long-term sustainable success, with reward linked to the successful
delivery of such long-term strategy. Remuneration, including variable remuneration, is aligned to the Bank’s purpose and values (see page 2), with a focus on customers and other stakeholders an
integral part of executive remuneration.
Remuneration at a glance
Continued
OR
Short Term Long Term
Cornerstone Focus Balanced Scorecard 2024 LTIP
People
People Banking
remains our key
differentiator
SME/Commercial
Banking
Financial FY Underlying P/(L)BT
FY Net Interest Margin
FY Costs
Gateways
CET1 capital
Liquidity Coverage Ratio
Total Shareholder Return
Specialist Mortgages
Non
Financial
Risk Relationship with Regulators
YTD/FY number of breaches of red limits for tier 1 appetite metrics
12mth NPS account opening
12mth NPS retail and business (relationships)
YTD/FY EODs per 1000 accounts
E-sat (How happy are you working at Metro Bank)
YTD/FY Diversity % ethnic minority in senior leadership roles
YTD/FY Diversity % gender in senior leadership roles
Return on Tangible Equity
Community Banking Customer Cost: Income Ratio
People Focus People &
Community
Gateway
Risk and Regulatory
Performance
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How the proposed Directors’ Remuneration Policy addresses the key features set out in the UK Corporate Governance Code
The following table summarises how the proposed remuneration policy fulfils the factors set out in provision 40 of the 2018 UK Corporate Governance Code (‘the Code’).
Clarity
Remuneration arrangements should be
transparent and promote effective engagement
with shareholders and the workforce.
The Committee is committed to providing open and transparent disclosures to shareholders and colleagues on its Executive Director
remuneration arrangements.
Colleagues are able to express their views on pay through regular surveys and feedback, as well as through our DNED.
Simplicity
Remuneration structures should avoid complexity
and their rationale and operation should be easy
tounderstand.
Our approach to remuneration for Executive Directors is simple and transparent. It is consistent with structures used widely across the
financial services industry.
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.
In line with regulatory requirements, our remuneration practices promote sound and effective risk management while supporting our
business objectives.
For 2024, 20% of our annual bonus balanced scorecard will be based on risk and regulatory measures, and the determination of annual
bonuses is subject to a risk adjustment process and input from the Chief Risk Officer (CRO) and the Chief People Officer.
The deferred portion of any bonus as well as LTIP awards granted to Executive Directors vest between years three and seven, during which
malus can be applied. LTIP awards only vest assuming performance conditions have been met as well as satisfaction of a gateway test
linked to satisfactory performance in relation to risk.
Vested variable remuneration awards are subject to our clawback policy for a period of up to seven years from the award date (extending
to ten years where an investigation is ongoing).
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.
Variable remuneration is delivered primarily through share based awards. The value of awards is 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 remuneration 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.
The Committee has discretion to override formulaic scorecard outcomes to ensure that they are appropriate and reflective of overall
performance.
Alignment to culture
Incentive schemes should drive behaviours
consistent with company purpose, values
andstrategy.
The primary objective of our remuneration framework is to support growth and our long-term success while reinforcing our unique culture.
The bonus pool for any year is based on Metro Bank’s overall performance in terms of culture and delivery in line with the balanced scorecard.
All colleagues are able to participate in our HMRC approved share incentive plan, which supports our ethos of colleague buy-in and ownership.
In accordance with Code Provision 41, the Directors’ Remuneration Report describes the work of the Committee, including those areas mentioned in that Provision. The table below highlights some
of those areas:
Remuneration at a glance
Continued
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Remuneration at a glance
Continued
Provision Approach
Operation of policy The Committee believes that the Remuneration Policy operates as intended in terms of Metro Bank performance and the quantum of
remuneration delivered.
Shareholder engagement We undertook substantial engagement with our shareholders as part of the development of the remuneration policy for Metro Bank PLC
inthe run up to the 2021 AGM. We are grateful for this feedback and subsequent input received that has shaped our thinking and
decision-making.
We have further engaged leading investors as we developed the remuneration policy for Metro Bank Holdings PLC and will continue to
engage stakeholders in the run up to the 2024 AGM.
Workforce engagement An outline of our approach to workforce engagement in set out on pages 62-63.
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Summary of the Remuneration Structure for colleagues below Board level
The Committee is directly responsible for the remuneration of the Executive Directors, the Executive Committee (ExCo) and other executives who have been identified as material risk takers under
the relevant regulators’ remuneration rules.
The Committee is also given regular updates and, as required, takes key decisions on benefit, pension and incentive arrangements that cascade through the organisation. During the year, the
Committee received updates on key activities and discussed material changes to all employee remuneration policies and arrangements. In 2023, there was also a deep dive on how colleague
pensions are structured and managed.
Metro Bank is committed to ensuring its 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 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 ExCo level is similar for all colleagues. Whilst variable remuneration for the ExCo is delivered differently to that for the wider
colleague population, it is consistent across this small group of colleagues. The focus is on simplicity, rewarding the right behaviours and outcomes for customers and the business, whilst
discouraging unnecessary risk taking.
Salary Benefits Pension Variable Remuneration
• The quantum of salary increases is primarily
driven by the external market, capability and
affordability.
• 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.
• All colleagues are eligible for private medical
insurance funded at different rates of cover
depending on their level.
• All colleagues, including the ExCo, receive
life assurance cover of four times their salary.
• All colleagues can participate in our Group
Personal Pension Plan when they join the
Bank. If they have exceeded the annual
pension tax-free contribution limit, they may
be eligible to take cash in lieu of pension for
all or some of the benefit.
• Employer pension contributions are up to 10%.
• Colleagues participate in the same annual
bonus plan with a single scorecard and a
consistent company performance
adjustment factor.
• For all colleagues whose personal behaviours
and delivery are as expected or better, we
apply an adjustment factor.
• Where appropriate and required by
regulations, variable remuneration may be
deferred and/or delivered in shares.
Regulators’ rules require the Bank to identify colleagues who are Material Risk Takers (MRTs): these are individuals who operate in roles deemed to have, or potentially have, a material impact on
the risk profile of the Bank. Metro Bank classified 59 colleagues as MRTs in 2023 (2022: 45).
The remuneration approach taken for our MRT population differs from that of the wider colleague population. To align the interests of our MRT population with those of our shareholders, we may
deliver a portion of variable remuneration in retained shares, deferred cash, deferred shares, and where appropriate, awards under the long-term incentive plan. Further information relating to
remuneration of our MRT can be found in our 2023 Pillar 3 disclosure (pages 70-76).
Alignment between our approach to Directors’ remuneration and other colleagues
In developing the proposed remuneration policy, the Committee carefully considered the remuneration arrangements across the Bank. The Committee receives information on wider workforce
demographics and remuneration on a regular basis to ensure that the Committee has a good understanding of the structure and application of reward policies throughout the organisation.
When making decisions about executive remuneration, the Committee ensures, for example, that pay review budgets for Metro Bank executives are typically set at levels which mirror those
beingapplied for other colleagues. In addition, all colleagues’ annual variable remuneration is linked to the delivery of the Bank-wide balanced scorecard, through which the Executive Directors
areincentivised.
Remuneration for colleagues
below Board level
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Gender pay gap reporting
The Company’s 2023 Gender Pay Gap Report, published in April 2024, shows that on a median basis, our gender pay gap is 16.7% (2022: 17.2%). This compares with a national average gender pay
gap of 14.3% across all industries, calculated by the Office of National Statistics (ONS) in November 2023: gender pay gaps tend to be higher in financial and banking organisations.
We expect to see small changes in the total pay gap each year due to changes in the composition of the workforce and hiring patterns, which can vary between men and women year-on-year.
Further information can be found in the Environmental, Social and Governance section on page 26.
Year-on-year change in colleague and Directors’ remuneration
We monitor year-on-year changes between the movement in remuneration for executives compared with the wider colleague population.
The relevant disclosure requirement is for this comparison to be made against the employees of the parent company. On the basis that Metro Bank Holdings PLC, the parent company, does not
employee any colleagues, we have voluntarily disclosed this information.
The table below sets out the year-on-year percentage change in salary, benefits, and annual bonus for the Directors of the Board against an average full-time equivalent colleague. The Committee
considers three consecutive measurement periods an appropriate level of insight. The percentage increases or decreases in the table below reflect changes in populations year-on-year or, in the
case of Directors, changes in responsibilities, e.g., committee memberships, or that the individual was not a Director for the whole year. Percentages for Directors are calculated using the
respective figures in the single total figure for the remuneration.
Salary/Fees % change Taxable benefits % change Annual bonus
2023 vs 2022 2022 vs 2021 2021 vs 2020 2023 vs 2022 2022 vs 2021 2021 vs 2020 2023 vs 2022 2022 vs 2021 2021 vs 2020
All colleagues⁷ 3.3% 3.7% 5.6% 1.6% -4.1% 4.4% -44.8% 12.9% 23.8%
Daniel Frumkin
1
0.0% 3.0% 3.5% -87. 2% 91.9% 985.6% -100% -28.3% 20.2%
James Hopkinson
2
207.0% n/a n/a 475.0% n/a n/a -100% n/a n/a
Executive Committee⁷ -3.1% 8.4% 3.8% -56.9% -47. 3% 71.7% -100% -45.5% 33.8%
Robert Sharpe
3
0.0% 0.0% 500.0% -64.1% 100.8% 0.0% n/a n/a n/a
Catherine Brown 1.0% 10.7% 7.9% 0.0% 0.0% 0.0% n/a n/a n/a
Dorita Gilinski
4
n/a n/a n/a 0.0% 0.0% 0.0% n/a n/a n/a
Anne Grim
5
2.8% -17.4% 104.6% 0.0% 0.0% 0.0% n/a n/a n/a
Ian Henderson 0.7% 2.0% 65.2% 0.0% 0.0% 0.0% n/a n/a n/a
Monique Melis
6
1.8% 27.6% -20.7% 0.0% 0.0% 0.0% n/a n/a n/a
Paul Thandi 2.6% 6.4% 0.0% 0.0% 0.0% 0.0% n/a n/a n/a
Michael Torpey 0.7% 2.0% 3.0% -26.5% 100.0% 0.0% n/a n/a n/a
Nicholas Winsor 15.5% 35.0% 56.3% 0.0% 0.0% 0.0% 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. The
year-on-year change in Taxable benefits for Daniel Frumkin has been heavily influenced by the decision to include the apportioned costs of a chauffeur and company car that was historically operated by Metro Bank (see commentary on
page 105). There has been no year in year change in terms of Daniel’s eligibility to standard benefits. The percentage change shown above in respect of 2022 versus 2021 has been adjusted from that disclosed last year.
2. James Hopkinson was appointed to his role on 5 September 2022, hence why his remuneration is recorded as increasingly significantly between 2022 and 2023.
3. Robert Sharpe became Chair of the Board on 1 November 2020, hence why his remuneration is recorded as increasingly by 500% between 2020 and 2021. The year-on-year change in taxable benefits for Robert has been heavily
influenced by the decision to include the apportioned costs of a chauffeur and company car that was historically operated by Metro Bank. The percentage change shown above in respect of 2022 versus 2021 has been adjusted from that
disclosed last year. This is consistent with the restatement of his 2022 emoluments (see commentary on page 117). As Chair of the Board, he is not eligible for standard benefits offered to other colleagues.
4. Dorita Gilinski was appointed to the Board on 26 September 2022 and has decided against receiving a fee.
5. The year-on-year movement for Anne Grim is largely a function of changes in responsibilities and her appointment to the Board in 2020.
6. Monique Melis was interim Senior Independent Director in 2020.
7. The data for ‘all colleagues’ and ‘ExCo’ is based on the population employed as at the relevant December year end. Average is calculated on a mean basis.
Remuneration for colleagues below Board level
Continued
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CEO to colleague pay ratio disclosure
Year
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
2023 A 30:1 21:1 13:1 £769,600 £25,400 £34,300 £58,200 £834,500 £27,600 £38,800 £66,100
2022 A 49:1 35:1 19:1 £762,200 £23,900 £32,600 £56,500 £1,276,200 £26,300 £36,900 £65,900
2021 A 55:1 40:1 22:1 £740,000 £23,000 £30,400 £55,000 £1,430,100 £25,800 £36,100 £64,700
2020 A 55:1 40:1 23:1 £714,800 £21,100 £27,400 £47,000 £1,297,000 £23,800 £32,200 £57,000
2019 A 36:1 27:1 16:1 £750,000 £20,700 £26,700 £43,400 £828,600 £22,900 £30,300 £51,200
Notes:
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.
The respective quartiles were calculated using the Option A methodology which the Committee considers the most straightforward approach. Colleagues are included in the 2023 data set if
employed as at 31 December 2023. 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, Bank-funded health and risk benefits and incentives in respect of the relevant performance year. For 2023 provisional annual bonus
awards, figures have been used as the year end performance management process for colleagues remains ongoing as at the date of this report. We are confident that the colleagues identified at
the lower, median and upper quartiles are remunerated in line with our wider policies on colleague pay, reward and progression.
There has been a reduction in the pay ratio between 2022 and 2023. The primary reason for this is the CEO did not receive any 2023 variable remuneration in contrast to 2022. The Committee is
satisfied that the individuals identified within each relevant percentile appropriately reflect the employee pay profiles at those quartiles and that the overall picture presented by the ratios is
consistent with our approach to colleague remuneration.
It is important to note that a high proportion of the CEO remuneration is based on performance against the short- and long-term incentive plans, and that payouts can significantly change
year-on-year, significantly affecting the ratio going forward.
Remuneration for colleagues below Board level
Continued
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Directors’ remuneration policy
The section below sets out the Remuneration
Policy for Executive and Non-Executive
Directors.
The current remuneration policy for Executive
Directors, the Chair and independent Non-
Executive Directors was adopted in 2023
following the Company’s incorporation. The
policy was summarised on pages 91-94 of the
prospectus published on 22 March 2023
relating to the admission of the Metro Bank
Holdings PLC shares to the premium listing
segment of the Official List and to trading on
the main market for listed securities of the
London Stock Exchange (‘Admission’).
The current remuneration policy is similar
tothat adopted by Metro Bank PLC and
approved by its shareholders at its AGM in
May 2021. The Company is required to seek
shareholder approval for its remuneration
policy no later than at its first annual meeting
following the Company’s Admission.
The new Remuneration Policy (the 'Policy')
will be submitted for shareholder approval at
our Annual General Meeting in May 2024. If
approved, it will take effect from that date.
Details of how the Policy (if adopted by
shareholders) will be applied in 2024 are
included in the next section of the Directors’
Remuneration Report.
The Policy may apply for up to three years
from the date of approval. The Committee will
consider annually how the Policy is operated
to ensure it remains aligned with the business
strategy and regulatory requirements.
In determining the new Policy, the Committee
has undertaken a thorough review of
remuneration arrangements across the
business, the Bank’s strategic priorities, FTSE
market practice and investor guidance. The
views of our shareholders on remuneration
matters are alsoimportant to us and, as a
result, we take into account feedback and
guidance from ourkey shareholders and the
shareholder representative bodies and
considered their guidelines in formulating
proposals.
The Committee is satisfied that any conflicts
of interest have been mitigated in the
preparation of this Policy.
Summary of Policy changes
This section sets out the key changes in the new Remuneration Policy from that set out and summarised in the prospectus published by the Company on 22 March 2023.
Component Overview of changes
Annual Bonus The new structure aligns the operation with FTSE banking market practice with the majority of the bonus being based on the balanced scorecard
and the remainder being based on individual strategic and cultural metrics. There is no change to the opportunity of 100% of base salary.
Business and individual performance multipliers have been removed to provide a clearer link between performance and payouts, in line with
shareholder feedback.
Consistent with remuneration rules from Metro Bank’s regulators, part of any bonus can be paid in cash (upfront and or deferred).
Long-Term Incentive Plan The long-term incentive plan has been updated to allow the Committee to exercise upward discretion where appropriate on the vesting of an
award, in addition to its existing power to make a downward adjustment in line with normal market practice. This is providing that no upward
adjustment may allow vesting in excess of the maximum amount of the Award as originally granted.
Flexibility has been added under the individual limit to allow higher awards above the current limit of 100% of salary, up to 200% of salary, in
exceptional circumstances. Such flexibility would only be used after careful consideration looking at the package as a whole and may be helpful in
a recruitment situation.
The share price used to determine the award value may be discounted by the expected dividend yield, to recognise the value of potential
dividends foregone on the share awards in line with normal UK banking marketpractice.
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Directors’ remuneration policy
Continued
Executive Directors – Fixed remuneration
Component Description
Salary
Purpose and link to strategy
Salary is part of the total proposition at Metro Bank, including career and growth opportunities and long-term reward. We aim to set pay at a level which enables us
to attract and retain the right calibre of colleagues, with the required level of skills, experience and cultural alignment.
Operation
Salaries for Executive Directors are reviewed annually by the People and Remuneration Committee (the Committee) with any increase usually taking effect from 1
April. When determining salary levels, the Committee considers factors including:
• Relevant external market data and alignment to market-competitive levels
• Scope and size of role
• Individual’s skills, expertise and experience and ability to grow with the role and organisation
• Salary increases across Metro Bank
• Economic factors, e.g. inflation and affordability.
Maximum potential
Salary increases in percentage terms for Executive Directors will normally be in line with increases awarded to other colleagues, but there may be instances where a
higher amount is agreed at the discretion of the Committee, including, but not limited to, where there has been a clear increase in the scope of role or change in
responsibilities.
Performance measures
There are no performance measures related specifically to salary.
Pension
Purpose and link to strategy
The pension arrangements comprise part of a competitive remuneration package and facilitate long-term retirement savings for Executive Directors, and without
exposing Metro Bank to any unnecessary financial risk or unacceptable cost.
Operation
Paid as a cash allowance and/or contribution to a defined contribution plan. Pension contributions may also be made in lieu of any waived salary (and the cash
amount of any annual bonus).
Maximum potential
For current and any new Executive Directors, the pension allowance will be in line with employer contribution for the majority of the workforce.
Performance measures
There are no performance measures related specifically to pension contributions.
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Directors’ remuneration policy
Continued
Component Description
Benefits
Purpose and link to strategy
We support the health, wellbeing and security of our Executive Directors through additional core benefits.
Operation
A range of benefits may be provided, including standard benefits such as holiday and sick pay, and may also include the provision of a car and driver (or other
car-related service), private medical insurance, health screening, life insurance, and tax preparation and tax return assistance. Benefits can be provided in kind and/or
in cash in lieu of the benefit.
Other benefits may be offered if considered appropriate and reasonable by the Committee.
Executive Directors are reimbursed for expenses, such as travel and subsistence, and any associated tax incurred in the performance of their duties.
Additional benefits may be provided in certain circumstances including, but not limited to, relocation. Executive Directors also have access to additional voluntary
benefits which are available to all colleagues, including ShareBuy, our Share Incentive Plan (SIP).
Maximum potential
The maximum opportunity will vary according to the market, individual circumstances and other factors.
Benefits are set at an appropriate level by the Committee based on the role and individual circumstances.
The cost may fluctuate from year-to-year even if the level of benefit provided remains unchanged.
Performance measures
There are no performance measures related specifically to benefits.
Executive Directors – Fixed remuneration Continued
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Executive Directors – Variable Remuneration
Directors’ remuneration policy
Continued
Component Description
Annual Bonus
Purpose and link to strategy
To recognise and reward the delivery of annual financial and strategic objectives which contribute towards the delivery of longer-term strategy.
Operation
Annual bonus is determined by an assessment of the balanced scorecard outcome and personal performance. The balanced scorecard will normally determine at
least 80% of the bonus outcome with the remainder based on achievement against individual performance objectives.
The Committee has discretion to adjust the annual bonus outcome if it is not aligned with underlying financial performance, the current and future risks and the wider
stakeholder experience.
If Metro Bank achieves threshold performance on all metrics in the balanced scorecard, we would pay out up to 25% of the maximum opportunity and for target
performance we would pay out 50% of the maximum.
Annual bonus is delivered as a combination of cash, shares subject to holding requirements, deferred shares and deferred cash.
Deferral and vesting of the bonus and LTIP are structured so that, in combination:
• The proportion of variable remuneration that is deferred is no less than required by the relevant remuneration regulations (currently 60%).
• The deferred remuneration vests no faster than permitted under the relevant remuneration regulations (currently pro rata over years three to seven after award).
The Committee can, in specified circumstances, apply malus or clawback to all or part of annual bonus in line with the 2024 UK Corporate Governance Code.
Deferred annual bonus will be granted as conditional share awards and/ or nil or nominal cost options. Deferred annual bonus can be delivered in cash as well.
Dividends or dividend equivalents will only be payable during the vesting period if permitted under relevant regulatory remuneration guidelines. Dividends or
dividend equivalents can be accrued from the vesting date.
On the occurrence of corporate events and other reorganisation events, the Committee may apply discretion to adjust: the vesting of deferred annual bonus awards
and/or the number of shares underlying a deferred annual bonus award.
Maximum potential
Up to 100% of salary for a financial year.
Performance measures
The choice of measures is reviewed by the Committee each financial year, with threshold, target and stretch levels of performance set for each measure. For 2024,
the balanced scorecard will be based at least 60% on financial performance with the remainder on other metrics which may include Risk and Regulatory; Customer
and People metrics. Additionally, the Committee has discretion each year to establish a gateway requirement of CET1 or a profit hurdle before any bonus is payable.
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Directors’ remuneration policy
Continued
Executive Directors – Variable Remuneration Continued
Component Description
Long-Term Incentive Plan (LTIP)
Purpose and link to strategy
To incentivise and reward the creation of long-term shareholder value thereby creating shareholder alignment.
Operation
An Executive Director may be considered for LTIP awards on an annual basis. Awards will be in the form of nil/nominal cost options or conditional awards of shares.
Awards will usually have performance assessed on the third anniversary of grant or, if later, when the Committee determines that the performance conditions have
been satisfied.
The vesting of the award will be in line with regulatory requirements In line with applicable regulations, which currently require the vesting to be in tranches over
years three to seven from grant, subject to a holding period per regulatory guidelines. The Committee has the discretion to adjust the level of vesting where it is not
considered to be in line with the underlying performance of the Company; the wider stakeholder experience; the Board’s risk appetite framework; in relation to any
individual conduct issues or in any other circumstances at the discretion of the Committee.
Dividends or dividend equivalents will only be payable during the vesting period if permitted under relevant regulatory remuneration guidelines. Dividends or
dividend equivalents can be accrued from the vesting date. Alternatively, the share price used to determine the award value may be discounted by the expected
dividend yield, to recognise the value of potential dividends foregone on the share awards.
Malus and clawback provisions will apply to these awards in line with the 2024 UK Corporate Governance Code.
On the occurrence of corporate events and other reorganisation events, the Committee may apply discretion to adjust the vesting of LTIP awards and/or the number
of shares underlying a LTIP award.
Maximum potential
Up to 100% of salary for a financial year, subject to an exceptional circumstances limit of 200% of salary.
Threshold vesting performance for the LTIP will be set at 25% of maximum opportunity.
Performance measures
Awards are subject to the achievement of performance targets linked to the long-term success of the Company.
Performance measures and weighting will be aligned to the Company’s strategy. The performance measures will be determined prior to grant and ordinarily the
majority of the award will be based on financial and/or relative Total Shareholder Return (TSR) metrics, with the remainder on other metrics which may include
strategic, risk or customer metrics.
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Remuneration approach when appointing new Executive Directors
The Committee’s approach to recruitment is to attract diverse experience and expertise by paying competitive remuneration enabling us to attract and retain key talent from the marketplace.
Any new executive director’s remuneration package would include the same elements and be subject to the same variable remuneration maximums as those for the existing executive directors.
The policy is summarised below.
Directors’ remuneration policy
Continued
Element Details
Salary
Base salary will be determined by virtue of the individual’s role, experience and responsibility. External market commentary will also be considered.
Benefits and Pension
Dependent on circumstances but will be set in line with the policy for existing Executive Directors.
Where the new Executive Director is required to relocate, Metro Bank may provide relocation support. The level of the relocation package will be assessed on a case
by case basis but may include, for example, a housing allowance / support, school fees, periodic trips home, family travel, and the tax thereon, as well as reflecting
cost of living differences.
Variable remuneration
The maximum variable remuneration opportunity for the performance period in which the Executive Director joined would be determined by the Remuneration
Policy and the Committee would consider whether it is appropriate to reduce the award, subject to time in role.
Shareholding requirement
In line with the policy for existing Executive Directors.
Buyout
The Committee may consider buying out forfeited remuneration and forfeited opportunities and/or compensating for losses incurred as a result of joining Metro
Bank subject to proof of forfeiture or loss.
The value of any buy-out award will not exceed, in broad terms, the aggregate value of the remuneration forfeited.
Any award will be structured within the requirements of the applicable remuneration regulations, and will be no more generous overall than the remuneration
forfeited in terms of the existence of performance measures, timing of vesting and form of delivery.
The value of buy-out awards is not included within the maximum variable remuneration level where it relates to forfeited remuneration from a previous role or
employer.
Legacy matters
Where a senior executive is promoted to the Board, their existing contractual commitments agreed prior to their appointment may still be honoured in accordance
with the terms of the relevant commitment, including vesting of any pre-existing deferred or long-term incentive awards.
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Directors’ remuneration policy
Continued
Other policy matters – Executive Directors
Component Description
Shareholding requirement
Purpose and link to strategy
A requirement for Executive Directors to hold a specified value of shares for alignment with the interests of shareholders during employment.
Operation
Executive Directors are subject to a minimum shareholding requirement equivalent to 200% of salary, normally expected to be built up over a period of five years
commencing from the date of appointment as an Executive Director (or, if later, from the date of any changes to the terms of the shareholding requirement).
The shareholding requirement is reviewed by the Committee as appropriate. Executive Directors are expected to retain all shares vesting under the Deferred Variable
Reward Plan (or equivalent) and the LTIP (in all cases net of tax and payment of any nominal exercise price) until such time as this shareholding requirement has been
met. Shares that count towards the requirement are beneficially owned shares, vested share awards subject to a retention period and unexercised share awards for
which performance conditions have been satisfied (on a net-of-tax basis).
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 the policy approved at the 2021 AGM, Metro Bank will enforce this by way of a contractual requirement.
Contractual arrangements
Purpose and link to strategy
Service agreements contain a maximum of 12 months’ notice from the employer and the Executive Director.
Operation
May be required to work and/or serve a period of garden leave during the notice period and/or may be paid in lieu of notice if not required to remain in employment
for the whole notice period.
Legacy arrangements
Purpose and link to strategy
Honour existing commitment.
Operation
Any previous commitments or arrangements entered into with current or former Executive Directors will be honoured, including remuneration arrangements entered
into under the previously approved directors’ remuneration policy.
The Committee reserves the right to make any remuneration payment and/or payments for loss of office notwithstanding that they are not in line with the Policy set
out in this report, where the terms of the payment were determined before the Policy or any previous policy came into effect, or if the individual was not a Director at
the date the remuneration was determined and the remuneration was not set in consideration or in anticipation of becoming a Director
External roles
Purpose and link to strategy
To encourage self-development and allow for the introduction of external insight and practice.
Operation
Executive Directors are permitted to accept one appointment on a Board or Committee of a listed company, subject to approval of the Board. When reviewing the
appropriateness of an external appointment, the Board will consider:
• Any regulatory guidance that may be in place at the time.
• Whether the appointment would interfere or conflict with the business of the Company.
Any fees received in respect of these appointments can be retained directly by the relevant Executive Director.
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Directors’ remuneration policy
Continued
Remuneration on or after termination
Component Description
Salary/fees and benefits
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. Metro 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 continue until the last day of contractual employment and the accrued but unused holiday will be paid out.
The Committee may pay reasonable reimbursement of professional fees, such as legal fees and tax advice (and any associated tax), in connection with such
termination arrangements. Career transition (or outplacement) support may also be provided.
Variable remuneration
Variable remuneration may accrue during a notice period, however (unless decided otherwise by the 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 (or equivalent) 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 Committee’s discretion, 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 an individual 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
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 Metro Bank.
Post shareholding
requirement
Executive Directors will be required to maintain the lower of the in-employment shareholding requirement or the level achieved at the cessation date for a period of
two years post-cessation.
Other
Executive Directors’ contracts can be terminated by either party on giving no more than 12 months’ notice.
On termination, 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.
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Directors’ remuneration policy
Continued
Notes to the remuneration policy for Executive Directors
Committee’s judgement and discretion
In addition to assessing performance and making judgements on the appropriate levels of annual bonus and LTIP awards, the Committee has certain operational discretions that it may exercise
when considering Executive Directors’ remuneration, including but not limited to:
i. determining whether a leaver is an eligible leaver under Metro Bank’s share plans and treatment of remuneration arrangements
ii. following a corporate event, the Committee may amend any performance conditions applicable to variable remuneration awards if any event occurs which causes the Committee to consider an
amended performance condition would be more appropriate and not materially less difficult to satisfy
iii. deciding whether to apply malus or clawback to an award.
In the event of a variation of Metro Bank’s share capital or a demerger, special dividend or any other event that may affect Metro Bank’s share price, the number of shares subject to an award and/
or any exercise price applicable to the award, may also be adjusted.
The delivery of deferred variable remuneration in the form of share options, shares and or deferred cash shall be operated in accordance with the rules of the respective plans. The Committee may
exercise operational and administrative discretions under the respective plan rules as set out in those rules.
Ability for the Committee to amend the policy for emerging and future regulatory requirements
The Committee will follow any statutory requirements when operating the Policy and may make minor amendments to the Policy for regulatory, exchange control, or administrative purposes
without obtaining shareholder approval for that minor amendment.
The Committee retains the discretion to make reasonable and proportionate changes to the remuneration policy if the Committee considers this appropriate to respond to changing legal or
regulatory requirements or guidelines (including but not limited to any FCA or PRA revisions to its remuneration rules). Where proposed changes are considered by the Committee to be material,
Metro Bank will engage with its major shareholders and any changes would be formally incorporated into the policy when it is next put to shareholders for approval.
Annual balanced scorecard used for determining annual bonuses
Assessment of Metro Bank performance is based on overall performance in line with the corporate scorecard. Typically the balanced scorecard comprises the following measures:
Measure Rationale
Financial
To ensure delivery of strong growth in deposits, loans and profit.
Risk and regulatory
To safeguard the future of Metro Bank by focusing on our strategy to offer low-risk and diversified lending.
Customer
To support our business model centred around creating FANS through our integrated customer experience.
People
To ensure we have dedicated colleagues focusing on our AMAZEING culture and by doing the right things the right way for the people in the communities in which
we operate.
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Directors’ remuneration policy
Continued
Illustration of Application of Remuneration Policy
The charts below illustrate the potential total remuneration for each current Executive Director under the Policy for the 2024 performance year. Four scenarios are considered:
Fixed pay Annual Bonus LTIP
Minimum: – base salary (as at 1 January 2024)
– pension contribution of 8% of salary
– benefits (based on 2023 value)
0% payout 0% payout
On-target:
50% payout – assuming on-target performance 62.5% payout – assuming on-target performance
Maximum:
100% payout – assuming full payout 100% payout – assuming full payout
Maximum with 50% share price growth
As for Maximum Maximum payout, illustrating a further 50% share price growth
Minimum (fixed pay only), on-target and maximum potential relates to annual variable remuneration that may be awarded:
Scenario charts: CEO
100% 49% 40%
23%
28%
23%
37%
£3,500
£3
,000
£2,500
£2
,000
£1,500
£1,000
£500
TargetBelow Target Maximum Maximum
(with share price growth)
0
Fixed Pay
Annual Bonus LTIP 50% share price growth on LTIP
1. 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, other than as noted.
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Directors’ remuneration policy
Continued
Chair and independent Non-Executive Directors’ remuneration policy
Element Details
Purpose and strategy link
Attract a Chair and Non-Executive Directors who, together with the Board as a whole, have a broad range of skills and experience to determine Metro Bank’s strategy
and oversee its implementation.
Fees
The Board sets NED fees and the Committee sets the Chair’s fees. The Chair and NEDs do not participate in any discussion on their fees. Maximum aggregate annual
fees that can be paid to the Chair and Non-Executive Directors are capped at £3,000,000.
Benefits
Non-Executive Directors do not participate in any pension, bonus or long term incentive arrangements or receive any other benefits.
Travel and expenses incurred in the normal course of business, e.g. in relation to attendance at Board and Committee meetings, are met by Metro Bank. All Non-
Executive Directors are reimbursed for reasonable expenses and any tax arising on those expenses will typically be settled by Metro Bank. In exceptional
circumstances, the Chair and other NEDs may be accompanied by their spouse or partner to meetings or events. Such costs (and any associated tax) are paid by
Metro Bank.
Fees on recruitment
Will be set in line with the Policy for the Chair and existing Non-Executive Directors.
Contractual
Appointment letters for the Non-Executive Directors provide for a notice period of three months, during which time they are entitled to be paid their normal fees or
payment in lieu without liability for compensation. There is no provision for any other early termination compensation and no payment for loss of office.
Other
When appointing any new Non-Executive Directors to the Board, the Nomination Committee will consider regulatory guidance relating to outside appointments and
whether the candidate can devote sufficient time to their Board roles.
Statement of consideration of shareholder views
The Committee welcomes shareholders’ views on executive remuneration and seeks to maintain an active and open dialogue with investors regarding any changes to Metro Bank’s
executive remuneration arrangements. The Directors have regular open discussions with investors and are available for feedback on reward matters.
The Committee takes very seriously the view of shareholders when making any changes to executive remuneration and will continue to acknowledge any feedback in reviewing our policy
in future.
Consideration of employment conditions elsewhere in Metro 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 remuneration approach 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 Committee received updates on overall pay and conditions for colleagues across Metro Bank and this was taken into account when setting pay for Directors and
reviewing the Directors’ Remuneration Policy. In particular, the base salary for Executive Directors is limited by reference to colleague pay, and ahead of our annual reward review process,
the Committee review the quantum to be made available for salary increases, annual bonus awards and other incentives. Colleagues can express their views on pay through regular
surveys and feedback, as well as through our DNED.
Workforce engagement
Metro Bank runs annual employee engagement surveys, as well as more regular ‘pulse’ surveys which provides colleagues with 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 Committee and/or the Board. Nick Winsor, as the DNED, attends the Committee periodically, presenting to the Committee on his engagement with the Bank’s Colleagues once
per annum. People diversity in all its forms is a core element of our talent strategy and succession planning.
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Annual report on remuneration
Annual report on remuneration
This section sets out how the existing remuneration policy for our Executive and Non-Executive Directors was implemented during the financial year ending 31 December 2023.
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. Daniel Frumkin was the highest paid director in 2023.
Daniel Frumkin James Hopkinson
2023 2022 2023 2022
Salary £769,600 £762,200 £500,000 £162,879
Taxable benefits
2
£2,434 £11,937 £995 £173
Pension benefits
3
£61,568 £60,975 £40,000 £10,000
Other
4
£905 £947 £905 £216
Total fixed remuneration £834,507 £836,059 £541,900 £173,268
Annual bonus
5
£0 £451,000 £54,500
Long-term incentive
6
N/A N/A N/A N/A
Total variable remuneration £0 £451,000 £54,500
Total remuneration¹ £834,507 £1,287,059 £541,900 £227,768
1. Remuneration shown above includes that paid to Daniel Frumkin and James Hopkinson as Executive Directors of Metro Bank PLC i.e. prior to the listing of Metro Bank Holdings PLC on the London Stock Exchange on 22 May 2023.
2. Taxable benefits include the cost of private medical cover (which for Daniel Frumkin was £994 and £1,039 in 2023 and 2022 respectively). The 2022 benefit figures for Daniel Frumkin have been restated to include travel related costs,
which were historically not shown. Until December 2022, Metro Bank retained a company car with a chauffeur. The use of this car was principally reserved for the Chair and Chief Executive. The proportion of the chauffeur, car benefit
and fuel costs attributed to the Chief Executive for financial year 2022 was £10,898 (which is included in the total above). Metro Bank has, in addition, settled the tax on these car benefits: the requisite gross up in respect of the benefit
for 2022 amounted to £8,917 across the 2021-22 and 2022-23 tax years. Since January 2023, the Chief Executive occasionally uses an executive car service for travelling and family members may travel to attend Board or other events. If
a tax liability arises on these including for any incidental personal use, the Bank may pay for this. The 2023 benefits figures for Daniel Frumkin includes car service costs of £1,439. A forecast UK tax gross up of £1,178 (on these car service
costs) will paid by the Bank following the end of the 2023-24 tax year: this latter amount (the forecast tax gross up) is not included in the table above.
3. Pension benefits is the amount of cash in lieu of participating in a pension plan.
4. Other includes life assurance cover premium.
5. 2022 annual bonuses were delivered in a combination of retained and deferred shares.
6. No long-term incentive awards have a performance period ending in financial year 2023, hence there is no value disclosed.
Details of the single figure salary (audited)
Salary as at
1 January 2023
Salary as at
1 April 2023
Total salary
paidin 2023
Daniel Frumkin £769,600 £769,600 £769,600
James Hopkinson £500,000 £500,000 £500,000
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Annual report on remuneration
Continued
2023 variable remuneration outcomes (audited)
How annual bonus is determined
Annual bonus outcomes across all colleagues is determined as follows:
Salary
x
On target annual
bonus
x
Bank-wide balanced scorecard outcome
‘Company performance adjustment factor’
(0%–120%)
x
Individual AMAZEING Review rating
multiplier ‘Personal adjustment factor’
(0%–200%)
=
Proposed annual
bonus
Understanding the annual bonus corporate balanced scorecard and calculation of the Company performance adjustment
The annual bonus in relation to performance during 2023, for all colleagues including Executive Directors was based on a balanced scorecard of performance measures and objectives, weighted
between financial (60%), risk and regulatory (20%), customer (10%) and people and communities (10%).
The table below illustrates 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 performance adjustment factor can range from 0% to 120% for each measure. 80% 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).
Performance measure Weighting Target/Objective
Actual
performance
outcome
Adjustment
factor
Weighted
performance
outcome
Total financial measures 60.0% – 0 0 0.00%
Underling earnings 50.0% Threshold £22.5m -13.0 0.00x 0.00%
Deposit growth 5.0% Target £404.0m -404.0 0.00x 0.00%
Organic MREL accretion 5.0% Target 0.49% 0.02% 0.00x 0.00%
Total non-financial 40.0% – – – 37. 8%
Risk and regulatory¹ 10.0% Relationship with regulators Qualitative 1.00% 10.00%
10.0% Breaches of red limits for tier 1 appetite metrics 6.6 1.00x 10.00%
Customer² 5.0% Net promoter score account opening 76.0% 0.80x 4.00%
2.5% Net promoter score relationship 36.0% 0.00x 0.00%
2.5% Expressions of dissatisfaction 3.3 1.20x 3.00%
Colleague and community 4.0% Colleague engagement 78% 1.05x 4.20%
4.0% Diversity in leadership positions 21.5% 1.15x 4.60%
2.0% Reach of Money Zone financial literacy programme Qualitative 1.00x 2.00%
Overall balanced scorecard (prior to Committee discretion) 100.0% – – – 37. 8%
1. Captures risk factors not measured elsewhere in the Balanced Scorecard, to reflect the need to deliver business performance within the Board approved risk appetite constraints.
2. Measures customer expression of dissatisfaction per 1000 accounts.
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Continued
2023 variable remuneration outcomes (audited) Continued
Commentary on the corporate balanced scorecard
The balanced scorecard outcome largely reflects the challenges the Bank faced in the run up to the Capital Raise, which acted as headwind on the financial results. The outflow of deposits seen in
the run up to this announcement meant that the envisaged deposit growth targets were not met. Equally, the cost to replenish the deposits lost acted as drag on full year profitability and as such
organic MREL accretion led to both these metrics falling short of the targets set.
On the non-financial measures, the Bank performed more robustly, despite the operating environment. Notably this included exceeding the people related targets for the year driven by record
colleague engagement scores and discernible progress in delivering increased diversity in senior roles. Likewise, the Bank performed on target for risk and regulatory measures as it retained
strong relationships with its regulators and continued to minimise breaches of its risk appetite measures. For customer related measures whilst the Group made positive steps in reducing its levels
of EODs, with an outturn exceeding target, NPS for both new account openings and ongoing relationships continued to fall behind the aspired levels, although remain above industry standards –
ensuring the reversal of this trend remains a key focus for Management in 2024.
Assessment of individual performance and behaviours and the calculation of the personal performance adjustment factor
A discretionary adjustment factor was applied to annual bonuses for all eligible colleagues, by reference to each colleague’s individual behaviours and performance for the year. Set out below are
details of the individual adjustment factor in respect of the Executive Directors as determined by the Committee.
Key objectives in 2023 Key achievements in 2023
Personal
adjustment factor
Daniel Frumkin
– Financial
– Customer
– People and Communities
– Risk and regulatory
2023 was a year of two halves, which continued to demonstrate Daniels strength in leadership of the Bank.
Daniel continued to deliver strong performance against the Banks turn around plan, which led the business to deliver a profit through the first
half of 2023. The turn around plan entered a transitional phase and profitability was building. However, the events in quarter three created a
difficult situation that required Daniel to deliver a recapitalisation of the Bank under tight timelines, which impacted on the financial measures.
His ability to both deliver profitability in half year one, and then deal with the complexity in half year two was an exceptional performance
from Daniel.
The non-financial measures in the scorecard remained strong throughout 2023, with the people and community measures exceeding
performance targets as we continued to focus on supporting our communities with the financial literacy programme.
Given the impact on all stakeholders of the recapitalisation, Daniel has volunteered and the Board agreed that Daniel would not to take any
bonus for his performance during 2023.
100%
James Hopkinson
– Financial
– Customer
– People and Communities
– Risk and regulatory
James was instrumental in establishing the bank’s Holding company and delivering the recent capital package and has been a valued part of
ExCo and the Board.
James stepped down from the Board on 12 January 2024 and left Metro Bank on 16 February 2024, no bonus was awarded to James for
performance year 2023.
100%
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Continued
Finalising the 2023 variable remuneration levels for Executive Directors
Annual bonuses
In recognition of the corporate balanced scorecard outcome, the Committee determined that no bonus would be payable in respect of 2023 performance.
Executive Director
Salary for
annual bonus
Company
performance
adjustment
factor
Personal
adjustment
factor
Aggregate
adjustment
outcome
1
Outcome after
any discretionary
adjustment
Target
opportunity
(as % of salary) Annual bonus
2
Daniel Frumkin £769,600 37. 8% 100% 37.8% 0.00% 50% £0.00
James Hopkinson £500,000 37.8% 100% 37. 8% 0.00% 50% £0.00
1. Aggregate adjustment outcome is “Company performance adjustment factor” multiplied by “Personal adjustment factor”
2. Annual bonus amounts are rounded to the nearest £500.
Long-term incentive awards
In addition, under the current Policy, Executive Directors are eligible to receive an LTIP award of 100% of their salary. 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.
Relative importance of spend on pay
The table below shows total remuneration of all colleagues for 2023 compared to 2022.
2023
£’million
2022
£’million % change
Employee costs 201.7 196.8 2.4%
The costs above are wages and salaries, and exclude social security, pension costs, equity-settled share-based payments and costs capitalised or offset against the Credits and Investments grant.
The year-on-year increase reflects a small increase in the average headcount during 2023.
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.
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Continued
Total shareholder return
The chart below shows our total shareholder return 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.
Dec 2016 Dec 2017 Dec 2018 Dec 2019 Dec 2020 Dec 2022 Dec 2023Dec 2021
0
50
100
150
200
250
Total shareholder return (%)
Metro Bank FTSE 250 FTSE Banks
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Continued
CEO historic remuneration
Chief Executive Officer Financial year
Single figure of
total remuneration
(£’000)
Annual bonus
as a % of maximum
LTIP vesting
as a % of maximum
Daniel Frumkin 2023 £834,507 0.0% N/A
2022 £1,276,161 59% N/A
2021 £1,430,076 85% N/A
2020 £1,297,176 35.7% N/A
Craig Donaldson 2019 £828,565 0.0% N/A
2018 £800,944 0.0% N/A
2017 £1,518,893 62% N/A
2016 £1,304,919 52% N/A
Payments to past Directors and payments for loss of office (audited)
As disclosed in last year’s remuneration report, David Arden stepped down from the Board on 15 February 2022 and left Metro Bank on 1 April 2022. In line with his contractual entitlements, he was
due to receive 12 monthly payments in lieu of notice (PILON) totalling £405,000, which represented his 12-month notice period. The final three PILON instalments were made in January, February
and March 2023, each totalling £33,750.
Further details of the treatment of termination arrangements including his share awards and post-employment shareholding requirement were set out in the 2022 Annual Report.
James Hopkinson stepped down from the Board on 12 January 2024 and left Metro Bank on 16 February 2024. Details of the remuneration arrangements relating to James' termination are
published on our website. The Committee determined that the following termination arrangements were fair and reasonable, consistent with the Directors’ Remuneration Policy and in line with
James' contractual entitlements.
James received his normal salary and contractual benefits up until his cessation of employment on 16 February 2024. Following cessation of his employment and in line with the Bank’s approved
Directors’ Remuneration Policy, James will receive £500,000 (in monthly instalments) in lieu of his 12-month notice period. Although James remained eligible to receive an annual bonus, the
Committee determined that no bonus would be payable in respect of 2023 performance.
The Committee determined that James would be treated as a good leaver for the purposes of any deferred share awards (granted in 2023). These awards will continue to vest over the original
vesting period i.e. there is no acceleration of vesting. The awards remain subject to malus and clawback. The Committee decided this approach was appropriate not least as the deferred awards
related to prior performance years and had already been earned. James received his reasonable legal fees in relation to his termination arrangements.
It was announced at the end of November 2023 that Anne Grim, Monique Melis and Ian Henderson would step down from the Board effective 31 December 2023. Ann, Monique and Ian received
payments in lieu of notice in January 2024 of £11,667, £17,500, and £15,833 respectively. The amounts, for each Director, equate to two months’ fees, being the balance of their notice periods.
Executive Director terms of employment and entitlement to fees from external positions (unaudited)
The Executive Directors are employed under service contracts with an indefinite term.
Executive Director Notice period Date of service contract Date of appointment
Daniel Frumkin 12 months 18 February 2020 1 January 2020
James Hopkinson 12 months 5 September 2022 5 September 2022
Executive Directors are entitled to receive fees from external appointments. Daniel Frumkin and James Hopkinson did not hold any external appointments at other listed companies for the last
reported financial year during the period they were appointed to the Board.
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Continued
Dilution limits
The respective rules of the Metro Bank Holdings 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 granted since the AGM in 2021, discretionary awards under the DVRP and the LTIP must also not exceed 5% of the issued share
capital in any rolling 10-year period, in line with institutional investor guidance.
Shareholding levels (audited)
Directors’ shareholding
These are the total shareholdings as at 31 December 2023 for each Director and any related connected persons.
Director No. of shares
1,2,4
Percentage of
share capital
Robert Sharpe 46,000 0.01%
Daniel Frumkin 8,183,333 1.22%
James Hopkinson
3
368,498 0.05%
Catherine Brown 100 0.00%
Dorita Gilinski 0 0.00%
Anne Grim 22,500 0.00%
Ian Henderson 0 0.00%
Monique Melis 1,690 0.00%
Paul Thandi 30,000 0.00%
Michael Torpey 20,000 0.00%
Nicholas Winsor 150,000 0.02%
1. 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 dependent child under the age of 18 years.
2. For Directors who have stepped down from the Board during the year, the number of shares owned is shown as at the date they stepped down.
3. For James Hopkinson, the total of beneficially owned shares includes shares acquired through our ShareBuy share plan, an HMRC regulated staff share incentive plan.
4. Unless otherwise stated, there has been no change in the Directors’ shareholding interests between the end of the financial year and 13 March 2024.
Shareholding guidelines
Executive Directors are required to build up a holding of shares equivalent to 200% of their annual salary. Executive Directors normally have five years from their appointment to build-up their
shareholding requirement.
Executive Directors are required to retain 100% of their shareholding requirement (or actual shareholding, if lower) for two years post-cessation of employment.
Salary
Requirement
as a % of
salary
Wholly
owned shares Value
1
Shareholding
requirement
met?
Daniel Frumkin £769,600 200% 8,183,333 £7,725 ,066 Yes
James Hopkinson² £500,000 200% 368,498 £347, 862 No
1. Value of beneficial shareholding based on average share price during 2023 of 94.4 pence. The value includes vested shares which remain subject to a retention period.
2. James Hokinson was appointed to the Chief Financial Officer role on 5 September 2022.
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Continued
Outstanding Share Awards (audited)
The tables below show for each Executive Director any outstanding share awards as at 31 December 2023 (or if earlier the date they stepped down from the Board).
Daniel Frumkin
Share Plan Name
Shares
under award
Award
date
Exercise
price
Face Value
of award
First
vesting date
Last
vesting date
Shares
vested
Shares
lapsed
Shares still
subject to
conditions
Exercised
in year
DVRP 2023 – deferred shares 86,814 31/03/2023 £0.00 £90,200 31/03/2026 31/03/2030 – – 86,814
DVRP 2023 – retained shares 347, 256 31/03/2023 £0.00 £360,800 31/03/2023 31/03/2023 347, 256 – –
DVRP 2022 – deferred shares 91,153 31/03/2022 £0.00 £81,400 31/03/2025 31/03/2029 – – 91,153 –
DVRP 2022 – retained shares 613,214 31/03/2022 £0.00 £547,600 31/03/2022 31/03/2022 613,214 – – –
DVRP 2021 – deferred shares 477,821 01/06/2021 £0.00 £523,214 01/06/2024 01/06/2028 – – 477,821 –
LTIP 2023 740,712 31/03/2023 £0.00 £769,600 31/03/2026 31/03/2030 740,712 –
LTIP 2022 828,667 31/03/2022 £0.00 £740,000 31/03/2025 31/03/2029 – 828,667 –
LTIP 2021 675,799 01/06/2021 £0.00 £740,000 01/06/2025 01/06/2028 – – 675,799 –
CSOP 2020 – Hiring Agreement 100,000 31/03/2020 £0.93 £93,000 30/04/2023 30/04/2027 19,999 – 80,001 –
Total 3,961,436 980,469 0 2,980,967 0
James Hopkinson
Share Plan Name
Shares and
share options
granted
Award
date
Exercise
price
Face Value
of award
First
vesting date
Last
vesting date
Share
options vested
Share
options lapsed
Share options
still subject to
conditions
Exercised
in year
DVRP 2023 – deferred shares 10,490 31/03/2023 £0.00 £10,900 31/03/2023 31/03/2030 – – 10,490 –
DVRP 2023 – retained shares 41,963 31/03/2023 £0.00 £43,600 31/03/2023 31/03/2023 41,963 – – –
LTIP 2023 481,231 31/03/2023 £0.00 £500,000 31/03/2026 31/03/2030 – 481,231 –
Total 533,684 41,963 0 491,721 0
Notes
1. All awards granted prior to May 2023 were initially granted over shares in Metro Bank PLC. On the establishment of the holding company, these shares were rolled over into the same number of shares in the new parent company,
MetroBank Holdings PLC.
2. 100% of salary was awarded under the 2021 LTIP, 2022 LTIP and 2023 LTIP respectively as nominal cost options that are subject to performance conditions (see table below).
3. The number of shares under award / option was determined using the relevant closing price prior to the grant date. For 2021, 2022 and 2023 awards the prices were 109.5p, 89.3p and 103.90p respectively.
4. Options under the Company Share Option Plan (CSOP) have an exercise price that is equal to market value at the date of grant.
5. No dividends or dividend equivalents are payable on any share options or on any unvested share awards held.
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Continued
Outstanding Share Awards (audited) Continued
LTIP performance conditions and targets
Performance conditions and targets together with corresponding weightings for LTIP awards. Unless otherwise stated, performance is measured over the relevant three-year performance period.
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.
Measure Weighting Threshold Maximum
2021 LTIP (granted on 1 June 2021)
Total shareholder return relative to the FTSE 250 (excluding investment trusts) 40% Median against peers Upper quartile or above
Statutory return on tangible equity for FY 2024 40% 4% 7%
Risk and regulatory 20% See notes below
2022 LTIP (granted on 31 March 2022)
Total shareholder return relative to the FTSE 250 (excluding investment trusts) 40% Median against peers Upper quartile or above
Statutory return on tangible equity for FY 2024 40% 4% 7%
Risk and regulatory 20% See notes below
2023 LTIP (granted on 31 March 2023)
Total shareholder return relative to the FTSE 250 (excluding investment trusts) 40% Median against peers Upper quartile or above
Statutory return on tangible equity for FY 2025 40% 5% 8%
Risk and regulatory 20% See notes below
Notes
1. Under the risk and regulatory measure, 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.
2. On 9 November 2023, the Company published a prospectus and circular outlining the proposed issuance of 500,000,000 new ordinary shares as part of a capital transaction. As outlined in the prospectus, the Committee may review,
prior to the dates of respective vesting, the impact of the transactions on the ability to meet any existing performance conditions under the LTIP and consider adjustments. As appropriate, more information will be published in next
year’s directors’ remuneration report.
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Continued
Approach to risk adjustment including application of malus and clawback
Individual remuneration is aligned with Metro Bank’s long-term interests and the time frame over which financial risks crystallise. For relevant colleagues including Executive Directors, a proportion
of variable remuneration is delivered in the form of awards that are deferred for a sufficient period during which risk adjustments can be applied. In addition, performance adjustment is made
through the reduction in the value of any deferred variable remuneration award through non-vesting due to performance considerations and share price movement over the deferral period.
The circumstance where malus and clawback may apply (as well as “in-year adjustment”) is summarised in the following table.
Criteria includes Application
Individual level • Deemed to have: (i) caused in full or in part a significant loss for or reputational damage to
Metro Bank as a result of reckless, negligent or wilful actions, or (ii) exhibited inappropriate
behaviours or conduct, or (iii) applied a lack of appropriate supervision and due diligence.
• The individual failed to meet appropriate standards of fitness and propriety.
• In-year adjustment, malus and clawback may be applied to
all or part of an award at the Committee’s discretion.
Business unit and/or
Group level
• Material restatement of the Metro Bank’s financials.
• Material downturn in performance.
• Significant failure in risk management.
• Discovery of endemic problems in financial reporting.
• Entering involuntary administration or insolvency process.
• Financial losses, due to a material breach of regulatory guidelines.
• The exercise of regulatory or government action to recapitalise Metro Bank following
material financial losses.
• In-year adjustment, malus and clawback may be applied to
all or part of an award at the Committee’s discretion.
Cash bonus and unvested share awards may be delayed or reduced before they are paid/before they vest (through malus) or may be subject to clawback on or after payment should the
Committee conclude that an adjustment needs to be made. Clawback may be applied, in respect of Executive Directors, up to seven years from the award date, or ten years where an investigation
has commenced.
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Continued
Implementation of remuneration policy for Executive Directors in 2024 (unaudited)
Remuneration for the Executive Directors in 2024 will be in line with our new directors’ remuneration policy as detailed on pages 94 to 104 of this report, subject to shareholder approval at the
AGM in May 2024.
The key elements of remuneration for 2024 include salary, pension, benefits, an annual bonus and normally an LTIP award. The Committee reviews the salaries of the Executive Directors on an
annual basis, after considering any changes to the scope or responsibility of the role, the individual’s development in the role, alignment with market-competitive levels, and consideration of the
average salary increases made across the Bank. Pension may be delivered as a contribution to a defined contribution plan and / or as a cash allowance.
The charts on page 103 illustrate the potential remuneration outcomes under the proposed directors’ remuneration policy being put to shareholders for approval at the AGM in May 2024
(i.e.based on 2024 performance and any salary with effect from 1 January 2024). Daniel Frumkin’s salary for 2024 is £925,000.
The proposed variable remuneration measures and targets are set below in the subsequent sections.
2024 Annual Bonus corporate scorecard measures and weightings
The 2024 scorecard reflects our strategic priorities. The targets are set annually by the Committee, considering the Bank’s annual financial plan, strategy and its priorities for the next few years
within the context of the economic environment. The Committee considers financial and operational targets to be commercially sensitive and that it would be detrimental to the Bank’s interests to
disclose them before the end of the financial year.
Financial measures make up 60% of the scorecard. Social and Governance related measures are assessed by the Committee using a combination of quantitative and qualitative assessment. The
Committee will, prior to reviewing scorecard performance, assess whether specific capital and liquidity gateways have been met and that the payment of annual variable awards is affordable.
Measure Weighting Measure type Target
Underlying profit 45% Financial Disclosed retrospectively
Net interest margin 5% Financial Disclosed retrospectively
Cost 10% Financial Disclosed retrospectively
Sub-total (financial) 60%
Risk and regulatory
– Relationship with regulators (qualitative)
– Breaches of red limits for tier 1 appetite metrics
20% ESG Disclosed retrospectively
Customer including
– Net promoter score
– EODs per 1,000 accounts
10% ESG Disclosed retrospectively
People including
– Colleague engagement
– Diversity in leadership positions
10% ESG Disclosed retrospectively
Total 100%
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2024 LTIP measures and targets
Daniel Frumkin may be granted an award under the LTIP. Any awards made will be subject to the satisfaction of the below performance conditions over a three year performance period.
2024 LTIP Weighting Threshold Maximum
Total shareholder return relative to the FTSE 250 (excluding investment trusts) 40% Median against peers Upper quartile or above
Statutory return on tangible equity for FY 2026 30% 10% 13%
Cost: income ratio for FY 2026 (underlying) 30% 75% 65%
Risk and regulatory performance will be the Gateway to the LTIP, the Committee shall determine the extent to which the gateway is achieved 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.
Non-Executive Directors’ remuneration
Non-Executive fee levels (unaudited)
Non-Executive Directors are paid an annual fee and additional fees for being Chair or a member of Board Committees and, if appropriate, other additional time commitments. During 2023, the
Chair of the Board did not receive any additional fees for membership of Board Committees. The annual fees remained unchanged during 2023 and are set out below, together with the relevant
annual fees effective from 1 January 2024.
Role
Annual fee
as at 1 January 2023
(£’000)
Annual fee as
at 1 January 2024
(£’000)
Chair of the Board 350 350
Fee arrangements for other Non-Executive Directors
Non-Executive Director – basic fee 65 65
Senior Independent Director 30 30
Designated NED for Colleague Engagement 17. 5 17. 5
Chair Member Chair Member
Audit Committee 20 5 20 5
Nomination Committee n/a 5 n/a 5
People and Remuneration Committee 15 5 15 5
Risk Committee 25 10 25 10
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Non-Executive Directors’ fees and taxable benefits (audited)
The table below shows the actual fees paid to the Chair and NEDs.
Fees Other Total
£’000 2023 2022 2023 2022 2023 2022
Robert Sharpe
1
£350,000 £350,000 £22,504 £62,664 £372,504 £412,664
Catherine Brown £97,837 £96,875 £0 £0 £97,837 £96,875
Dorita Gilinski
2
£0 £0 £0 £0 £0 £0
Anne Grim £70,000 £68,125 £0 £0 £70,000 £68,125
Ian Henderson £95,000 £94,375 £0 £0 £95,000 £94,375
Anna (Monique) Melis £105,000 £103,125 £0 £0 £105,000 £103,125
Paul Thandi £75,000 £73,125 £0 £0 £75,000 £73,125
Michael Thorpey
3
£95,000 £94,375 £3,683 £4,677 £98,683 £99,052
Nicholas Winsor
4
£97, 500 £84,441 £0 £0 £97, 500 £84,441
1. The 2022 benefit figures have been restated to include travel related costs , which were historically not shown. Until December 2022, Metro Bank retained a company car with a chauffeur. The use of this car was principally reserved for
the Chair and Chief Executive. The proportion of the chauffeur, car benefit and fuel costs attributed to the Chair for financial year 2022 was £62,664 (as shown above). Metro Bank has also settled the tax on these benefits: the requisite
gross up in respect of the benefit for 2022 amounted to £51,271 across the 2021-22 and 2022-23 tax years. Since January 2023, the Chair occasionally uses an executive car service for travelling and family members may travel to attend
Board or other events. If a tax liability arises on these including for any incidental personal use, Metro Bank may pay for this. The 2023 benefits figures for Robert Sharpe includes car service costs of £22,504. A forecast UK tax gross up
of £18,412 (on these car service costs) will also paid by the Bank following the end of the 2023-24 tax year. This latter amount (the forecast tax gross up) is not included in the table above.
2. Dorita Gilinski has waived her entitlement to fee.
3. Michael Torpey was reimbursed expenses in respect of his NED duties including travelling from overseas to attend Board and committee meetings, which are included in the benefits section above. Although these expenses are
necessary and reasonable, under HMRC rules these are deemed taxable in the UK. Metro Bank therefore paid the tax on the above expenses, which in 2023 and 2022 amounted to £2,286 and £3,455 respectively.
4. The total above for Nicholas Winsor includes an additional annual fee of £5,000 payable chairing an internal steering committee since 1 April 2022.
Non-Executive Directors’ fees and taxable benefits (audited)
Non-Executive Directors are bound by letters of appointment which are available for inspection on request at our registered office. Non-Executive Directors are appointed for fixed terms not
exceeding three years, which may be renewed subject to their re-election by shareholders at AGMs, with three months’ notice. The Chair’s letter of appointment was issued on 30 October 2023:
hisappointment may be terminated by either party upon three months' notice.
Fees for new Non-Executive Directors appointed will be set in accordance with the terms of the approved remuneration policy in force at the time of appointment.
Non-Executive Director Policy implementation in 2024 (unaudited)
The applicable Non-Executive Director fees for 2024 are shown in the table above.
Annual report on remuneration
Continued
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Role and focus of the Remuneration Committee
The Committee is responsible for recommending to the Board the Remuneration Policy for Executive Directors and senior management, and for setting the remuneration packages for Executive
Directors and senior management including material risk takers.
The table below outlines the activity undertaken by the Committee in its five scheduled meetings in 2023.
Committee activities January February May October November
Directors’ remuneration
Review of the directors’ remuneration policy and implementation
Review of individual performance, fixed and variable remuneration
Senior management remuneration
Contractual terms, joiners and leavers
Review of individual performance, fixed and variable remuneration
All colleague remuneration
Annual salary review approach
Incentive measures, targets and outcomes. Scorecard review
Reward policies and rules review
Share plans, pension and benefits
Other
Broader people activity e.g. talent management, colleague engagement
Implications of new holding company, capital raising activity
Risk review / input and risk adjustment related activity
Non-Executive Director Expenses Approach
Reward governance
Review regulatory, investor and market developments
Remuneration disclosures (such as DRR and gender pay gap) and regulatory policy statement
Review investor feedback
Terms of reference, Committee evaluation, advisers
In addition, the Committee met in January, February and March 2024 to consider (and, where appropriate, approve):
• The draft Directors’ Remuneration Report.
• The Directors Remuneration Policy.
• Salary and fixed remuneration for Executive Directors and other management.
• The extent to which any 2023 annual bonus performance measures had been satisfied, together with individual award levels.
Annual report on remuneration
Continued
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Shareholder voting and consideration of shareholder views
At the Annual General Meeting on 26 April 2023, shareholders approved the Directors’ Remuneration Report published in the Metro Bank PLC Annual Report and Financial Statements, receiving a
strong vote in favour. Details of recent shareholder votes on remuneration are shown below.
Item For no. For % Against no. Against % Votes withheld
Metro Bank PLC Directors’ Remuneration Report – April 2023 84,129,882 91.35 7,965, 230 8.65 751,503
Metro Bank PLC Directors’ Remuneration Report – May 2022 69,619,984 91.23 6,692,221 8.77 2,780
Metro Bank PLC Directors’ Remuneration Policy – May 2021 62,150,543 95.11 3,193,940 4.89 22,200
The Committee greatly values the continued dialogue with our shareholders and 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.
We undertook substantial engagement with shareholders as part of the development of the Metro Bank PLC remuneration policy in 2021 and then again as we developed the new remuneration
policy for Metro Bank Holdings PLC. We are grateful for the feedback and input received during this time and the Committee looks forward to engaging with shareholders in the run up to the
policy’s renewal at the forthcoming AGM.
Annual report on remuneration
Continued
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Directors’ report
The Directors have the pleasure of presenting their Annual Report and Accounts for the year
ended 31December 2023. 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 IFRS and includes the Corporate Governance Report set out on
pages 51 to 123.
The Directors consider the Annual Report for the year ended 31December 2023, 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 2023 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 sized
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.
Results and dividend
The results for the year are set out in the consolidated statement of comprehensive income on
page 167.
No dividend was declared or paid during 2023 (2022: £nil). The Directors do not anticipate
declaring a dividend in the near future.
Significant events
In May 2023, Metro Bank Holdings PLC became the holding company of Metro Bank PLC and its
subsidiaries and the new principal debtor under the £350,000,000 Fixed Rate Reset Senior
Non-Preferred Notes due 8 October 2025.
In September 2023, the Bank announced that the Prudential Regulation Authority had indicated
that our AIRB application for residential mortgages would not be attained during 2023.
On 8 October 2023, the Bank confirmed completion of a £925 million capital package. The
package comprised of £150 million of new equity and £175 million of new MREL issuance,
alongside £600 million of debt refinancing.
Articles of Association
The Articles of Association can be found on our website at: metrobankonline.co.uk.
Share capital
As at 31December 2023, our issued share capital was £50,672.68 comprising 672,676,547
ordinary shares of 0.0001p each and 50,000 redeemable preference shares of £1 each. Further
details of our called-up share capital, together with details of shares allotted during the year, are
shown in note 26 to the financial statements on page 195.
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.
2024 Annual General Meeting
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 54 to 55. Monique Melis resigned as the
Senior Independent Director and Anne Grim and Ian Henderson resigned as independent NEDs,
effective 31December 2023. James Hopkinson resigned on 12 January 2024. Catherine Brown
was appointed as the Senior Independent Director with effect from 1 January 2024 (subject to
regulatory approval).
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.
Directors who served on the Board during the year ended 31 December 2023
Appointment date Resignation date
Robert Sharpe (Chair) 1 November 2020
Daniel Frumkin (CEO) 1 January 2020
James Hopkinson (CFO) 5 September 2022 12 January 2024
Catherine Brown (Senior Independent Director) 1 October 2018
Dorita Gilinski (Shareholder Nominated NED) 26 September 2022
Anne Grim (Independent NED) 20 April 2020 31 December 2023
Ian Henderson (Independent NED) 20 April 2020 31 December 2023
Anna (Monique) Melis (Senior Independent Director) 20 June 2017 31 December 2023
Paul Thandi (Independent NED) 1 January 2019
Michael Torpey (Independent NED) 1 September 2019
Nicholas Winsor (Independent NED) 20 April 2020
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Directors’ report
Continued
Directors’ interests
Details of the Directors’ beneficial interests are set out in the Annual Report onRemuneration
onpage 111.
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 67.
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 People and Remuneration Committee’s discretion. As at 31December 2023, 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 10 April 2024, 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. The information provided below was correct at the date of notification; however, the
date received may not have been within the current financial year. It should be noted that these
holdings are likely to have changed since the Group was notified. However, notification of any
change is not required until the next notifiable threshold is crossed.
Shareholder
Ordinary
shares held
% of total
ordinary
shares
Direct/
indirect
interest
Spaldy Investments Limited 355,723,914 52.88% Direct
Spruce House Partnership 15,500,000 8.99% Direct
Davis Selected Advisers 9,191,516 5.33% Indirect
Ruane, Cunniff and Goldfarb 5,020,755 5.15% Direct
Kernow Asset Management Limited 5,522,224 3.20% Direct
Greenhouse gas emissions
Our energy consumption and associated GHG emissions during 2023 are set out in the Strategic
report on page 42.
Colleague involvement
We encourage colleague 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 in the
Corporate governance report on page 59.
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 on pages 59 to 61.
Diversity
Our D&I 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 D&I for the Board can befound
on our website at: metrobankonline.co.uk/investor-relations.
We believe that a diverse Board, appointed on merit, with a broad range of skills, backgrounds,
knowledge and experience, is a more effective and responsible Board.
More information on our performance against our objectives within the policy can befound in
the Nomination Committee report on page 80.
Disabled employees
For all colleagues and candidates we always look to make reasonable adjustments to ensure
equality. 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.
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Directors’ report
Continued
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 during 2023 can be found on page 28. The
Chair of the Audit Committee is appointed as our Modern Slavery Champion, whowith the CEO
monitors 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 124–157. Details around the processes inplace in relation to financial
reporting can be found in the Audit Committee Report onpages 70 to 74. 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.
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. Further details can be found
in note 1.2 to the financial statements on page 171 and in the Viability statement (details of which
can be found below).
Viability statement
Our Viability statement is set out on pages 49–50.
Hedge accounting
The policy for hedging transactions is detailed in note 21.
Auditors
Our Auditors, PwC, have indicated their willingness to continue in office and a resolution seeking
to reappoint them will be proposed at the 2024 AGM.
Controlling Shareholder Independence
On 9 November 2023, Metro Bank entered into a Relationship Agreement with Spaldy
Investments Limited (“Spaldy”) and Jaime Gilinski Bacal (together, the ‘Controlling
Shareholder’) in relation to the company’s obligations under the UK Listing Rules to put in place
an agreement with any controlling shareholder (as defined for these purposes in the Listing
Rules). The Relationship Agreement covers the three independence provisions mandated by the
Listing Rules: (i) that contracts between Metro Bank and the Controlling Shareholder and/or any
of its associates will be arm’s length and normal commercial arrangements, (ii) that neither the
Controlling Shareholder nor any of its associates will take any action that would have the effect
of preventing the company from complying with its obligations under the Listing Rules; and (iii)
neither the Controlling Shareholder nor any of its associates will propose or procure the
proposal of a shareholder resolution which is intended or appears to be intended to circumvent
the proper application of the Listing Rules. The company has complied with the independence
provisions in the relationship agreement and as far as the company is aware the independence
and procurement provisions in the relationship agreement have been complied with in the
period by the controlling shareholders.
Political donations
We made no political donations in the year ending 31December 2023 (2022: £nil).
As part of our community engagement during 2023 we met with 25 Members of Parliament
(MPs), including Government and opposition party figures as well as MPs visiting local Metro
Bank stores in their constituencies.
Research and development
During the year, we spent £26million on intangible assets and a further £25million onresearch
and development costs which were not capitalised.
Post balance sheet events
Our post balance sheet events are set out in note 38 to the financial statements.
Future developments
Our business and future plans are set out in the Strategic Report.
Financial instruments and financial risk management
Information relating to financial instruments and financial risk management can be found on
pages 124-157 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 is set
outin the Directors’ Report, with the exception of the following set out elsewhere in the
AnnualReport.
Item Location
Detail of long-term
incentive schemes
Annual Report on Remuneration and in note 29 to the
financialstatements
Contracts of significance Any contracts of significance or related party transactions
canbefound in note 35 to the financial statements
Waived emoluments Annual Report on Remuneration
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Directors’ report
Continued
Corporate Governance Statement
Our Corporate governance report is set out on pages 52-123 in accordance with Rule7.2of the
DTR and Rule 9.8.6 (5) and (6) of the Listing Rules forms part of this Directors’ Report.
Statement of Directors’ responsibilities in respect of the financial statements
The Directors are responsible for preparing the Annual Report and Accounts 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.
• 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 its website. Legislation in the UK 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 Board of Directors page inthe
Governance section confirm that, to the best of their knowledge:
• 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,
• 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.
• 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 120-123 has been approved by the Board ofDirectors.
By Order of the Board
Clare Gilligan
Company Secretary
16 April 2024
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Metro Bank Holdings PLC Annual Report and Accounts 2023
124
Risk
In this section
125 Risk management framework
126 Risk governance and oversight
128 Risk culture
130 Financial risks
151 Non-financial risks
Governance Additional informationStrategic report Financial statements 124Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk management framework
Approach to risk management
Effective risk management is critical to realising our strategic priorities and underpins our day-to-day
operational activities and strategic change initiatives. We have an established Enterprise Risk Management
Framework to manage and report the various risks that we face over the course of our daily business.
Culture, capability and process
Policy framework and
three lines of defence
Executive
leadership
committees
Board of
Directors
The Board sets the risk appetite,
approves the risk management framework
policies and maintains an appropriate
control environment.
The Executive leadership committees
oversee the risk management framework
and policies, and the Bank’s strategy for
managing its risks.
The Bank operates a ‘three lines of
defence’ model for risk management.
Policies are aligned with the Bank’s
pri
ncipal risks and risk appetite.
The Bank fosters a strong risk culture
enabled by procedures, standards and
training, and operates a robust control
environment with collective responsibility
for managing risk.
Our risk management process comprises the following key stages that
enable the Board to fulfil its obligations under the Corporate Governance
Code 2018:
1. Identification of the risks we are exposed to at various levels, making
use of the Bank’s established Risk Taxonomy.
2. Assessment or measurement of the identified risks using suitable risk
management tools.
3. Response to the risk exposures, applying and operating appropriate
controls to mitigate the risks to acceptable levels.
4. Monitoring and reporting of these risks to ensure they remain
within risk appetite.
2
3
4
1
Ongoing
communication
and feedback
1
Risk identification
2
Risk assessment
3
Risk response
4
Risk monitoring andreporting
Risk report
Risk management process
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Risk governance and oversight
Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk management framework
First line Second line Third line
Lines of
defence
• Own and manage the risks we
face and agree, establish,
embed and comply with
appropriate frameworks,
policies and standards (key
executives).
• Design, implement and
maintain effective controls.
• Align strategy with, and
monitor exposure against,
appetite.
• Ensure adequate resources,
tools and training are in place.
• Promote and maintain an
appropriate risk culture.
• Establish and communicate
the framework, governance
structure and underlying
policies and standards.
• Provide oversight and
challenge the first line via
review, enquiry and discussion.
• Report/escalate to executive
management and the Board.
• Facilitate the development of
risk appetite, tools and
training.
• Independently verify that the
framework is operating
effectively.
• Validate the first and second
line approach to risk
management.
• Assess against regulatory
developments and leading
practices.
Risk
governance
committees
• Executive Committee.
• Business Risk Committees.
• Risk Oversight Committee.
• Executive Risk Committee.
• Other executive-level risk
committees.
• Audit Committee.
All of our colleagues are risk managers, in
accordance with our ‘Three Lines of
Defence’ risk model, which is based on the
overriding principle that risk capability must
be embedded within the first line of defence
(business) teams, overseen by our central
Risk and Internal Audit teams in the second
and third lines respectively.
Effective operation of the three lines of
defence results from:
• Colleagues being equipped with the
necessary skills and experience to
manage risks and responsibilities being
well understood.
• Proactive and transparent collaboration
between colleagues across the lines,
working with a common objective.
• Well-defined governance structures
and processes that promote
accountability and action.
Stress testing
We use stress testing as a key part of our risk management, strategic, capital and liquidity planning. It provides insight into the impact of severely
adverse events and provides confidence of our financial stability. We use stress testing in strategic, capital and liquidity planning, and to inform
risk appetite, risk mitigation and contingency planning.
Risk report
Continued
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk report
Continued
Board
Sets risk appetite and strategy
• Sets our strategy, corporate objectives
and risk appetite.
• Ensures an adequate framework is in
place for reporting and managing risk.
• Maintains an appropriate control
environment to manage risk effectively.
• Ensures capital, liquidity and other
resources are adequate to achieve our
objectives within risk appetite.
Risk Oversight Committee (ROC)
Oversees risk governance and management
• Recommends risk appetite statement
measures to the Board.
• Reviews risk exposures in relation to the
risk appetite.
• Reviews risk frameworks and policies, and
approves or recommends to the Board for
approval.
• Monitors the effectiveness of risk
management processes and procedures
put in place by management.
Audit Committee
Oversees financial reporting
• Reviews our annual and half-year financial
statements and accounting policies.
• Reviews the effectiveness of the internal
audit, audit controls, whistleblowing and
fraud systems in place.
• Advises on the appointment of external
auditors.
• Reviews internal and external audits and
controls, monitors the scope of the annual
audit and the extent of the non-audit work
undertaken by external auditors.
Executive-level committees
Oversee the risk management framework
Executive Risk Committee (ERC)
• Endorses the risk appetite for approval by the Board and monitors performance against
risk appetite.
• Reviews and recommends risk frameworks for approval by ROC (and Board as
appropriate).
• Oversees the quality and composition of the credit risk portfolio, and recommends
strategies to adjust the portfolio.
• Oversees and advises on financial and non-financial risk matters, including those
escalated from oversight committees.
Asset and Liability Committee (ALCO)
• Monitors performance against the Board capital/funding plans.
• Ensures that we meet internal liquidity and capital targets.
• Agrees pricing decisions to ensure visibility of capital and liquidity impacts.
• Monitors interest rate risk.
Credit Approval Committee (CAC)
• Approves higher value lending requests.
Impairment Committee (ICOM)
• Reviews and approves monthly portfolio-level impairment results.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk culture
We know that a culture that truly focuses on creating FANS
byexceeding customers’ expectations will reduce the risk of
customer harm and deliver consistently good outcomes. We
value open and honest feedback from our customers which
allows us to identify problems, put them right and ensure we
are consistently delivering the high level of service we expect.
Managing risk is a key part of our AMAZEING values, which are
at the heart of everything we do, and we continually seek to
enhance our risk management framework to ensure effective
risk ownership and management within risk appetite, in turn
enabling delivery of our strategic plan.
Our risk culture is shaped by our executive team, which leads
by example with consistent and clear communication of our
commitment to managing risk at all levels of the organisation.
Enabled through operation of the Senior Managers and
Certification Regime and its principals of personal accountability,
we encourage open and effective challenge and work to create
an environment in which colleagues are encouraged and able
to raise concerns.
Risk management is a key aspect of every colleague’s
objectives and is embedded within our scorecard, against
which performance is measured. Colleagues are recruited with
the core skills, abilities and attitude required to fulfil their role.
They are provided with training and development to ensure
they develop and maintain the required levels of competence.
This supports colleagues in making decisions and judgements
with risk in mind.
Risk management
framework
Risk culture
Emerging and
principal risks
Governance
Risk management
process
Risk operating
model
Risk appetite
Read more
on page 127
Read more
on page 125
Read more
on page 126
Read more
on page 129
Risk report
Continued
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Risk report
Continued
Risk appetite
We define risk appetite as the aggregate level and types of risk that we are willing to accept in
our pursuit of our business objectives. Qualitative statements are in place which articulate our
risk appetite to stakeholders and provide a view on the risk-taking activities with which the
Board is comfortable, guiding our decision-makers in their strategic and business decisions.
The risk appetite statements detail the risk parameters within which we seek to operate,
promoting good customer outcomes and protecting us from excessive risk exposures.
TheBoard-owned statements are reviewed at least annually and include quantitative metrics
which inform strategies, targets, policies, procedures and other controls.
We actively monitor exposure against our stated risk appetite on an ongoing basis. Key risk
indicators are in place for all principal risks and these are reported regularly to Executive and
Board committees together with actions and assessment of the adequacy of response. Business
areas supplement monitoring of risk appetite with additional key risk indicators that are set
within the overall parameters of those reported to the Board. Our overall risk appetite statement
is set out below.
Overall risk appetite statement
Metro Bank has a clear goal: to be the UK’s best community bank, offering a superior level of
service, whilst consistently delivering good customer outcomes and operating on an inclusive
and socially responsible basis. It strives to achieve this by creating FANS, digitally and via its
network of stores and AMAZE Direct, creating sustainable growth for its stakeholders, living
byits AMAZEING values and taking active steps to reduce any negative impact on the climate
and environment as a whole. We seek to balance risk and return as articulated in risk appetite
statements which are separately defined for the Bank’s principal risks, operating robust controls
and processes and remaining within its impact tolerances at all times.
Policies and procedures
To support our colleagues in managing our key risks and operating within our risk appetite,
asuite of policies and procedures is in place. These articulate our stance and approach to
managing each of our key risk exposures and define the minimum control requirements that
must be observed to achieve compliance. Policy documents are in place covering each of the
Bank’s principal risks and include policy documents defined and operated to meet legal and
regulatory requirements such as those for Financial Crime and Conduct Risk.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Financial risk covers several categories of risk which have
the potential to impact the Bank’s capacity to support its
customers and continue operating in a safe, sustainable
and compliant way. Financial risks include Credit risk,
Capital risk, Liquidity and Funding risk and Market risk.
Credit risk
Risk definition
The risk of financial loss should our borrowers or counterparties fail to fulfil their contractual
obligations in full and on time.
Risk appetite statement
Our credit risk appetite reflects our position as a community bank, providing lending capacity to
support UK retail and commercial customers. In line with the our strategy to return to sustainable
profitability, and meet the credit product needs of our customers, our cautious credit risk
appetite reflects our lending strategy and forecasted macroeconomic outlook. Our tolerance
forcredit losses has been set to reflect this and is consistent with the type of bank we are and
with relevant peers. To enable us to remain within this tolerance, we control the quality of our
credit assets through quantitative credit limits and a comprehensive credit risk management
framework. We seek to control concentrations in credit exposures in line with the profile of a
UKcommunity bank.
Exposure and assessment
Our primary source of credit risk is through the loans, limits and advances we make available to
our customers. We have exposures across three key areas: retail mortgages, consumer lending,
and commercial. We continue to take a prudent approach to origination and our arrears profile
and our ECLs reflect the high quality of our lending.
We manage credit risk throughout the lending activity lifecycle and within clear risk appetite
limits via a comprehensive set of policies and lending criteria. Individual credit decisions are
controlled through both quantitative models and review under delegated lending authority
depending on the product, materiality, and complexity of the exposure. Prior to approval of a
new or amended credit facility, the risk of the customer and transaction must be assessed and
approved through an automated decision engine or though delegated lending authority using
procedures in compliance with the relevant lending policy. Retail lending decisions are made in
the first instance through an automated process. This includes a quantitative credit scorecard to
assess likelihood of arrears, an affordability model to assess capacity to pay and assign a credit
limit, and a set of rules that set credit criteria and automate credit policy. This assessment is
further subject to verification of information such as financials, and valuation of collateral.
A manual underwriter review is also performed as part of the credit approval process.
Commercial exposures are individually assessed under delegated lending authority.
Credit risk measurement and management
We use a wide range of measures to assess, control and monitor credit risk including a suite of
reports covering performance against risk appetite limits and key credit risk metrics such as new
business flow, portfolio quality, early warning indicators, arrears and recovery performance,
sector and geographical concentration, and exceptions to lending policy. Reports are provided
periodically to the Executive Risk Committee, Risk Oversight Committee, Group Risk Oversight
Committee and the Board. Where required, further insight on credit risk performance is obtained
through portfolio reviews, and deep dives on material portfolios and key credit risk themes.
In addition, we measure credit risk through the application of models that use internal and external
data to calculate ECL. These calculations are based on the application of IFRS 9 models and
staging to determine the relevant term of the calculation (12 months or lifetime) and incorporate
assessments of the probability of default (PD), loss given default (LGD), and exposure at default
(EAD). There are individual assessments of defaulted commercial exposures (and in mortgage
exposures in some circumstances), and where relevant management judgement via post model
adjustments (PMAs) and post model overlays (PMOs). The impairment assessment for year-end
2023 has been undertaken in line with our Impairment Policy.
All models are subject to independent validation and are approved through the Model
Governance Committee (MGC) and Model Oversight Committee (MOC). PMAs have also been
reviewed and approved at MGC and MOC. The overall ECL position and methodology is
reviewed and approved by the Impairment Committee (ICOM) which is a sub-committee of
ERC. Individual impairments for defaulted commercial customers are approved by the Individual
Impairment Committee, a sub-committee of ICOM.
Rigorous internal challenge is undertaken in order to assess the reasonableness of the
impairment calculations, models, PMO/PMAs, individual assessments and overall level of
impairments.
IFRS 9 staging and ECL recognition
IFRS 9 requires accounts to be allocated into one of three stages. Stage 3 reflects accounts in
default. Stage 2 are the accounts which have shown a significant increase in credit risk since
origination (SICR), with all other lending falling into Stage 1. IFRS 9 requires a higher level of ECL
to be recognised for underperforming loans. For loans in Stage 2 and Stage 3 a lifetime ECL is
recognised, with a 12-month ECL for performing loans (Stage 1).
An assessment of whether credit risk has increased significantly since initial recognition is
performed at each reporting period by considering the change in the PD over the remaining life
of the financial instrument. Judgement may be required to determine when a significant
increase in credit risk has occurred.
The assessment for a Retail financial instrument compares the PD occurring at the reporting
date to that at initial recognition, considering reasonable and supportable information, including
information about past events, current conditions, and future economic conditions. The
assessment for a Commercial financial instrument is based on quantitative and qualitative
assessment, including financial performance, forecast economic conditions and our internal
credit risk rating grade.
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Continued
IFRS 9 requires a higher level of ECL to be recognised for underperforming loans. This is considered based on a staging approach:
In light of the classifications our stage allocation criteria must include:
• A relative measure of creditworthiness deterioration since origination.
• An absolute measure of creditworthiness deterioration since origination.
There are three main criteria driving the SICR assessment identified as follows:
• Quantitative criteria – where the numerically calculated PD on a retail financial instrument
hasincreased significantly since initial recognition. This is determined when 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, different thresholds are used by sub-products within each portfolio (term loans,
revolving loan facilities and mortgages). The assessment for a commercial financial instrument
uses the internal credit risk rating grade. The commercial approach recognises that credit
rating at origination is not available for some commercial lending.
• Qualitative criteria – Early Warning List is used to inform allocation to Stage 2, regardless of
the results of the quantitative analysis.
• Backstop criteria – instruments that are 30 days past due or more are allocated to Stage 2
(where they do not meet the criteria for Stage 3), regardless of the results of the quantitative
and qualitative analysis.
There are additional SICR rules utilised across portfolios. These rules, as well as more granular
detail on both quantitative and qualitative criteria, are captured within the IFRS 9 model
methodology and are approved as part of the annual model review process by the Model
Governance and Model Oversight Committees.
Stage Description ECL recognised
Stage 1
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.
12-month ECL
Total losses expected on defaults which may occur within the next 12 months.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Stage 2
Financial assets that have had a significant increase in credit risk since initial
recognition but that do not have objective evidence of impairment.
For Commercial counterparties, Early Warning List is used to inform qualitative
triggers for SICR.
SICR includes the rebuttable presumption that financial instruments falling 30 DPD
due on contractually defined payments are to be considered as having deteriorated
significantly since origination and should trigger Stage 2.
Lifetime ECL
Losses expected on defaults which may occur at any point in a loan’s lifetime.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Stage 3
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. This includes customers in
Commercial who are categorised as Early Warning List 3 (EWL3) or forbearance.
Lifetime ECL
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.
Purchased or
originated
credit-impaired
(POCI) assets
Financial assets that have been purchased and had objective evidence of being
‘non-performing’ or ‘credit impaired’ at the point of purchase.
Lifetime ECL
At initial recognition, POCI assets do not carry an impairment allowance. Lifetime ECL
are incorporated into the calculation of the asset’s effective interest rate. Subsequent
changes to the estimate of lifetime ECL are recognised as a loss allowance.
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Non-performing loans (NPLs)
A loan will be considered to be ‘non-performing’ or ‘credit impaired’ when it meets our definition
of default. A loan will be classed as in default when the loan is greater than 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. This definition of default is aligned with internal credit risk management policies,
and accounting and regulatory definitions.
A loan is 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 due to financial difficulty; 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.
In some cases 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.
Where an asset which has been classified as Stage 3 is showing improving trends and is no
longer considered non-performing or credit impaired, a probation period of 12 months is
implemented before transferring a financial instrument from Stage 3 to Stage 2.
Credit exposure summary
The following provides an overview of the performance of our portfolios during 2023. Total
loans and advances to customers have decreased in 2023 by £793 million from £13.3 billion to
£12.5 billion. Reductions have been driven by the run-off of Government-backed lending and of
the professional buy-to-let (PBTL) portfolio within commercial lending, and more limited new
lending of Consumer products.
Table 1: Total expected credit losses by portfolio (audited)
31 December 2023 31 December 2022
Gross
carrying
amount
£’million
ECL
allowance
£’million
Net carrying
amount
£’million
Gross
carrying
amount
£’million
ECL
allowance
£’million
Net carrying
amount
£’million
Retail mortgages 7, 817 (19) 7,798 7,649 (20) 7,629
Consumer lending 1,297 (108) 1,189 1,480 (75) 1,405
Commercial lending 3,382 (72) 3,310 4,160 (92) 4,068
Total loans and advances
to customers 12,496 (199) 12,297 13,289 (187) 13,102
Table 2: Total portfolio credit performance
31 December 2023 21 December 2022
Coverage ratio (including Stage 3) 1.59% 1.41%
% loans in Stage 2 12% 16%
% loans in Stage 3 3% 3%
90+ days past due 2% 1%
Our retail mortgages portfolio grew by £168million during 2023 whilst consumer lending and
commercial reduced by £183million and £778million respectively.
Non-performing loans
The below table provides information on NPLs by portfolio.
Table 3: Non-performing loans
31 December 2023 31 December 2022
Group
NPLs
£’million
NPL
Ratios
NPLs
£’million
NPL
Ratios
Retail mortgages 146 1.87% 111 1.45%
Consumer 77 5.94% 50 3.38%
Commercial 166 4.91% 191 4.59%
Total 389 3.11% 352 2.65%
NPLs increased to £389million (31December 2022: £352million) with the overall NPL ratio
increasing to 3.11% (31December 2022: 2.65%). The NPL ratio for mortgages has increased to
1.87% (31December 2022: 1.45%). This is driven by new defaults primarily due to accounts
moving to 90+ day arrears. The NPL ratio for consumer customers has increased to 5.94%
(31December 2022: 3.38%) driven by the maturation of the RateSetter loans portfolio together
with the runoff of the legacy portfolios. NPLs have decreased for Commercial due to successful
BBLS claims, repayments and write-offs of a small number of large commercial exposures;
however, due to the reduction in overall Commercial lending, the NPL ratio has increased to
4.91% (31December 2022: 4.59%).
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Financial risks
Continued
Expected credit loss
Expected credit losses (ECL) have increased during the year by £12million to £199million
(31December 2022: £187million) predominantly driven by maturation of the consumer portfolio,
offset by repayments in commercial and improvements in macroeconomic scenarios. Metro
Bank continues to hold overlays to reflect the continued macroeconomic uncertainty given the
cost-of-living pressures, higher interest rates and anticipated property price falls not fully
captured in the latest macroeconomic scenarios and IFRS 9 models. Overlays continue to be
retained given the continued economic uncertainty, more details of which can be found on
pages 204 to 205.
Cost of risk
The below table provides information on the cost of risk. Cost of risk is the credit impairment
charge expressed as a percentage of average gross lending over the year.
Table 5: Cost of risk
Group 31 December 2023 21 December 2022
Retail mortgages (0.01%) 0.02%
Consumer 3.29% 2.26%
Commercial (0.30%) 0.11%
Total 0.26% 0.32%
The overall cost of risk (CoR) is primarily driven by increased ECL for consumer lending
(resulting from maturation of this portfolio) which carries a higher CoR than retail mortgages
and commercial. The CoR for retail mortgages has reduced due to improvements in the
macroeconomic scenarios. The CoR for Commercial has reduced due to improvements in
macroeconomic scenarios, and repayments of a small number of large commercial exposures.
Credit risk exposure by internal PD rating
The table below summarises balances by PD bandings and IFRS 9 production stage at a total bank level. All PDs include forward looking information and are based on 12-month values for all stages.
Table 4: Credit risk exposure, by IFRS 9 12-month PD rating and stage allocation (audited)
31 December 2023
Gross carrying amount (£’million) Loss allowance (£’million)
All Portfolios
IFS 9 PD range
% Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
ECL coverage
%
Band 1 0.00 – 3.00 8,928 499 – – 9,427 29 3 – – 32 0.34%
Band 2 3.00 – 17.00 1,664 883 – – 2,547 33 27 – – 60 2.36%
Band 3 17.00 – 99.99 4 129 – – 133 1 13 – – 14 10.53%
Band 4 100 – – 389 – 389 – – 93 – 93 23.91%
Total 10,596 1,511 389 – 12,496 63 43 93 – 199 1.59%
31 December 2022
Gross carrying amount (£’million) Loss allowance (£’million)
IFS 9 PD range
% Stage 1 Stage 2 Stage 3 POCI Total Stage 1 Stage 2 Stage 3 POCI Total
ECL coverage
%
Band 1 0.00 – 3.00 8,042 549 – – 8,591 32 5 – – 37 0.43%
Band 2 3.00 – 17.00 2,209 1,313 – – 3,522 33 29 – – 62 1.76%
Band 3 17.00 – 99.99 598 226 – – 824 1 17 – – 18 2.18%
Band 4 100 – – 352 – 352 – – 70 – 70 19.89%
Total 10,849 2,088 352 – 13,289 66 51 70 – 187 1.41%
The information in the tables above has been presented at a total bank level including BBLS.
The migration observed across bandings, in particular band 1, is primarily driven by the improvement in macroeconomic scenarios feeding through the IFRS 9 models resulting in customers moving
to lower PD bands.
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Continued
Stage 2 balances
Stage 2 balances are identified using quantitative and qualitative tests that determine the SICR
criteria. In addition, customers that trigger the 30 days backstop classification are also reported
in Stage 2, in line with IFRS 9 standards. The Bank’s SICR assessment is set out in Section 3.3.1.
Table 6: Stage 2 balances
31 December 2023
£’million
31 December 2022
£’million
Gross carrying
amount
Loss
allowance
Gross carrying
amount
Loss
allowance
Quantitative 1,353 30 1,845 38
Qualitative 103 5 189 7
30 days past due backstop 55 8 54 6
Total Stage 2 1,511 43 2,088 51
Note: Where an account satisfies more than one of the Stage 2 criteria above, the gross carrying amount and loss
allowance has been assigned in the order presented. For example, an account that triggers both Quantitative and
Qualitative SICR criteria will only be reported as Quantitative SICR.
Stage 2 balances have decreased in 2023, with the quantitative SICR criteria continuing to be
the primary driver. Improvements in macroeconomic outlook have resulted in customers no
longer triggering SICR, and consequently transferring back to Stage 1. Marginal decreases in
Stage 2 balances have also been observed in the qualitative criteria. As at 31December 2023,
90% (31December 2022: 88%) of Stage 2 balances triggered quantitative SICR criteria, 7%
(31December 2022: 9%) triggered qualitative SICR and the remaining 4% (31December 2022:
3%) triggered the 30 days past due backstop criteria.
Portfolio level analysis – Retail mortgages
Table 7 summarises key credit performance metrics for the retail mortgages portfolio.
Table 7: Retail mortgage credit performance
31 December 2023
£’million
31 December 2022
£’million
Loans and advances 7,817 7,649
Loss allowance 19 20
Coverage ratio 0.24% 0.26%
% loans in Stage 2 10% 18%
% loans in Stage 3 2% 1%
90+ days past due 1% 1%
Mortgage balances have grown slightly during 2023 to £7,817million (31December 2022:
£7,649million) with modest organic book growth outstripping the run-off of our legacy
acquired portfolios.
The credit performance of the portfolio has seen some impact from the economic environment
resulting from house price reductions, and rising cost of living and interest rates. Portfolio
average DTV has increased by 2% to 58% as at 31December 2023 (31December 2022: 56%)
asa result of falling house prices. Early arrears cases (>1 to < 3 months in arrears) have increased
to 0.97% at 31December 2023 (31December 2022: 0.63%). Accounts that are 3 or more months
in arrears have increased from 0.73% at 31December 2022 to 1.08% at 31December 2023.
Increases in arrears have been seen to a greater extent in the legacy acquired portfolios that are
in run-off and have greater sensitivity to interest rate rises.
Retail Mortgage new lending has continued to be of good quality during 2023. The average
LTVwas 63% (2022: 69%) and the proportion of lending with an LTV over 90% was only 1%
dueto restrictions on this lending. The proportion of new lending that is buy-to-let reduced in
2023 to 7% from 34% in 2022. Credit quality measured through credit score has remained stable
over the last 3 years. Near Prime lending has continued to make up a small proportion of new
lending (December 2023: 1.5%) and contributes a small proportion of the portfolio (December
2023: 0.6%).
27% of loans at December 2023 are on interest rates ≥4%, and 8% of loans are on variable
rates;the remaining 65% remain on existing fixed rate mortgages and will migrate to higher
rateproducts at the end of the fixed period. We expect that owner-occupied customers have
adegree of protection against increasing interest rates as a result of origination credit criteria
and underwriting approach; all of our organically originated owner-occupied loans were
underwritten at a stressed interest rate allowing for at least a 2% increase, and in the majority
ofcases (88%) customers did not borrow the maximum lending amount that was available
creating an additional buffer against interest rate and inflationary rises. Rental coverage for
buy-to-let lending is strong, providing capacity to absorb increases in mortgage payments.
Allorganic buy-to-let mortgages have been underwritten at a minimum 140% rental cover and
at a stressed interest rate.
The buy-to-let portfolio consists of simple retail loans on prime residential housing stock; there
is no cross-collateralisation and there are no houses in multiple occupation. Landlord portfolios
are a small proportion of lending.
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Continued
Impairment
There has been an increase in coverage ratio for Stage 1 (Stage 1: 0.10% in 2022 to 0.11% in 2023)
driven by new business lending and improvements in macroeconomic scenarios resulting in
fewer customers with higher PDs triggering SICR into Stage 2. There has been a decrease in
coverage ratio in Stage 2 (0.82% in 2022 to 0.72% in 2023) driven by improvements in
macroeconomic scenarios, and improvements made in the measurement of SICR in the IFRS 9
lifetime PD model (introduced as an overlay in 2022), resulting in an overall reduction in
modelled ECL. There has been an increase in Stage 3 coverage ratio (Stage 3: 2.70% in 2022
to4.05% in 2023) due to one single name case that triggered default.
Payment performance
Portfolio arrears have increased from a low base during 2023 due to the impact of the cost of
living and interest rate rises. The proportion of the portfolio with >1 and >3 months in arrears has
increased from 0.63% to 0.97% of the total retail mortgage portfolio, and the proportion of the
portfolio with three or more missed payments has increased from 0.73% to 1.06%. A greater
increase in arrears has been observed on the legacy acquired portfolios due to the portfolios
being in run-off and there being a larger proportion of mortgages with variable rates in these
portfolios. The acquired portfolios were not written under Metro Bank credit criteria and do not
represent similar arrears profiles to organic lending. We also observe a higher increase in arrears
in the buy-to-let portfolio due to this containing a larger proportion of interest only mortgages
that are more sensitive to interest rate rises. Forbearance levels also remain low with 0.19% of
our non-arrears portfolio subject to forbearance measures, increasing from 0.02% at December
2022.
Interest-only lending
Interest-only lending holds the additional risk of balance repayment at the end of the mortgage
term. This risk arises principally in the mortgage book where the exposure to interest-only loans
stands at £3.8 billion (31December 2022: £4.1 billion).
All borrowers of interest-only facilities are assessed as being able to refinance the lending at
theend of the term or have an appropriate repayment plan in place. These loans are also
appropriately collateralised with lower LTV thresholds compared to capital and interest
mortgage lending. The table below shows the amounts of the retail mortgage that are subject
toeither interest only, or capital and interest payments.
Table 8: Retail mortgage lending by repayment type (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
Repayment type
Retail Owner
Occupied Retail BTL Total
Retail Owner
Occupied Retail BTL Total
Interest only 1,933 1,878 3,811 2,005 2,047 4,052
Capital and interest 3,918 88 4,006 3,502 95 3,597
Total 5,851 1,966 7,817 5,507 2,142 7,649
Geographic exposure
The geographic distribution of our retail mortgages customer balances is set out below. All
ofour loan exposures which are secured on property are secured on UK-based assets. Our
current retail mortgages portfolio is concentrated within London and the South-East, which is
representative of our customer base and store footprint. We are expanding our footprint which
will reduce the geographical concentration of lending over time.
Table 9: Retail mortgage lending by geographic exposure (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
Region
Retail Owner
Occupied Retail BTL Total
Retail Owner
Occupied Retail BTL Total
Greater London 2,040 1,091 3,131 1,937 1,201 3,138
South east 1,564 381 1,945 1,435 408 1,843
South west 487 87 574 476 99 575
East of England 590 150 740 531 163 694
North west 268 65 333 263 68 331
West Midlands 240 71 311 226 76 302
Yorkshire and the
Humber 185 32 217 184 34 218
East Midlands 180 53 233 168 54 222
Wales 111 17 128 109 18 127
North east 60 8 68 63 10 73
Northern Ireland – – – – – –
Scotland 126 11 137 115 11 126
Total 5,851 1,966 7,817 5,507 2,142 7,649
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Collateral
Table 10 shows the distribution of the retail mortgage portfolio by DTV. The portfolio DTV profile
has increased slightly during 2023 as a result of falling house prices.
Table 10: Retail mortgage lending by DTV (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
DTV ratio
Retail Owner
Occupied Retail BTL Total
Retail Owner
Occupied Retail BTL Total
Less than 50% 1,994 439 2,433 2.007 568 2.575
51–60% 1,069 375 1,444 961 463 1,424
61–70% 1,044 642 1,686 1,088 660 1,748
71–80% 1,100 493 1,593 990 434 1,424
81–90% 550 16 566 374 13 387
91–100% 89 – 89 87 – 87
More than 100% 5 1 6 – 4 4
Total 5,851 1,966 7,817 5,507 2,142 7,649
Portfolio level analysis – Consumer
Table 11 summarises key credit performance metrics for the consumer lending portfolio.
Table 11: Consumer credit performance
31 December 2023
£’million
31 December 2022
£’million
Loans and advances 1,297 1,480
Loss allowance 108 75
Coverage ratio 8.33% 5.07%
% loans in Stage 2 24% 17%
% loans in Stage 3 6% 3%
90+ days past due 5% 3%
Portfolio and credit risk profile
Consumer balances have reduced to £1.3 billion as at 31 December 2023 (31 December 2022:
£1.5 billion) following a reduction in, and subsequent cessation of lending through the
RateSetter brand. The portfolio is now composed of 96% lending through the RateSetter brand.
The performance of this portfolio is aligned with expectations; increases in arrears and non-
performing loans are in line with the growth of the book and normal portfolio maturation, and as
a result of very low levels of write-offs causing an accumulation of cases in arrears. A batch
write-off planned for 2024 is expected to reduce arrears levels. New lending in 2023 remained
strong across fixed term and revolving products with average income and application scores
remaining stable. Continual enhancements have been performed in relation to the affordability
in light of the economic environment.
Impairment
The total ECL coverage position for consumer has increased to 8.3% as a result of the continued
maturation of the portfolio and a post model overlay to reflect the uncertainty due to high
inflation not fully captured in the IFRS 9 model (31December 2022: 5.1%).
Portfolio level analysis – Commercial
Table 12 summarises key credit performance metrics for the commercial portfolio.
Table 12: Commercial credit performance
31 December 2023
£’million
31 December 2022
£’million
Loans and advances 3,382 4,160
Loss allowance 72 92
Coverage ratio 2.13% 2.21%
% loans in Stage 2 12% 12%
% loans in Stage 3 5% 5%
90+ days past due 2% 2%
Table 13: Summary of Commercial lending
31 December 2023
£’million
31 December 2022
£’million
Professional buy-to-let 465 731
Bounce back loans 524 801
Coronavirus business interruption loans 86 127
Recovery Loan Scheme 328 385
Other term loans 1,341 1,578
Total commercial term loans 2,744 3,622
Overdrafts and revolving credit facilities 172 122
Credit cards 4 4
Asset and invoice finance 462 412
Total commercial lending 3,382 4,160
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Continued
Portfolio and credit risk profile
Our commercial lending remains largely composed of term loans secured against property and
Government-supported lending. In addition, commercial lending includes facilities secured by
other forms of collateral (such as debentures and guarantees), and Asset Finance and Invoice
Finance.
Our commercial balances have decreased from £4,160million to £3,382million during 2023
reflecting the reduction in our portfolio of buy-to-let and Real Estate lending, and run-offs in
Government-supported lending.
Commercial customers are managed through an early warning categorisation where there
areearly signs of financial difficulty, thereby allowing timely engagement and appropriate
corrective action to be taken. Early warning categories support our IFRS 9 stage classification.
The percentage of the portfolio in Early warning categories has remained broadly flat
sinceDecember 2022, however, some deterioration within early warning categories has
beenobserved. Close customer management is key to identifying issues and supporting
ourcustomers.
Impairment
The ECL allowance has reduced to £72million in 2023 (31December 2022: £92million) with
coverage reducing to 2.13% (31December 2022: 2.21%). The proportion of commercial lending
inStage 2 has remained flat at 12% (FY 2022: 12%) as a percentage of total balances. Reduced
coverage reflects repayments received and reduction of cases with higher coverage,
includingconclusion of some larger single name cases as well as improvements in
macroeconomic scenarios.
Our commercial book consists predominately of SME lending which is reflected in the coverage.
The operating environment continues to be challenging and Commercial customers may be
impacted by interest rates which remain higher than observed in recent years, and the impact
ofinflationary increases on discretionary spending and business expenses. We continue to hold
appropriate levels of ECL to reflect the higher risk of default.
Interest-only lending
Interest-only lending in our commercial loans is concentrated towards professional buy-to-let
where interest-only lending makes up 94% of professional buy-to-let lending (31December
2022: 95%).
Table 14: Commercial term lending – excluding BBLS by repayment type (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
Repayment Type
Professional
buy-to-let
Other
term loans Total
Professional
buy-to-let
Other
term loans Total
Interest only 438 222 660 691 253 944
Capital and interest 27 1,533 1,560 40 1,837 1,877
Total 465 1,755 2,220 731 2,090 2,821
Geographic exposure
The below table summarises the geographic distribution of the commercial term loans portfolio.
72% of commercial term loans are to companies in London and the South East (31December
2022: 73%), which reflects the historical concentration of our store network.
The following table reflects the geographic distribution of the commercial term loans portfolio
excluding BBLS.
Table 15: Commercial term lending – excluding BBLS by geographic exposure (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
Region
Professional
buy-to-let
Other –
term loans Total
Professional
buy-to-let
Other –
term loans Total
Greater London 298 880 1,178 472 1,052 1,524
South east 88 340 428 149 377 526
South west 15 111 126 22 143 165
East of England 31 122 153 45 147 192
North west 11 106 117 13 153 166
West Midlands 4 101 105 8 112 120
Yorkshire and the
Humber 2 17 19 3 23 26
East Midlands 9 44 53 12 43 55
Wales 3 8 11 3 11 14
North east 3 19 22 3 19 22
Northern Ireland 1 2 3 1 3 4
Scotland – 5 5 – 7 7
Total 465 1,755 2,220 731 2,090 2,821
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Continued
Sector exposure
We manage credit risk concentration to individual borrowing entities and sector. Our credit
riskappetite includes limits for individual sectors where we have higher levels of exposure.
Thesector profile for commercial term lending is broadly consistent with the position as at
31December 2022. There has been an overall reduction in commercial real estate and
professional buy-to-let. The following table shows the distribution of the commercial portfolio
across business sectors.
Table 16: Commercial term lending – excluding BBLS by sector exposure (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
Region
Professional
buy-to-let
Other –
term loans
Total
commercial
term loans
Professional
buy-to-let
Other –
term loans
Total
commercial
term loans
Real estate
(rent, buy and sell) 465 509 974 731 681 1,412
Hospitality – 368 368 – 372 372
Health & social work – 298 298 – 334 334
Legal, accountancy
& consultancy – 150 150 – 196 196
Retail – 136 136 – 161 161
Real estate (develop) – 14 14 – 6 6
Recreation, cultural
& sport – 72 72 – 87 87
Construction – 48 48 – 62 62
Education – 19 19 – 17 17
Real estate
(management of) – 7 7 – 9 9
Investment
& unit trusts – 7 7 – 11 11
Other – 127 127 – 154 154
Total commercial term
lending 465 1,755 2,220 731 2,090 2,821
Collateral
DTV is calculated for property and cash backed lending in commercial. As of 31December
2023,76% of this secured lending had a DTV of 80% or less, reflecting the prudent risk appetite
historically applied. Lending with DTV >100% includes loans which benefit from additional
formsof collateral, such as debentures. The value of this additional collateral is not included in
the DTV but does provide 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 decrease in DTV >100% in 2023 reflects a reduction in government-backed lending. The
following table shows the distribution of the commercial portfolio DTV.
Table 17: Commercial term lending – excluding BBLS by DTV (audited)
31 December 2023 (£’million) 31 December 2022 (£’million)
DTV ratio
Professional
buy-to-let
Other
term loans Total
Professional
buy-to-let
Other
term loans Total
Less than 50% 160 707 867 278 817 1,095
51 to 60% 59 319 378 158 433 591
61 to 70% 105 185 290 219 112 331
71 to 80% 76 79 155 62 76 138
81 to 90% 60 21 81 3 53 56
91 to 100% 2 11 13 5 12 17
More than 100% 3 433 436 6 587 593
Total 465 1,755 2,220 731 2,090 2,821
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Government-backed lending
The table below summarises government-backed lending.
Table 18: Government-backed lending
31 December 2023
No. of loans
Drawn balance
£’million
Average loan
amount
£’000
% of total
business
lending
Bounce Back Loan Scheme 22,062 524 24 18.8%
Coronavirus Business Interruption
Loan Scheme 240 86 358 3.0%
Coronavirus Large Business
Interruption Loan Scheme 2 8 3,920 0.3%
Recovery Loan Scheme
1
1,304 328 252 11.6%
Total government-backed lending 23,608 946 40 33.7%
31 December 2022
No. of loans
Drawn balance
£’million
Average loan
amount
£’000
% of total
business
lending
Bounce Back Loan Scheme 26,824 801 30 21.7%
Coronavirus Business Interruption
Loan Scheme 279 127 455 3.4%
Coronavirus Large Business
Interruption Loan Scheme 4 26 6,580 0.7%
Recovery Loan Scheme
1
1,349 385 285 10.4%
Total government-backed lending 28,456 1,339 47 36.2%
1. Recovery loan scheme includes £71million acquired from third parties under forward flow arrangements
(31December 2022: £97million). 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).
Undrawn commitments
At 31December 2023, we had undrawn facilities granted to retail and commercial customers of
£718million (2022: £1,120million).
As part of our retail and commercial operations, this includes commitments of £327million
(2022: £250million) for 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.
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 2023 we held £4.9 billion (31December 2022:
£5.9 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 (FVOCI) depending on our intentions regarding each asset. We do not hold investment
securities at fair value through profit and loss.
Table 19: Investment securities by credit rating (audited)
31 December 2023 £’milion 31 December 2022 £’milion
Group
Investment
Securities held at
amortised cost
Investment
Securities held
at FVOCI Total
Investment
Securities held at
amortised cost
Investment
Securities held
at FVOCI Total
AAA 3,400 256 3,656 3,649 356 4,005
AA- to AA+ 1,003 220 1,223 1,694 215 1,909
Total 4,403 476 4,879 5,343 571 5,914
We have a robust securities investment policy which requires us to invest in high-quality liquid
debt instruments. At 31December 2023, 75% of our investment securities were rated as AAA
(31December 2022: 68%) with the remainder rated AA- or higher, the majority of which
comprises of UK gilts.
Additionally, we hold £3.9 billion (31December 2022: £2.0 billion) in cash balances, which is
either held by ourselves or at the Bank of England.
Response
We have a strong credit risk framework in place that manages lending within risk appetite limits,
provides a comprehensive set of policies and lending standards, and sets out a clear set of
procedures for managing our portfolios and customers in financial difficulty.
We control credit risk through a set of quantitative limits that measure the aggregate level and
type of credit risk that we are willing to accept in order to support our business objectives.
These limits, which are set at total portfolio and product level, are supported by a suite of
product-level policies and lending criteria which define the parameters within which individual
exposures can be approved and which manage new lending within the risk appetite. Credit risk
is further controlled through the use of automated decision tools, underwriter approval and
monitoring of individual transactions. Independent oversight is provided by the Credit risk
function, and includes independent underwriting of commercial lending, monitoring of
performance against limits, ongoing portfolio monitoring and regular portfolio reviews.
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Financial risks
Continued
The 2023 credit risk appetite limits were set with reference to the appetite for credit
impairments as well as analysis of past performance, peer comparisons and qualitative
approaches using expert judgement. These limits reflect the Bank’s strategy as well as the
macroeconomic outlook.
We continue to maintain our climate change risk management capabilities and have policies
thatoutline prohibited commercial sectors which are of particular concern for climate change.
Inaddition, our policies provide for enhanced borrower assessment where borrowers operate
inother carbon-intensive industries. In retail mortgages, there are policies in place to mitigate
property risk, including the risks that could result from climate change. These include
requirements concerning the durability of the property for the lifetime of the loan, the
requirement that properties must be insurable, and limits for lending on certain products
wherethe property has received a low EPC rating.
Individual credit decisions are controlled through both quantitative models and review under
delegated lending authority depending on the product, materiality, and complexity of the
exposure. These assessments take into account the potential for future stress in customers’
financial positions. We mitigate credit risk through holding collateral against our retail mortgage
and commercial term loan portfolios.
This robust framework continues to support underlying portfolio resilience as cost-of-living and
interest rate pressures have materialised.
Mitigation
We mitigate risk through regular monitoring and analysis of our customers and their ability
tomaintain contractual obligations, as well as the external factors that can impact customer
credit risk. We have established Credit Risk policies and lending criteria, and assess customer
affordability under different scenarios where appropriate. We employ specialist expert
underwriters in our assessments of our commercial customers, and categorise customer risk
aspart of our Closer Monitoring and Early Warning List as described above. This allows for the
early identification of customers who may develop financial difficulties, which have not yet fully
materialised. Monthly analysis and reporting provide insight into portfolio credit performance
and highlight where deterioration is taking place or is likely to occur.
In addition to active management and monitoring of our portfolios and customer affordability,
we mitigate credit risk through holding collateral against our retail mortgage and commercial
term loan portfolios. 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. The management
of this is governed by our collateral management policy. At 31December 2023, 80%
(31December 2022: 78%) of our loans consisted of retail mortgages and commercial term loans,
with average debt to value of 58% (31December 2022: 56%) and 55% (31December 2022: 55%)
respectively.
Subject matter experts further mitigate the risk of credit losses through regular review and
assessment of cases at an individual level. Specialist teams provide customers with support
where financial difficulties are identified, and the use of automated and manual credit
assessments help to ensure good customer outcomes and to maximise the likelihood that
customers maintain the ability to meet their contractual obligations.
Supporting our customers
We work with our customers who are in arrears, have payment shortfalls or are in financial
difficulties to obtain the most appropriate outcome for both the Bank and the customer. The
primary objectives of our policy are to ensure that appropriate mechanisms and tools are in
place to support customers during periods of financial difficulty, and to minimise the duration
ofthe difficulty and the consequence, costs and other impacts arising.
We will always seek to understand the customer’s individual circumstances and ensure a
considered, measured, and consistent approach is taken which is, to the best of our knowledge,
appropriate for their individual circumstances. Where a customer’s financial difficulty is due to
them being impacted by a vulnerable situation, we will seek to provide tailored and flexible
solutions and services appropriate to the circumstances of the vulnerability. As part of this
process, we have a range of treatments that may be considered to support the customer
through the period of financial difficulty, alongside working with them to understand and agree
how to return their account to good standing where possible. This includes the forbearance
options outlined below.
Commercial customers who are showing signs of potential financial difficulty are supported
through our relationship teams, and where appropriate, our Business & Credit Support team.
Each situation is individually assessed, and our preference is to provide flexibility where possible
to help a customer avoid financial difficulty and to resume normal contractual obligations.
Forbearance may be offered where this is sustainable and appropriate to the nature of the
customer’s financial distress.
Forbearance
When our customers show signs of financial difficulties, we may seek to continue our support
through the provision of a concession such as a modification of the terms and conditions of the
loan, or a total or partial refinancing of an existing loan. Concessions can often result in more
favourable terms than those offered or available under normal circumstances. Such events are
considered to be acts of forbearance and are dealt with and monitored in accordance with our
forbearance policies and regulatory guidelines.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Monitoring/reporting
Governance
Credit risk is managed within our Enterprise Risk Management Framework, as part of our
overarching three lines of defence model. Management of credit risk is split primarily into the
firsrt and second lines of defence. The first and second lines are operationally independent and
have separate reporting lines.
The first line management of credit risk is shared across the Bank’s functions that design,
distribute, approve and service credit facilities, referred to in this document as the ‘lending
functions’. These are the functions under the management of the Managing Director, Corporate
and Commercial Banking, Managing Director, Retail and Business Banking, and the Chief
Commercial Officer. The first line lending functions are responsible for proposing and
implementing lending propositions and are responsible for conducting lending activity in
accordance with Credit Risk Appetite and Credit Policies and Standards.
The second line Credit Risk function reports to the Chief Credit Officer (CCO) who, in turn,
reports to the Chief Risk Officer. The CCO, supported by the Credit Risk team, is responsible for:
• Recommending and overseeing Credit Risk Appetite limits
• Developing and overseeing credit risk policies and standards
• Overseeing credit risk strategies in accordance with policies and risk appetite
• Developing and monitoring credit risk models
• Providing an independent review and approval of individual commercial credit proposals and
renewals of loan facilities
• Developing and overseeing retail arrears management strategies
• Managing commercial and Business Support strategy and activities
• Ensuring appropriate IFRS 9 credit provisions are held, and
• Monitoring and reporting credit risk performance.
Monitoring
The credit risk function monitors the risk profile using a broad range of risk metrics, reporting
against risk appetite limits and regular portfolio reviews. This includes oversight of credit risk
performance indicators such as arrears levels, modelled risk measures, such as probability of
default and loss given default, and measures of concentration risk. Stress testing is conducted
toassess the impact on ECL and RWAs.
Credit risk appetite metrics are measured and reported regularly to oversight committees to
ensure we remain within risk appetite and continue to support our strategic objectives. These
metrics include a focus on particular segments of the portfolio which may be susceptible to or
indicative of increased levels of risk, and which are crucial to our strategy. These include
modelled risk parameters and performance metrics such as probability of default and loss given
default, as well as concentration metrics such as sector or geographical concentration. More
granular performance metrics are also tracked to assess the likelihood of potential breaches and
their drivers. The limit framework includes early warning thresholds which identify where action
may need to be taken to avoid a breach of appetite limits. If necessary, a plan is presented to
bring the measurements back to approved levels.
A monthly portfolio insight report is presented to ERC and ROC to provide oversight of key
indicators and performance trends. This is supplemented by a detailed suite of portfolio-level
reports which are reviewed by the Credit Risk Oversight Committee. In addition, we perform
regular portfolio asset quality reviews as well as monitoring and reporting on our credit
decisioning. We have developed statistical models that utilise both internal and external data for
the purposes of estimating ECL under IFRS 9, as well as Internal Ratings Based (IRB) models as
part of our journey to seek permission to use the IRB approach to calculate risk-weighted
exposure amounts for credit risk.
Commercial customers are also monitored through our Closer Monitoring and Early Warning
List. The objective is to identify the potential risks at an individual level before they materialise
and mature. Customers are categorised into one of four categories. The first is ‘closer
monitoring’, followed by early warning list categories one to three. Closer Monitoring and Early
Warning List categories support IFRS9 stage classification.
We monitor the effectiveness of our policies and management framework through the various
credit risk committees outlined above. These committees provide oversight of portfolio quality
and help inform on where changes to our strategy or policies are required in response to
ongoing developments in the external environment. In addition, we assess and estimate the risks
associated with climate change through developed models and we continue to develop our
quantitative capabilities to further support our longer-term objectives and increased focus in
this area.
Future focus
Our overall approach to credit risk management, level of provisions and portfolio shape has put
us in a strong position to remain resilient throughout 2024.
We remain focused on monitoring emerging trends and the impact of high inflation and interest
rate pressures on our customers. We have taken a number of steps to further enhance our
support for customers that may be facing financial difficulty through this period, and will
continue to work with our customers to support them where needed.
As we develop our future product offering, we will continue to update our credit risk policies
and processes to ensure that these remain appropriate for the developing balance sheet.
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Financial risks
Continued
Capital risk
Risk definition
The risk that financial resources are not adequate in terms of capital, in order to ensure that
these resources can cover the nature and level of the risks to which the Bank is or might be
exposed.
Risk appetite statement
The Bank has a cautious appetite for Capital Risk. The Board has determined that the Bank shall
be able to maintain a surplus of regulatory capital resources above its total regulatory capital
requirement plus public buffers, as communicated by the regulator, with a buffer to include the
amount of capital identified as required through the Bank’s ICAAP, utilising an appropriate mix
of regulatory capital.
Exposure and assessment
Capital risk exposures arise from the depletion of our capital resources which may result from:
• Increased risk-weighted assets (RWAs).
• Losses.
• Unfavourable changes to regulatory minima or other regulatory rule changes.
Our capital risk management approach is centred around ensuring we can maintain appropriate
levels of capital to meet regulatory minima and support our strategic objectives under both
normal and stressed conditions.
Capitalisation is a core component of our annual planning process, involving the creation of our
budget and Long Term Plan. This sets the forecast of our capital position through the planning
horizon and is further assessed through our ICAAP scenarios, where the scale of risks to capital
is fully considered, and allows the Bank to make informed judgements on risks, the adequacy of
capital carried to support them and the overall robustness of our capital risk management
approach. Management actions to preserve capital are identified and applied, where relevant to
those scenarios. Further details on this process are set out in our Viability statement on pages
49 and 50.
Capital risk is a core focus and our current and forecast capital position is regularly monitored
by the ALCO and ExCo and reported to ROC and the Board. This involves the production of
reports including capital forecasts for the Board and management, which are compared to our
risk appetite and limits for acceptable capitalisation.
The regulatory environment in which we operate continues to evolve. Consequently, a core
component of our capital risk thinking involves horizon scanning of prudential developments
toensure we continue to monitor potential future capital impacts and anticipate appropriate
capital resources.
Table 20: Key regulatory metrics and ratios
31 December 2023 31 December 2022
CET1 ratio 13.1% 10.3%
Tier 1 ratio 13.1% 10.3%
Total capital ratio 15.1% 13.4%
MREL ratio 22.0% 17.7%
Leverage ratio 5.3% 4.2%
Capital resources
The capital raise completed in November saw the Bank issue £150 million of new equity and
£175 million in new MREL eligible debt. We ended the year with CET1, Tier 1 and total capital plus
MREL ratios of 13.1%, 13.1% and 22.0% respectively (31 December 2022: 10.3%, 10.3% and 17.7%).
In addition to raising new capital, we also refinanced all of our existing regulatory debt.
Thisconsisted of £350 million of MREL, which now has a call date of 30 April 2028, providing
additional runway for us to deliver our strategy. Alongside this, we replaced our existing
£250million of Tier 2 debt with £150 million of new instruments.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Our capital resources as at 31 December 2023 are summarised below:
Table 21: Regulatory capital
31 December 2023
£’million
31 December 2022
£’million
Share capital – –
Share premium 144 1,964
Retained earnings 978 (1,015)
Other reserves 12 7
Intangible assets (193) (216)
Other regulatory adjustments 44 79
Total Tier 1 capital (CET1) 985 819
Debt securities (Tier2) 150 250
Total Tier 2 capital 150 250
Total regulatory capital 1,135 1,069
Capital requirement
We calculate our capital requirement in line with the regulatory requirements set out in the PRA
Rulebook. This consists of a Pillar 1 calculation of RWAs and a Pillar 2A assessment that captures
point in time risks not covered by the Pillar 1 calculation. The Pillar 2A assessment is conducted
through the ICAAP process, which is documented and approved by the Board on an annual
basis and discussed with the PRA as part of the Supervisory Review and Evaluation Process.
Table 22: Capital requirements
31 December 2023 31 December 2022
CET1 Total capital CET1 Total capital
Pillar 1 4.5% 8.0% 4.5% 8.0%
Pillar 2A 0.2% 0.4% 0.3% 0.5%
Total capital requirement 4.7% 8.4% 4.8% 8.5%
Capital conservation buffer 2.5% 2.5% 2.5% 2.5%
UK countercyclical buffer 2.0% 2.0% 1.0% 1.0%
Total (excluding PRA buffer, if applicable) 9.2% 12.9% 8.3% 12.0%
Capital landscape
Basel 3.1
The PRA has published the first of two near-final policy statements covering the implementation
of the Basel 3.1 standards for market risk, credit valuation adjustment risk, counterparty credit
risk, and operational risk, with the remaining elements of the standards expected to be
published in Q2 2024. Discovery sessions are ongoing to develop more precise estimates of the
likely impact on the Bank.
Resolvability regime
Financial institutions, with total assets greater than £15-25 billion, are subject to stringent MREL
‘bail-in’ requirements meaning that we will need to continue to hold and issue MREL eligible
debt. In order to give further effect to the resolvability regime, the Bank has established a
holding company.
Resolvability assessment framework
The Bank of England (BoE) introduced its Resolvability Assessment Framework (RAF), with
implementation for UK mid tier-firms from 1 January 2023. We fall into this category.
In light of the proportionate requirements for mid-tier firms, we conducted an internal resolution
readiness assessment during 2023. The assessment concluded that we have put in place
capabilities to facilitate the management of a potential resolution event, if required, acknowledging
that the firm’s capabilities will continue to be enhanced as the Resolvability Assessment
Framework is embedded into our business-as-usual activities. Following a review of our RAF
and the successful issuance of MREL, the BoE confirmed that the Bank is resolvable.
Ring-fencing
In 2019, legislation came into force for banks with greater than £25 billion of ‘core deposits’,
requiring them to separate their retail banking from other parts of their business including
investment and international activities. Given our current level of deposits we are not subject to
this separation (referred to as ‘ring-fencing’), although our planned level of growth could see us
become subject to it in the future. As we are purely a UK-focused retail bank the impacts of
ring-fencing should have limited consequences, beyond the costs of ensuring compliance.
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Financial risks
Continued
Risk-weighted assets
Our RWAs decreased over the course of 2023 to £7,533million (31December 2021:
£7,990million).
Table 23: RWAs
31 December 2023 31 December 2022
Exposure Risk density RWAs Exposure Risk density RWAs
Loans and advances 12,297 46% 5,597 13,102 45% 5,949
Treasury portfolio 8,770 3% 242 7,870 3% 265
Other assets 1,181 75% 886 1,147 75% 859
Total Assets 22,248 30% 6,725 22,119 32% 7,073
Off-balance sheet 79 169
Credit risk (exc. CCR) 6,804 7, 242
CCR, Market risk and
Operational risk 729 748
Total RWAs 7,533 7,990
Response
Capital risk management is focused on three key components:
• A return to sustainable profitability that will allow us to generate organic capital growth.
• The continued optimisation of our balance sheet to both ensure we are maximising our return
on regulatory capital and managing our RWAs.
• Continuing to assess the raising of external regulatory debt capital, as and when market
conditions and opportunities allow.
Sustainable profit growth
The main long-term management approach to capital is the sustainable generation of additional
capital through the accumulation of profits. The Board and ExCo are focused on ensuring the
successful delivery of a return to sustainable profitability.
Balance sheet optimisation
Another key mitigation used to manage capital risk is efficient deployment of our existing
capital resources. One of our strategic priorities is ensuring we continue to optimise our balance
sheet to ensure we maximise our risk-adjusted returns, while remaining above regulatory
requirements. This approach saw us take active measures during the year to enhance our capital
ratios by matching originations to the level of asset run-off.
Raising of additional capital
The ability to raise additional capital, as well as the associated cost, is dependent upon market
conditions and perceptions and is monitored closely..
Monitoring/reporting
We measure our capital resources in line with regulatory requirements in order to appropriately
manage our capital resources. The PRA expects prudential reporting, which includes capital
reporting, to be as rigorous as that for financial reporting. Over the past few years we have
invested in our regulatory reporting systems as well as making enhancements to our control
environment to ensure we are continuing to produce accurate and reliable capital reporting and
deliver against these expectations.
Governance Additional informationStrategic report Financial statements 144Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Liquidity and funding risk
Risk definition
Liquidity risk is the risk that we fail to meet our obligations as they fall due. Funding risk is the
risk that we cannot fund assets that are difficult to monetise at short notice (i.e. illiquid assets)
with funding that is behaviourally or contractually long-term (i.e. stable funding).
Risk appetite statement
Liquidity – The Bank has a cautious appetite for Liquidity risk. The Board has determined that
the Bank 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 the Bank’s internal risk
appetite stress test, utilising the Bank’s Liquidity Pool, having identified the Bank’s material
liquidity risks.
Funding – The Bank has a cautious appetite for Funding risk. The Board has determined that
theBank shall maintain a prudent funding profile by using stable funding to fund illiquid assets,
without undue reliance on wholesale funding markets, whilst ensuring that funding is not
inappropriately concentrated by customer, sector or term, as identified during the Bank’s
liquidity stress testing.
Encumbrance – The Bank has a cautious appetite for Encumbrance risk. The Board has
determined that encumbrance of its balance sheet should be no greater than 30% of the Bank’s
total assets in business-as-usual conditions, and unlimited in relation to any encumbrance
relating to repo or use of Bank of England facilities in order to manage through a liquidity stress
situation – and to test the adequacy of those facilities from time to time.
Exposure and assessment
Liquidity risk concerns our ability to meet short-term obligations as they fall due. This requires
liquidity management to maintain investor and market confidence in both business-as-usual and
stressed environments. Funding risk concerns any mismatch between asset liquidity and how
the assets are funded. The primary aim is to ensure assets that are slow to monetise are
supported by funding which is behaviourally or contractually stable.
At the start of October 2023, speculative media reports contributed to uncertainty around the
Bank’s capital negotiations and led to an increased outflow of customer deposits. Our strong
levels of liquidity and prudent approach meant these outflows were manageable and, as at
31December 2023 we had returned to broadly the same customer deposit levels as we reported
for the third quarter, with strong liquidity and funding regulatory ratios. This was largely
achieved by a successful targeted deposit campaign. As at 31 December 2023, our liquidity
coverage ratio was 332% (31 December 2022: 213%) and our net stable funding ratio was 145%
(31 December 2022: 134%).
We measure our liquidity and funding resources in line with regulatory requirements, with the
key metric for liquidity being the liquidity coverage ratio and for funding, the net stable funding
requirement where we remain above our minimum regulatory requirements. This is supported
by monitoring of the encumbrance ratio and other balance sheet metrics.
In order to appropriately manage our liquidity and funding resources, we run an ILAAP exercise
which considers the risks that we are exposed to in both normal and stressed conditions. The
ILAAP process also sets appropriate limits and determines the Bank’s liquidity risk appetite, and
internal liquidity stress scenario. We produce regular reports on the current and forecast level of
liquidity and capital, which are tracked against limits both at the operational level in Treasury
and at the Executive level at ALCO.
Response
Our liquidity and funding risk management is focused on three key components:
• We retain a deposit-funded approach, with a broad customer deposit base covering both
retail and commercial customers. This means we are not reliant on wholesale funding,
although we continue to utilise the Bank of England’s TFSME as an additional stable source of
funding.
• We continue to maintain prudent liquidity levels through the holding of high-quality liquid
assets in the form of investment securities with strong credit ratings as well as cash balances
held at the Bank of England.
• We monitor and manage the behavioural maturity of our assets and liabilities on an ongoing
basis to ensure we are not taking undue risk.
• We monitor encumbrance levels and contingent funding capacity.
Deposit-funded approach
We aim to attract service-led core deposits which are less sensitive to competition within the
deposit market. At 31 December 2023, 43% of our deposits came from commercial customers
(31 December 2022: 51%) with the remaining 57% (31 December 2022: 49%) coming from retail
customers. Additionally, 36% of deposits at year end 31 December 2022: 49%) 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
internal liquidity stress test ensures that we comply with our own risk appetite as well as
regulatory requirements.
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Financial risks
Continued
Table 24: Contractual maturity (audited)
Table 24 sets out the maturity structure of our assets and liabilities, by their earliest possible contractual maturity date. The contractual maturity will differ 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, such deposits are
repayable on demand or at short notice. 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, but may be redeemed or remortgaged earlier. The total balances set out in the analysis do not reconcile with the carrying amounts
asdisclosed in the consolidated balance sheet. The difference arises from the maturity analysis incorporating all the expected future cash flows (including interest), on an undiscounted basis.
31 December 2023
Group
Carrying
value
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
Cash and balances with the Bank of England 3,891 3,891 – – – – – – 3,891
Loans and advances to customers 12,297 – 562 486 911 5,078 15,811 381 23,229
Investment securities 4,879 – 454 117 397 4,110 52 57 5,187
Other assets 1,178 – – – – – – 1,178 1,178
Total assets 22,245 3,891 1,016 603 1,308 9,188 15,863 1,616 33,485
Deposits from customers (15,623) (13,430) (391) (398) (931) (484) – (67) (15,701)
Deposits from central banks and repurchase agreements (4, 241) – (347) (551) (67) (3,621) – – (4,586)
Debt securities (694) – – (35) (42) (829) (160) – (1,066)
Other liabilities (553) – (6) (6) (11) (107) (238) (319) (687)
Total liabilities (21,111) (13,430) (744) (990) (1,051) (5,041) (398) (386) (22,040)
Equity (1,134) – – – – – – (1,134) (1,134)
Total equity and liabilities (22,245) (13,430) (744) (990) (1,051) (5,041) (398) (1,520) (23,174)
Derivative cashflows – 2 – (3) 37 1 – 37
Cumulative liquidity gap (9,539) (9,265) (9,652) (9,398) (5,214) 10,252
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Table 24: Contractual maturity (audited) Continued
31 December 2022
Group
Carrying
value £’million
Repayable
on demand
£’million
Up to
3 months
£’million
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
No contractual
maturity
£’million
Total
£’million
Cash and balances with the Bank of England 1,956 1,956 – – – – – – 1,956
Loans and advances to customers 13,102 – 573 507 942 5,472 17,525 341 25,360
Investment securities 5,914 – 576 206 951 4,312 164 59 6,268
Other assets 1,147 – – – – – – 1,147 1,147
Total assets 22,119 1,956 1,149 713 1,893 9,784 17,689 1,547 34,731
Deposits from customers (16,014) (15,310) (139) (136) (201) (162) – (75) (16,023)
Deposits from central banks and repurchase agreements (4,038) – (215) (41) (147) (4,147) – – (4, 550)
Debt securities (571) – – (272) (17) (383) – – (672)
Other liabilities (540) – (6) (6) (12) (111) (263) (292) (690)
Total liabilities (21,163) (15,310) (360) (455) (377) (4,803) (263) (367) (21,935)
Equity (956) – – – – – – (956) (956)
Total equity and liabilities (22,119) (15,310) (360) (455) (377) (4,803) (263) (1,323) (22,891)
Derivative cashflows – (2) (1) (3) – – – (6)
Cumulative liquidity gap (13,354) (12,567) (12,310) (10,797) (5,816) 11,610
Monitoring/reporting
We consider the effective and prudent management of liquidity to be fundamental to our ongoing resilience and viability. The Board has overall responsibility for establishing and maintaining an
adequate risk management framework, including risk appetites that enable the management of our liquidity and funding risks. We are committed to ensuring that at all times we have sufficient
liquidity resources – in terms of both quantity and quality – to ensure we can meet payments as they fall due.
The Treasury function has responsibility for our compliance with liquidity policy and strategy. We have a dedicated prudential risk team who independently monitor our liquidity and funding risk
daily including ensuring compliance with the policies we have developed. A regulatory reporting team also monitors compliance with relevant metrics.
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Financial risks
Continued
Market risk
Risk definition
The risk of loss arising from movements in market prices. Market risk is the risk posed to
earnings, economic value or capital that arises from changes in interest rates, market prices or
foreign exchange rates.
Risk appetite statement
Our market risk appetite is determined by reference to a number of sub-risk appetites:
Earning sensitivity – We have a low appetite for earnings risk, with the Board determining a limit
calibrated to ensure net interest income does not exceed an amount recommended and
scrutinised by the ALCO and approved by ROC. The limit is calibrated using a 2% instantaneous
shock in both directions.
Economic value sensitivity – We have a low appetite for economic value risk, with the Board
determining a limit calibrated to ensure that a change to the present value of our balance sheet
does not exceed an amount as recommended and scrutinised by ALCO and approved by ROC.
The limit is calibrated by calculating the impact of a 2% instantaneous shock in both directions.
Revaluation risk – We have a low appetite for revaluation risk, with the Board prescribing that
we should avoid situations where the potential losses caused by changes in market prices shall
not exceed capital held under standard risk weights, taking account of any offsets, determined
by our Revaluation Risk stress scenario.
Foreign exchange risk – We have no appetite for foreign exchange risk, with the Board
determining that exposures in foreign currencies should not represent a material portion of our
capital resources.
Exposure and assessment
We do not have a trading book and we do not actively seek to create value through taking
interest rate positions. While we support our customers in making payments or hold accounts in
foreign currency, we actively avoid exposing our own balance sheet to foreign exchange risk.
The primary source of our market risk exposure is structural interest rate risk in the banking
book mismatch between the fixed rate assets and liabilities and any differences in bases. Interest
rate risk in the banking book crystallises in, and is measured through, the sensitivity of our
current and future net interest income and our economic value to movements in market interest
rates. During 2023, we reached the peak of the current interest rate cycle and at year end
remain well within our risk appetite and supervisory outlier tests.
The Board is responsible for setting market risk appetite. Market risk is mitigated through a risk
management framework that allows it to be monitored and managed by first line management
and second line risk, with oversight from ALCO. Accordingly, ALCO ensures that steps are taken
to identify, measure, monitor and control the interest rate risk in the banking book in line with
the approved strategies and policies.
Management limits are set at the ALCO for economic value and net interest income sensitivity to
ensure prompt action and escalation. Limits and the relevant metrics are also reported to ROC
and the Board.
The Teasury function has responsibility for managing market risk within our market risk policy
and strategy. We have a dedicated prudential risk team who independently monitor our market
risk daily including ensuring compliance with the policies we have developed. The Prudential risk
function runs additional interest rate risk simulations monthly to assess other threats that may
not be evident in the standard parallel shock metrics or supervisory outlier tests.
Response
We have a low appetite for those market risks which we do take, with clear limits set for net
interest income and economic value. These limits are sufficient to allow proper management of
operational and financial hedging, but low enough to prevent active use of open positions.
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 derivatives. We enter into derivatives only for hedging
purposes and not as part of customer transactions or for speculative purposes. Our treasury
andprudential risk teams work closely together to ensure that risks are identified and managed
appropriately – and that we are well-positioned to avoid losses outside our appetite, in the event
of unexpected market moves.
Foreign exchange exposure
We have very limited exposure to foreign exchange risk. Foreign currency denominated assets
and liabilities are matched off closely in each of the currencies we operate, and we eliminate our
foreign exchange exposure as far as is practical on a daily basis. In any event the risk is strictly
capped at 2% of our capital base. We offer business current accounts in foreign currency and
foreign exchange facilities to facilitate customer requirements only.
Monitoring/reporting
We measure interest rate risk exposure using methods including the following:
• Interest rate gaps: calculating the net difference between total assets and total liabilities
across a range of time buckets.
• Economic value sensitivity: calculating repricing mismatches across our assets and liabilities
over the horizon of our balance sheet and then evaluating the change in value arising from an
instantaneous 2% change in the yield curve in both directions, taking into consideration any
embedded customer optionality. Our economic value sensitivity risk appetite scenario is
based on an instantaneous parallel rate movement of 2% at all maturities, which is widely
considered severe but plausible. Additionally, we evaluate the PRA’s outlier test in line with
regulatory requirements.
• Net interest income sensitivity: calculating repricing mismatches across our assets and
liabilities over a one-year horizon and then evaluating the change in net income arising from
an instantaneous 2% change in the yield curve in both directions. Our net interest income risk
appetite scenario is based on an instantaneous parallel rate movement of 2% at all maturities,
which is widely considered severe but plausible. We also assess basis risk by considering
divergences between the Bank of England base rate and the Sterling Overnight Index Average
(SONIA), which replaced the London Inter-Bank Offered Rate (LIBOR) from January 2022.
Governance Additional informationStrategic report Financial statements 148Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Financial risks
Continued
Interest rate risk
Table 25 sets 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 prepayments in line with our policy.
A positive interest rate sensitivity gap exists when more assets than liabilities reprice during a given period. A positive gap 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 periods. The converse is true for a negative
interest rate sensitivity gap.
Table 25: Repricing analysis (audited)
31 December 2023
Up to
3 months
£’million
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
Total
£’million
Cash and balances at central banks 3,817 – – – – 74 3,891
Loans and advances to customers 3,803 860 1,499 6,063 71 1 12,297
Investment securities 2,029 3 154 2,642 51 – 4,879
Other assets – – – – – 1,178 1,178
Total assets 9,649 863 1,653 8,705 122 1,253 22,245
Deposits from customers (6,829) (734) (1,607) (5,897) (556) – (15,623)
Deposits from central banks and repurchase agreements (4, 241) – – – – – (4, 241)
Debt securities – – – (544) (150) – (694)
Other liabilities – – – – – (553) (553)
Total liabilities (11,070) (734) (1,607) (6,441) (706) (553) (21,111)
Equity (23) (23) (47 ) (374) – (667) (1,134)
Total equity and liabilities (11,093) (757) (1,654) (6,815) (706) (1,220) (22,245)
Interest rate derivatives (145) (2) – (3) 150 – –
Interest rate sensitivity gap (1,589) 104 (1) 1,887 (434) 33 –
Cumulative gap (1,589) (1,485) (1,486) 401 (33) – (4,192)
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Financial risks
Continued
Table 25: Repricing analysis (audited) Continued
31 December 2022
Up to
3 months
£’million
3 to 6 months
£’million
6 to 12 months
£’million
1 to 5 years
£’million
Over 5 years
£’million
Non-interest
bearing
£’million
Total
£’million
Cash and balances at central banks 1,881 – – – – 75 1,956
Loans and advances to customers 4,154 915 2,010 5,850 173 – 13,102
Investment securities (AC & FVOCI) 2,163 – 539 3,052 160 – 5,914
Other assets – – – – – 1,147 1,147
Total assets 8,198 915 2,549 8,902 333 1,222 22,119
Deposits from customers (6,186) (613) (1,154) (7,456) (605) – (16,014)
Deposits from BoE and repos (3,978) – (60) – – – (4,038)
Debt – (249) – (322) – – (571)
Other liabilities – – – – – (540) (540)
Total liabilities (10,164) (862) (1,214) (7,778) (605) (540) (21,163)
Equity (760) (10) (21) (165) – – (956)
Total equity and liabilities (10,924) (872) (1,235) (7,943) (605) (540) (22,119)
Interest rate derivatives (68) 40 (62) 105 (15) – –
Interest rate sensitivity gap (2,794) 83 1,252 1,064 (287) 682 –
Cumulative gap (2,794) (2,711) (1,459) (395) (682) – (8,041)
Table 26 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.
This is a hypothetical scenario based on a constant balance sheet as well as a full pass through of the increase to all of our variable rate assets and liabilities.
Table 26: Interest rate sensitivity (audited)
200bps increase
£’million
200bps decrease
£’million
At 31 December 2023 (13.8) 14.3
At 31 December 2022 (8.3) 8.4
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Horizon scanning
We continue to identify emerging trends and typologies through conducting horizon scanning
activity, through information obtained from investigative and intelligence teams and through
attending key industry forums (or associations) such as those hosted by UK Finance. As
required, we continue to update our control framework to ensure emerging risks are identified
and mitigated.
Resourcing and training
Resourcing continues to be a significant focus to ensure our Financial Crime Framework
is implemented effectively. All colleagues have a key role to play in the detection and
management of financial crime risk. To this extent, all colleagues receive financial crime training,
ensuring they are able to meet their personal obligations as well performing effectively in role.
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 all applicable sanctions regimes. We continue to invest in our sanctions control
framework and keep under review the effectiveness of controls we have in place in order to
ensure that sanctions risk is managed in line with risk appetite. We will not tolerate any
deliberate breach of financial crime laws and regulations (including sanctions) that apply to our
business and the activity we undertake.
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 support the implementation and ongoing
monitoring of these requirements into our systems and controls.
Anti-bribery and corruption and anti-tax evasion compliance
We are committed to acting professionally, fairly and with integrity in all our business dealings
and relationships and comply fully with the UK Bribery Act 2010 and Criminal Finances Act 2017.
We do not give or receive improper financial or other benefits in our business operations, nor do
we help facilitate tax evasion.
Monitoring/reporting
We monitor compliance with policies and standards through a range of activities completed by
specialist colleagues. These include 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. The results of these reviews and the status of follow
up actions are escalated through our governance bodies.
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 and remediation activity is escalated and tracked through
our risk committees.
Future focus
We are committed to safeguarding the Bank and our customers from financial crime. The FCA is
currently undertaking enquiries regarding our financial crime systems and controls. We continue
to engage and co-operate fully with the FCA in relation to these matters, and the FCA’s
enquiries remain ongoing.
Non-financial risk covers the remaining categories of risk
which have the potential to impact the Bank’s operations,
service quality and ability to operate in a safe and
compliant way. Non-financial risks include Financial crime
risk, Operational risk, Conduct risk, Regulatory risk, Legal
risk, Model risk and Strategic risk.
Financial crime
Risk definition
Financial crime risk is the risk that Metro Bank’s products and service offerings will be used to
facilitate financial crime. Financial crime risks include money laundering, violations of sanctions,
bribery and corruption, facilitation of tax evasion and terrorist financing.
Risk appetite statement
We have a low appetite for customer relationships or activity that pose a high financial crime risk
and have no appetite for customer relationships or activity that violate our sanctions obligations.
The nature of our business model as a UK retail bank inherently exposes us to financial crime risk
and as a result of this exposure, strong and effective controls are required to mitigate this. We
have defined a set of quantitative and qualitative key risk appetite metrics against which we
monitor performance. We do not accept customers outside of our financial crime risk appetite
and likewise where customers are reassessed and found to be outside of appetite (i.e. where the
risks are too great to manage effectively) they are exited.
Exposure and assessment
Failure to prevent financial crime may result in harm to our customers, the Bank and third
parties. In addition, non-compliance with regulatory and legal requirements may result in
enforcement action which will have an adverse effect on Metro Bank from a financial and
reputational perspective.
Our overall inherent financial crime risk remains the same as last year and continues to be
medium based on our 2023 risk assessment (anti-money laundering/combating terrorist
financing, anti-tax evasion facilitation and sanctions inherent risks are rated medium, anti-
bribery and corruption inherent risk is rated low).
Response
We continue to deliver enhancements to our financial crime control framework to ensure that it
remains fit for purpose, identifying and mitigating financial crime risk as well as delivering our
financial crime strategy.
Investment in our systems and controls
We continued to deliver strategic enhancements to our financial crime systems throughout
2023 with equal focus on embedding previously implemented controls, as well as introducing
new controls to strengthen our control framework.
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Non-financial risks
Continued
Operational risk
Risk definition
The risk that events arising from inadequate or failed internal processes, people and systems, or
from external events cause regulatory censure, reputational damage, financial loss, service
disruption and/or detriment to our FANS.
Risk appetite statement
We maintain a cautious appetite for operational risk and aim to minimise incidents, losses and
adverse customer impacts arising from operational risk issues. We do this 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. Operational risk
eventsand losses are recorded and assessed, corrective actions completed and steps taken to
avoid recurrence.
Exposure and assessment
We operate with both a physical and a digital presence and are exposed to a broad range of
operational risks across our distribution channels, businesses and functions. Operational
incidents and other risk events have the potential to cause service disruption and outages,
impacting internal processes, customers, as well as leading to financial losses.
Operational risks arise from day-to-day business activities and the Bank’s operational resilience
is an outcome that we actively monitor and oversee, including through the identification of
important business services and setting of impact tolerances. Our business model, activities and
processes have remained broadly consistent with those of last year and as such our material
operational risk exposures are largely unchanged.
Our Operational Risk Management Framework sets the approach we take to the management
of operational risks including the performance of Risk and Control Self-Assessments,
consideration of a variety of disruption scenarios and recording and management of incidents
and resultant operational risk losses. Operational risk is overseen by the Chief Risk Officer and
teams in the first and second lines of defence, monitored via reporting to Business Risk
Committees, the Non-Financial Risk Oversight Committee run by the second line, ERC and ROC.
Top operational risk exposures through the course of 2023 have included:
Information Security and Cyber – The risk that the confidentiality, integrity or availability of our
information, data and / or systems are compromised or not compliant with regulatory
requirements.
Technology – The risk of inadequate performance of IT infrastructure.
Data – The risk of the inability to identify and maintain data within agreed data standards.
Fraud – The risk of loss due to colleagues, customers or third parties carrying out fraud.
Third Party – The risk that reliance on third parties impairs the bank’s performance/operational
resilience, including the ability to provide excellent customer service and to manage risk
effectively.
People – The risk of the inability to attract, retain or engage colleagues who have the right
capabilities to carry out the required roles within the Bank.
Response
We aim to minimise incidents and losses arising from operational risk events by maintaining a
resilient infrastructure, including robust systems and employing and training the right
colleagues. We consider and prepare for a range of potential disruption events and when they
do occur, we respond effectively and ensure that operational risk incidents and losses are
recorded and assessed, and corrective steps taken to avoid recurrence. In accordance with
regulatory requirements, we hold capital appropriate to potential severe yet plausible
operational risk exposures, informed by an assessment of a range of operational risk scenarios.
We have put in place detailed policies, standards and controls to mitigate the variety of
operational risks to which we are exposed. These are designed to both minimise 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.
Responses to our top operational risk exposures have included:
Information Security and Cyber
Refreshed this year, our Information Security Policy sets out that all colleagues have an
important responsibility to safeguard the systems and sensitive information we hold. We
continuously invest in our cyber and information security infrastructure to identify and respond
to threats, protect customer data and minimise the risk of disruption. We recognise the dynamic
cyber threat landscape in which we operate and the risks that come from increased digitisation,
responding by continuing to enhance the control environment and operating advanced tools to
identify and resolve potential vulnerabilities.
Technology
We continue to invest and improve our key technology capabilities that underpin the Bank’s
customer service proposition and maintain our operational resilience. The Bank’s technology
estate is continuously reviewed to ensure it remains fit for purpose and work has been
progressed to deliver required and strategic updates, risk and performance reviews of our
material third-party technology providers and independent assessment of our technology
resilience. We continue to patch and upgrade our systems and platforms and keep an open
dialogue with our regulators on actual or potential disruption events.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Continued
Data
The effective use and maintenance of our data underpins the success of our strategy as well as
our ability to deliver good customer outcomes. This year our Data Management Policy has been
comprehensively refreshed, reflective of good practice and designed in line with regulatory
requirements concerning the creation, storage, distribution, usage and deletion of data.
Ownership and accountability for data is defined and controls are in place to safeguard its access
and use. A dedicated Data Governance forum is in place to oversee adherence to standards and
data management maturity, with representatives from across the three lines of defence.
Fraud
The safety and security of our customers and their money is of the highest importance. Our
dedicated teams monitor the rapidly evolving threats posed to both ourselves and our customers
and quickly respond by deploying a range of preventative and detective measures. Authorised
push payment fraud remains an increasing threat across the banking industry and we
continuously review and enhance our prevention and detection capabilities in response, notably
implementing Confirmation of Payee for our customers in 2023. We share fraud prevention
trends and best practice via our various communication channels and pay close attention to
supporting customers that fall victims of fraud to ensure they receive a good outcome.
Third Party
We operate in close collaboration with numerous third parties, with those relationships
underpinning many of our operational processes and customer service offering. Our
Procurement and Supplier Risk Policy sets out our robust approach for safely managing our
third-party relationships, including the potential impacts to our important business processes.
Our supplier risk team provides ongoing oversight and monitoring of our material third parties in
line with regulatory requirements and undertakes independent assurance as required.
People
Our people are central to our community banking strategy, building strong relationships by
living our AMAZEING values, meeting and exceeding customer expectations. Our dedicated
people team provides business support in resource management, talent identification and
training and the Bank has continued to actively manage its resource mix to ensure we have the
right colleagues, in the right place, at the right time.
Monitoring/reporting
Material operational risk events are identified, reviewed and escalated in line with criteria set out
in the Enterprise and Operational Risk Management Frameworks. Incidents and losses are
recorded and root-cause analysis is undertaken with action plans implemented to prevent
recurrence and continually improve our processes. Quantitative metrics are used to measure our
material operational risks and assess our exposure against our stated risk appetite. We conduct
regular operational risk scenario workshops to identify severe yet plausible events which could
impact us. This enables us to quantify the potential losses that such events could cause and hold
sufficient capital against them, as well as highlighting potential areas for ongoing enhancements
to our operational risk capabilities.
Business Risk Committees manage operational risks at business area level, supported by forums
and working groups. Key risk indicators are in place to monitor our operational risk exposures
against stated risk appetite and these are reported to the Non-Financial Risk Oversight
Committee which further escalates to ERC and ROC where appropriate.
Future focus
Work to further mature our management of operational risk will continue in 2024. Making use of
tooling introduced and embedded over the course of the year, increased use of data driven
insights will empower business teams to further refine their risk assessments and enhance and
streamline the control environment. Our operational risk profile will remain under close review as
the Bank implements its strategy, with particular focus on increased use of technology and
automation.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Continued
Conduct risk
Risk definition
The risk that our behaviours or actions result in poor outcomes or detriment to customers and/
or undermines market integrity.
Risk appetite statement
We are built around a culture of supporting our customers, offering them a range of relatively
simple retail products. We have a low appetite for conduct risk and seek to minimise risks which
may result in poor outcomes or lead to customer detriment. Where poor outcomes are
identified they must be remediated effectively to minimise risk, prevent recurrence, reduce
customer harm, and reasonably avoid foreseeable harm.
Exposure and assessment
We are built on a people-focused culture of supporting our customers, offering them a range of
relatively simple retail products. We remain exposed to conduct risk resulting from of our
normal day-to-day business activities and the provision of services and products to customers.
Our key focus remains on those customers with additional support needs who may be
increasingly vulnerable following specific life events, or facing financial difficulties due to the
cost-of-living pressures, or who may be the victim of fraudulent activity.
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 Audit Committee on an annual
basis, independently assesses our ability to appropriately mitigate this risk.
Response
We have enhanced our conduct risk management framework to improve oversight of the
conduct agenda and have implemented programmes to address the key drivers of potential
customer harm to further support the delivery of good customer outcomes in line with the
requirements of Consumer Duty.
• 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 ERC, ROC and the Board.
• Oversight and ongoing review of conduct risks and issues in relevant business risk and
oversight risk committees, including progress against key customer remediation projects,
conduct-related regulatory change initiatives, complaints, vulnerable customers and arrears
management.
• Maintenance of proactive and coordinated engagement with our regulators around key
customer initiatives.
• 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 good customer
outcomes, supported and embedded through training.
• A risk-based assurance framework, designed to monitor compliance with regulation and
assess customer outcomes.
Monitoring/reporting
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
regulators, as well as a defined set of Board-approved risk appetite metrics relating to
complaints, arrears management, product performance, colleague training and customer
outcome delivery.
A clear governance structure is in place which enables escalation of conduct risks from the first
line risk committees through to the relevant second line oversight committees, including
tracking and challenging adherence to our risk appetite through our Bank Risk Report. ERC,
ROC and the Board 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 frameworks.
Future focus
In line with the requirements of Consumer Duty, we will continue to ensure our products and
services meet customer expectations and can deliver good outcomes, enabling customers to
pursue their financial objectives. We will continually assess our internal processes in line with
regulatory changes, ensuring we meet our regulatory requirements and can reasonably prevent
customer harm and avoid foreseeable harm.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Non-financial risks
Continued
Regulatory risk
Risk definition
The risk of regulatory sanction, financial loss and reputational damage as a result of failing to
comply with relevant regulatory requirements.
Risk appetite statement
We have a low appetite for regulatory risk and seek to minimise this risk by maintaining robust
systems and controls that are designed to meet existing regulatory requirements and to ensure
we comply with future changes to the regulatory landscape.
Exposure and assessment
We remain exposed to regulatory risk arising from our normal day-to-day business activities, as
well as significant ongoing and new regulatory changes. We manage regulatory risk through a
combination of clearly defined risk frameworks covering our principal risks, and a comprehensive
set of risk appetite measures and limits, together with appropriate compliance policies and
standards. We undertake a range of mitigating actions to manage regulatory risk, including a
risk-based assurance programme designed to assess areas of the control framework
underpinning regulatory compliance, oversight of key regulatory developments and proactive
and coordinated engagement with our key regulators. Our risk oversight committees monitor
and assess compliance with our regulatory requirements.
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 risk appetite metrics
relating to our principal risks. This includes measures around major/critical regulatory, financial
crime and operational impacts, impairment provisioning, credit, model and capital risk exposure,
regulatory breaches, high risk assurance and audit findings, incidents and implementation of
material regulatory change.
Response
Investment in our systems and controls
We continue to invest in and develop our core systems and controls to enable us to meet
existing and new regulatory requirements. Key areas of focus in 2023 included:
• Financial crime.
• Outsourcing and third-party management.
• Operational resilience.
• Open banking.
• Implementation of the Holding Company.
• Consumer Duty.
• New Payment requirements (confirmation of payee).
Monitoring/reporting
Horizon scanning
We undertake ongoing horizon scanning to identify and address upcoming regulatory change.
As part of this process, we engage proactively with our regulatory authorities as well as industry
bodies in respect of any proposed changes. Additionally, a clear governance structure is in place
which enables escalation of regulatory risks 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 our Risk Report. ERC, ROC and the Board in turn monitor and oversee our
focus on maintaining regulatory compliance. As well as our Risk Report, this also includes
periodic reporting on regulatory themes and key focus areas aligned to the regulator’s strategic
priorities, regulatory changes on the horizon and the regulatory environment, alongside
supporting key risk appetite measures and Board-approved frameworks.
Future focus
We continue to place significant focus on overseeing and ensuring compliance with regulatory
requirements. We undertake regular reviews of our risk frameworks, appetite limits and
monitoring processes to ensure that these remain up to date and reflect current regulatory
priorities. During 2024, we will focus on key developments such as Basel 3.1, enhancements
tointernal control requirements under the revised UK Corporate Governance Code and
Consumer Duty.
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Non-financial risks
Continued
Legal risk
Risk definition
The risk of loss, including to reputation, that can result from lack of awareness or
misunderstanding of, ambiguity in or reckless indifference to, the way the law applies to the
Directors, the business, and its relationships, processes, products and services.
Risk appetite statement
We have a low appetite for legal risk, limited to those events where there is a minimal chance of
material financial, reputational or commercial negative consequences.
Assessment and exposure
We remain exposed to a range of legal risks in relation to our normal business activities. These
risks may arise from:
• Defective contracts.
• Claims and litigation against us.
• Failure or inability to take appropriate measures to protect intellectual property.
• Failure to comply with specific legislation (e.g. Market Abuse).
Given the pervasive and fundamental nature of legal risk, rather than having a separate
framework, the methodology for the robust management of legal risk is set out in reporting to
ERC and ROC.
Response
We minimise legal risk via a range of mitigants, including:
• In house legal expertise, maintained via appropriate training and development and specialist
recruitment.
• Selective use of expert external legal advice via an approved panel of lawyers.
• Appropriate policy documentation and training related to specific legal requirements.
• Monthly reporting of metrics to measure compliance with our legal risk appetite.
Monitoring/reporting
A range of key risk indicators are used to measure our exposure to legal risk, including the risk of
defective contracts and claims made against us. Details of our material legal and regulatory
matters can be found in note 32 to the financial statements on page 213.
Future focus
We will continue to ensure that we work within legal parameters for all aspects of our activities
and measure compliance with risk appetite. Further to the enhancements made to the
Enterprise Risk Management Framework in respect of legal risk, further refinement to the suite
of key risk indicators is planned in 2024.
Model risk
Risk definition
The risk of potential loss and regulatory non-compliance due to decisions that could be
principally based on the output of models, due to errors in the development, implementation,
oruse of such models.
Risk appetite statement
We adopt a cautious appetite for risk due to errors in 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 exposure
We use models to support a broad range of business and risk management activities,
includinginforming business decisions and strategies, measuring, and mitigating risk, valuing
exposures (including the calculation of impairment), conducting stress testing, and assessing
capital adequacy.
Model risk is assessed via our Model Risk Index and underlying key risk indicators, which include
monitoring of the materiality and complexity of our models.
Model risk remains stable, while closely managed, with ongoing enhancements to risk
governance, risk appetite metrics and scope having been implemented. This has in turn helped
to mitigate potential increased risk from the impacts and uncertainties arising from
macroeconomic challenges.
Response
The main mitigant to model risk is the robust governance process, including two dedicated
model committees, the Model Oversight Committee, and the Model Governance Committee.
There is also an expert panel to opine on contentious issues. The committees monitor the
effectiveness of the Model Risk Management Framework. This includes a review of findings in
relation to specific modelling processes, escalating to ERC and ROC as appropriate.
We have in place a well-qualified independent model validation function that performs model
validations prior to model implementation, when a model is changed and on a periodic basis.
Monitoring/reporting
Our Model Risk Management Framework sets out the roles and responsibilities of the various
stakeholders, underpinned by robust governance of model risk supported by model
development, monitoring, validation, implementation and risk appetite standards.
Exposure against the key risk indicators is reported to the model risk committees, ERC and ROC
on a monthly basis and periodic, more detailed assessments are also reported through the risk
governance structure.
Future focus
We continue to enhance and evolve governance of model risk. Whilst we are a standardised
bank and do not need to comply by the regulatory deadline, we are working towards complying
with the principles of the Bank of England Supervisory Statement SS1/23 ‘Model risk
management principles for banks’.
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Strategic risk
Risk definition
The risk of having an insufficiently defined, flawed or poorly implemented strategy, a strategy
that does not adapt to political, environmental, business and other developments and/or a
strategy that does not meet the requirements and expectations of our stakeholders.
Risk appetite statement
We have not set a separate risk appetite for strategic risk and instead monitor it via the full
rangeof reporting via our governance structure and direct risk input into the formulation of
ourstrategy and Long Term Plan, including providing a risk review to support Board approval.
Assessment and exposure
During 2023, we remained focused on the execution of our strategy with the return to
profitability in the first half of the year demonstrating the strengths of our community banking
strategy. The second half of the year saw a combination of increased capital requirements
together with a setback in our ambition to achieve AIRB accreditation for residential mortgages.
These factors put pressure on our capital position and restrained the levels to which we were
able to grow capital organically. Despite challenging market conditions, we were successful in
delivering a £925million capital package which included the raising of new capital as well as the
refinancing of our existing regulatory debt. We now need to successfully execute on the
opportunities the capital affords us and meet stakeholder expectations.
Response
Strategic risk is considered in everything we do, as having a clear and successful strategy is
keyto the Bank achieving its goals. This includes reporting our success in relation to our
competitors, our monitoring and governance of ESG-related issues and requirements and an
ongoing assessment of the geopolitical and macroeconomic landscape we operate within.
We continue to oversee the development and execution of our strategy on an ongoing basis
through regular in-depth management reviews of business performance and change delivery,
oversight of strategic risks through risk governance and regular updates presented to the Board.
The Board undertakes an annual review of the Bank’s strategy and Long Term Plan which is
supported by risk assessment reviewed at the Risk Oversight Committee. During 2023, we have
continued to strengthen our cost management discipline including prioritisation and delivery of
technology change through further embedding and optimising Agile ways of working.
Monitoring/reporting
Strategic risk is addressed through the Board-approved strategy and long-term financial plan.
We consider strategic risk as part of ongoing risk reporting and an annual review of our strategy
and Long Term Plan, as well as ongoing monitoring and management via our risk governance
structure and ExCo oversight of execution, including oversight and challenge by the second line
of defence. In addition, the emerging risks the Bank faces are assessed on at least a six-monthly
basis, including strategic risks.
Future focus
We continue to see a high level of volatility in the external environment, with political and
economic turbulence in the UK and beyond. The likelihood of a general election, ongoing
cost-of-living pressures and a subdued UK economy, as well as continuing conflicts in both
Ukraine and the Middle East, provide a challenging backdrop for the execution of strategy.
Monitoring of performance will remain heightened with close Board oversight of the efficacy
ofthe strategy and its implementation. This will be supported by ongoing risk assessment to
support active management of the evolving risk profile, with oversight from the Risk Oversight
Committee. The Bank continues to conduct horizon scanning against emerging risks which may
have a severe impact and will adjust its approach accordingly.
Non-financial risks
Continued
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Financial statements
In this section
159 Independent auditors’ report to the members of
Metro Bank Holdings PLC
167 Consolidated statement of comprehensive income
168 Consolidated balance sheet
169 Consolidated statement of changes inequity
170 Consolidated cash flow statements
171 Notes to the consolidated financial statements
219 Company balance sheet
220 Company statement of changes inequity
221 Company cash flow statements
222 Notes to the company financial statements
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Independent auditors’ report
to the members of Metro Bank Holdings PLC
Report on the audit of the financial statements
Opinion
In our opinion, Metro Bank Holdings 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 2023 and of the group’s profit 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 as applied in accordance with the provisions of the Companies Act 2006; 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, which comprise:
the Consolidated and Company balance sheets as at 31 December 2023; the Consolidated
statement of comprehensive income; the Consolidated and Company statements of changes
inequity; the Consolidated and Company cash flow statements 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
Context
The company was incorporated on 29 September 2022. On 19 May 2023, the company listed on
the London Stock Exchange and acquired 100% of the ordinary share capital of Metro Bank PLC.
The acquisition has been accounted for using merger accounting and therefore this is our first
audit of the new group. The comparative numbers in the financial statements were audited as
part of our audit of Metro Bank PLC for the year ended 31 December 2022.
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 components 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. For our group audit, we identified two financially significant
components, which are Metro Bank Holdings PLC (the company) and Metro Bank PLC.
Weperformed other procedures including testing information technology general controls,
analytical procedures and tests of detail over 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 on loans and advances to
customers(group).
• Carrying values of non-financial assets (group).
• Carrying value of investment in subsidiary (parent).
Materiality
• Overall group materiality: £11.4m based on 1% of total equity.
• Overall company materiality: £10.0m based on 1% of total equity.
• Performance materiality: £8.5m (group) and £7.5m (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.
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.
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Key audit matter How our audit addressed the key audit matter
Determination of allowance for Expected Credit Losses on loans and
advances to customers (group)
Refer to page 70 (Audit Committee report), Note 12: Loans and advances to
customers and Note 30: Expected credit losses.
The calculation of the allowance for expected credit losses (ECL) requires
management to make a number of significant judgements and estimates. In
2023, the level of estimation uncertainty and judgement remained high as the
UK experienced continued high levels of inflation and increases in interest rates.
The uncertainty driven by forecast weak economic growth in 2024 and 2025 has
increased the amount of judgement required in determining ECL.
Management determines the amount of ECL using a number of complex models.
In addition, a number of post model overlays are required where the models do
not capture all relevant risks. The overlays included adjustments in relation to the
impact of inflation on customer affordability and commercial borrowers which
was determined either not to be fully reflected in the economic forecasts or where
the modelled output did not fully reflect the impact on credit risk.
Across the in-scope portfolios, we identified heightened audit risk in determining
the ECL for the following portfolios: Retail Mortgages, Consumer unsecured
(specifically for RateSetter loans) and Commercial (excluding the small asset
finance and invoice finance portfolios, and government backed loans).
Our work focused on the following key assumptions and judgements:
• Forward-looking economic assumptions used in the models, and the weighting
selected by management. Management uses a third party expert to determine
the economic assumptions;
• Judgements involved in creating post model overlays to change modelled
outputs and the application of those adjustments in response to heightened
economic uncertainty and the impact of inflation and higher interest rates;
• Judgements exercised in determining whether a significant increase in credit
risk (‘SICR’) should be recognised for Commercial loans where staging is based
on a qualitative assessment of credit risk; and
• Judgements applied by management in estimating stage 3 individual
impairment allowances, specifically in relation to the valuation of collateral.
We evaluated the design and implementation of key controls but did not test the operating effectiveness of controls as
we did not plan to rely on them. We performed a fully substantive audit.
We engaged the support of our credit modelling specialists and performed the following substantive audit
procedures in order to assess the performance, methodology and accuracy of the ECL models. We also assessed
the appropriateness of management’s key judgements and assumptions in the context of the current economic
environment and our wider industry experience.
Forward looking information and multiple economic scenarios
We used our economic analysis tool developed by our economic and modelling experts utilising data from the Bank of
England, HM Treasury and Consensus Economics. This tool assessed the reasonableness of management’s economic
scenarios and associated weightings, giving specific consideration to the current economic environment.
Where economic inputs fell outside of a reasonable range, we ensured that a suitable post model overlay was recorded.
Management kept their scenario weightings consistent with 2022 in response to the current economic risks and slow
recovery of the UK economy.
We evaluated whether the scenario weights appropriately captured the economic uncertainty created by the economic
risks, high inflation and interest rates, and the weak growth of the UK economy.
Model methodology and post model overlays
We critically assessed the methodology used in the in- scope impairment models and evaluated compliance with IFRS
9 requirements. We also tested the key assumptions and judgements which comprise the PDs/LGDs/EADs used in the
calculation of provisions.
We tested the input of certain data elements into impairment models and management judgemental adjustments,
including credit reviews that determine credit risk ratings for commercial customers. Our credit modelling specialists
independently rebuilt the commercial loans, retail mortgages and the RateSetter ECL models. This was performed
using management’s methodology and we compared the output to management’s modelled ECL output. For the other
in-scope portfolios our modelling specialists performed an independent code review to validate that the models were
implemented in line with the group’s methodology. Our credit modelling specialists also assessed the results of model
monitoring performed by management, and independently re-performed the key tests.
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. We evaluated and challenged the methodologies, the accuracy of
application and the completeness of overlays. Where appropriate, we ran a series of independent scenarios based on
alternative assumptions, and compared the results to the ECL results produced by management.
Significant increase in credit risk (SICR) – Commercial loans
To test the judgements in determining whether SICR events have occurred, we evaluated the appropriateness of the
SICR criteria being used. For a sample of loans across the Commercial stage 1 and 2 populations and independently
assessed the stage allocation against SICR criteria.
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. We also independently challenged whether the
key assumptions used, such as the recovery strategies and collateral valuations, and ranges of potential outcomes, were
appropriate given the borrowers’ circumstances.
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Independent auditors’ report
Continued
Key audit matter How our audit addressed the key audit matter
Carrying values of non-financial assets (group)
Refer to page 70 (Audit Committee report), Note 14: Property, Plant and
Equipment and Note 15: Intangible assets.
The group’s tangible fixed assets mainly comprised leasehold improvements
and Right of Use assets. The group also capitalised as intangible assets certain
expenditure in the development of software to support its business strategy.
The market value of the group and the 2023 operating performance of the
Bank indicated that the investment might be impaired.
Management evaluated the above non-financial assets for impairment, and
estimated the recoverable amounts of those assets. As 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 non-financial
assets is the ‘retail bank CGU’ within Metro Bank PLC.
The determination of the recoverable amount requires management to
estimate the higher of value in use and fair value less costs to sell the retail
bank CGU. This assessment is complex and involves subjective judgements.
The recoverable amount is estimated using forecast cash flows included
in management’s 5 year Long Term Plan (‘LTP), a decreasing growth rate
from years 6 to 10, a terminal growth rate and a discount rate. There are
methodology judgements required in determining a value in use in compliance
with IAS 36 ‘Impairment of assets’. The LTP is also supported by various
assumptions relating to compliance with regulatory capital requirements.
Management concluded that no impairment existed as at 31 December
2023. The forecast cash flows in the LTP, in particular relating to net interest
income, the determination of the discount rate and the assumptions relating to
compliance with regulatory capital requirements are key judgements. Due to
the magnitude of the balance and the judgements involved in respect of the
retail bank CGU, the impairment assessment represents a 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.
Our work included the following substantive tests:
• Tested the mathematical integrity of the impairment model and agreed the relevant inputs to the Board
approved LTP;
• Evaluated management’s accounting policy and impairment methodology with reference to IFRS
requirements;
• Reviewed the forecasts in the LTP and evaluated these for reasonableness. We made inquiries of management,
inspected business plans and critically assessed management’s growth assumptions, including those relating
to net interest income, using third party evidence where relevant;
• Evaluated compliance with regulatory capital requirements and the underlying assumptions during the period
of the plan using our regulatory experts. We tested forecast capital ratios, reviewed regulatory correspondence
and held discussions with the PRA; and
• Engaged our valuation specialists in assessing the reasonableness of the discount rate and terminal growth
rate.
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Key audit matter How our audit addressed the key audit matter
Carrying value of investment in subsidiary (parent)
Refer to page 70 (Audit Committee report) and Note 3.
Management reviewed the equity investment in the subsidiary, Metro
Bank PLC, for indicators of impairment in accordance with IAS 36 as at
31December 2023. The market value of the group and the 2023 operating
performance of the Bank indicated that the investment might be impaired.
Management estimated the recoverable amount using the higher of value
in use (‘ViU’) or fair value less cost to sell.
The methodology used to estimate the recoverable amount is dependent
on various assumptions, both short term and long term in nature. These
assumptions, which are subject to estimation uncertainty, are derived
from a combination of management’s judgement and third party data.
The significant assumptions that we focused our audit on were those with
greater levels of management judgement and for which variations had
the most significant impact on the recoverable amount. These included
the compliance of the chosen methodology with IAS 36, the bank’s Long
Term Plan (‘LTP’) for 2024 to 2028, in particular the net interest income
forecasts, regulatory capital requirements and the discount rate.
Management’s assessment resulted in an impairment charge. Due to
the magnitude of the investment and the impairment charge and the
judgements involved, the impairment assessment represents a key
auditmatter.
We performed a number of audit procedures over the calculation of the impairment determined by
management. We challenged and tested the reasonableness of management’s methodology and key
assumptions.
Our work included the following substantive tests:
• Tested the mathematical integrity of the impairment model and agreed the relevant inputs to the Board
approved LTP relating to the subsidiary;
• Evaluated management’s accounting policy and impairment methodology with reference to IFRS
requirements, including adjustments made to the LTP to comply with IAS 36;
• Reviewed the forecasts in the LTP and evaluated these for reasonableness. We made inquiries of
management, inspected business plans and critically assessed management’s growth assumptions,
including those relating to net interest income, using third party evidence where relevant;
• Engaged our regulatory experts in assessing the reasonableness of the risk weighted asset and capital
requirements; and
• Engaged our valuation specialists in assessing the reasonableness of the discount rate and terminal
growth rate.
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Continued
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 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 of Metro Bank PLC. We continually assessed the risks and changed the scope
of our audit where necessary.
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 42, 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 within Metro Bank PLC, which we determined to be most likely to be impacted by
climate risk. Management’s assessment gave consideration to a number of matters, including
the Biennial Exploratory Scenario climate stress testing performed in 2021. As a result of their
assessment, an immaterial model overlay was recognised in 2021, and continues to be held as
at31 December 2023.
The group comprises four components. Any components which were considered individually
financially significant in the context of the group’s consolidated financial statements 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 two financially significant components, which
are Metro Bank Holdings PLC (the company) and Metro Bank PLC.
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 and SME Invoice 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 £11.4m. £10.0m.
How we determined it 1% of total equity 1% of total equity
Rationale for benchmark applied The group’s total equity
isthe most appropriate
benchmark as it is correlated
with the level of regulatory
capital which is a key metric
for management and users
of the financial statements.
Italso provides a
stablebenchmark.
The company’s total equity
(before the one-off
impairment of the
subsidiary) has been used as
the most appropriate
benchmark given its primary
purpose isto act as a holding
company, not to generate
operating profits and
therefore a profit based
measure is not relevant.
For each component in the scope of our group audit, we allocated a materiality that is less than
our overall group materiality.
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% of overall
materiality, amounting to £8.5m for the group financial statements and £7.5m 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.
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Continued
We agreed with the Audit Committee that we would report to them misstatements identified
during our audit above £0.5m (group audit) and £0.5 (company audit) 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:
• Understanding the Directors’ going concern assessment process, including the preparation
and approval of the budget. We obtained management’s Board approved forecast covering
the period of the going concern assessment to 30 June 2025. We evaluated the forecasting
method adopted by the Directors in assessing going concern;
• Evaluation of management’s financial and regulatory capital forecasts. We checked the
mathematical accuracy of the model and evaluated the key assumptions using our
understanding of the Group and external evidence where appropriate. We used our Prudential
Regulatory experts to review the Bank’s risk weighted assets and forecast capital requirement
assumptions. We also performed a comparison of the 2023 budget and the actual results to
assess the accuracy of the budgeting process;
• Evaluation of the appropriateness of management’s severe but plausible scenario using our
firm’s economics experts and our understanding of the bank and the external environment.
We evaluated management’s assumptions by performing an independent stress test to
determine whether a reasonable alternative stressed scenario would result in a breach of
minimum regulatory requirements;
• Considering the mitigating actions that management identified, including the reduction of
costs and slowing down the origination of new loans and advances, and assessing whether
these were in the control of management and possible in the going concern period of
assessment;
• Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of
past stress events. We substantiated the liquid resources held, and liquidity facilities available
to the group, for example, with the Bank of England. We also reconciled Metro Bank Holdings
PLC’s liquidity position to its regulatory liquidity reporting returns;
• Reviewing correspondence between the Bank and its regulators and we met with the PRA
during the audit and understood the PRA’s perspectives on the Bank’s risks and its capital and
liquidity position; and
• Assessing the adequacy of disclosures in the Going Concern statement in note 1 of the
Consolidated and Company Financial Statements and within the Assessment of going
concern section of the Viability statement on page 50 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.
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. 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 2023 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.
Governance Additional informationStrategic report Financial statements 164Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
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 and
company 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.
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.
165
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report
Continued
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 the Financial Conduct Authority (FCA) and
Prudential Regulatory Authority (PRA), 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 and holding discussions 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 respect of the
determination of allowance for expected credit losses on loans and advances to customers,
the carrying value of non-financial assets and the carrying value of the investment in
subsidiary (see related key audit matters); and
• Identifying and testing journal entries including those posted by infrequent or unexpected
users, related to significant one off or unusual transactions, as well as year-end provisions or
write downs 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25 April 2023 to audit the financial statements for the year ended 31 December 2023 and
subsequent financial periods. Metro Bank Holdings PLC is the parent of Metro Bank PLC which
we have audited since the year ended 31 December 2010 with the period of total uninterrupted
engagement being 14 years, covering the years ended 31 December 2010 to 31 December 2023.
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
16 April 2024
Governance Additional informationStrategic report Financial statements 166Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated statement
of comprehensive income
For the year ended 31 December 2023
Years ended 31 December
20232022
Notes £’million £’million
Interest income
2
8 55 .7
56 3.7
Interest expense
2
(443.8)
(1 59.6)
Net interest income
411 . 9
404.1
Fee and commission income
3
95.0
8 4.4
Fee and commission expense
3
(4 . 6)
(2 . 6)
Net fee and commission income
9 0.4
81 .8
Net gains on sale of assets
4
2 .7
–
Other income¹
5
143.9
3 7. 6
Total income
648.9
523 .5
General operating expenses
6
(5 0 2 . 9)
(467 .6)
Depreciation and amortisation
14, 15
(7 7. 7)
(7 7. 0)
Impairment and write-offs of property, plant, equipment and intangible assets
14, 15
(4 . 6)
(9 .7)
Total operating expenses
(5 85 . 2)
(55 4 . 3)
Expected credit loss expense
30
(33 . 2)
(39.9)
Profit/(loss) before tax
30. 5
(70.7)
Taxation
9
(1 . 0)
(2 . 0)
Profit/(loss) for the year
29. 5
(72 .7)
Other comprehensive income/(expense) for the year
Items which will be reclassified subsequently to profit or loss:
Movement in respect of investment securities held at fair value through other comprehensive income (net of tax):
•
changes in fair value
28
2 .4
(7. 6)
Total other comprehensive income/(expense)
2.4
(7. 6)
Total comprehensive profit/(loss) for the year
31.9
(8 0 . 3)
Profit/(loss) per share
Basic (pence)
36
13. 8
(42 . 2)
Diluted (pence)
36
13.4
(4 2 . 2)
1. Other income includes a £100m gain on debt extinguishment.
The accompanying notes form an integral part of these financial statements.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated balance sheet
As at 31 December 2023
Years ended 31 December
20232022
Notes £’million£’million
Cash and balances with the Bank of England
11
3, 891
1,956
Loans and advances to customers
12
12,297
1 3,1 02
Investment securities held at fair value through other comprehensive income
13
476
57 1
Investment securities held at amortised cost
13
4,403
5, 343
Financial assets held at fair value through profit and loss
–
1
Derivative financial assets
21
36
23
Property, plant and equipment
14
723
74 8
Intangible assets
15
193
216
Prepayments and accrued income
16
118
85
Assets classified as held for sale
14
–
1
Other assets
17
108
73
Total assets
2 2, 24 5
2 2 ,11 9
Deposits from customers
18
15,6 23
1 6,014
Deposits from central banks
19
3 ,050
3, 800
Debt securities
20
694
57 1
Repurchase agreements
10
1,1 91
238
Derivative financial liabilities
21
–
26
Lease liabilities
22
234
248
Deferred grants
23
16
17
Provisions
24
23
7
Deferred tax liability
9
13
12
Other liabilities
25
267
230
Total liabilities
21,111
2 1 ,16 3
Called-up share capital
26
–
–
Share premium
26
14 4
1 ,964
Retained earnings
27
978
(1,015)
Other reserves
28
12
7
Total equity
1 ,13 4
956
Total equity and liabilities
2 2, 24 5
2 2 ,11 9
The accompanying notes form an integral part of these financial statements. They were approved by the Board of Directors on 16 April 2024 and signed on its behalf by:
Robert Sharpe Daniel Frumkin
Chair Chief Executive Officer
Governance Additional informationStrategic report Financial statements 168Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated statement of changes in equity
For the year ended 31 December 2023
Called-upShare
shareShareRetainedMergerFVOCIoptionTotal
capitalpremiumearningsreservereservereserveequity
£’million£’million£’million£’million£’million£’million£’million
Balance as at 1 January 2023
–
1, 964
(1,015)
–
(13)
20
956
Profit for the year
–
–
29
–
–
–
29
Other comprehensive income (net of tax) relating to investment securities designated at FVOCI
–
–
–
–
2
–
2
Total comprehensive income
–
–
29
–
2
–
31
Net share option movements
–
–
–
–
–
3
3
Cancellation of Metro Bank PLC share capital and share premium¹
–
(1 , 9 6 4)
1 ,964
–
–
–
–
Issuance of Metro Bank Holdings PLC share capital¹
–
–
(9 6 5)
965
–
–
–
Bonus issuance
965
–
–
(9 65)
–
–
–
Capital reduction of Metro Bank Holdings PLC share capital
(9 65)
–
9 65
–
–
–
–
Shares issued
–
150
–
–
–
–
150
Cost of shares issued
–
(6)
–
–
–
–
(6)
Balance as at 31 December 2023
–
144
97 8
–
(1 1)
23
1 ,13 4
Balance as at 1 January 2022
–
1,964
(9 42)
–
(5)
18
1 ,03 5
Loss for the year
–
–
(73)
–
–
–
(73)
Other comprehensive expense (net of tax) relating to investment securities designated at FVOCI
–
–
–
–
(8)
–
(8)
Total comprehensive loss
–
–
(73)
–
(8)
–
(8 1)
Net share option movements
–
–
–
–
–
2
2
Balance as at 31 December 2022
–
1,9 64
(1 ,015)
–
(13)
20
956
Notes 26 26 27 28 28 28
1. The cancelled called up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC amount to £172 and as such have been rounded to £nil.
The accompanying notes form an integral part of these financial statements.
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Consolidated cash flow statement
For the year ended 31 December 2023
Years ended 31 December
20232022
Notes£’million£’million
Reconciliation of profit/(loss) before tax to net cash flows from operating activities:
Profit/(loss) before tax
31
(7 1)
Adjustments for non-cash items
37
(376)
(273)
Interest received
834
553
Interest paid
(3 70)
(1 24)
Changes in other operating assets
74 4
(8 5 2)
Changes in other operating liabilities
(2 3 5)
(4 1 8)
Net cash inflows/(outflows) from operating activities
628
(1 ,1 85)
Cash flows from investing activities
Sales, redemptions and paydowns of investment securities
1, 8 70
8 57
Purchase of investment securities
(81 6)
(1 , 20 6)
Purchase of property, plant and equipment
14
(1 2)
(29)
Purchase and development of intangible assets
15
(2 6)
(2 4)
Net cash inflows/(outflows) from investing activities
1, 016
(4 0 2)
Cash flows from financing activities
Repayment of capital element of leases
22
(2 3)
(25)
Issuance of new shares
26
150
–
Cost of share issuance
26
(6)
–
Issuance of debt securities
20
175
–
Cost of debt issuance
20
(5)
–
Net cash inflows/(outflows) from financing activities
291
(25)
Net increase/(decrease) in cash and cash equivalents
1 ,93 5
(1 , 61 2)
Cash and cash equivalents at start of year
11
1,956
3, 568
Cash and cash equivalents at end of year
11
3, 891
1, 956
The accompanying notes form an integral part of these financial statements.
Governance Additional informationStrategic report Financial statements 170Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated
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 Holdings PLC (the ‘Company’) is the holding company of Metro Bank PLC, which
provides retail and commercial banking services in the UK. Metro Bank Holdings PLC is a
public limited liability company incorporated and domiciled in England and Wales under the
Companies Act 2006 (Company number 06419578) and is listed on the London Stock
Exchange (LON:MTRO). The address of its registered office is One Southampton Row, London,
WC1B 5HA .
1.2 Basis of preparation
The consolidated financial statements of the Company together with its subsidiaries (the
‘Group’) have been prepared in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the UK, interpretations issued by the IFRS Interpretations Committee and
the Companies Act 2006 applicable to companies reporting under IFRSs.
The consolidated financial statements of the Group and Company were authorised by the Board
for issue on 16 April 2024.
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 124 to
157. Where information is marked as audited, it is incorporated into these financial statements
and it is covered by the Independent auditor’s report.
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 severe but plausible downside scenarios. The 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 at least 15 months from the date of these financial
statements). The Directors do not consider 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 49 to 50.
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 3 to the Company financial statements on page 223).
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.
This means we have chosen not to present a Company statement of comprehensive income
and related notes as part of these financial statements.
Insertion of Metro Bank Holdings PLC
To meet the Bank of England’s resolution requirements, on 19 May 2023, Metro Bank Holdings
PLC was inserted as the new ultimate holding company and listed entity of the Group. Prior to
this date Metro Bank PLC was both a banking entity and the ultimate parent company of the
Group, but has subsequently become a 100% subsidiary of Metro Bank Holdings PLC. In addition
to the insertion of a new holding company the Group undertook a reduction in capital to provide
the Group with distributable reserves.
The insertion of Metro Bank Holdings PLC has been treated as a business combination under
common control, with the Group controlled by the same parties both before and after the
insertion. Combinations under common control are outside the scope of IFRS 3 ‘Business
Combinations’ and accordingly, the insertion has not been recognised at fair value and no
goodwill or fair value acquisition adjustments have been recognised. The Group has instead
applied the predecessor accounting approach as this most faithfully represents the substance
of the facts and circumstances of the series of transactions that comprise the insertion of
Metro Bank Holdings PLC. This is on the basis that those transactions are not designed to deliver
economic benefits, but represent a rearrangement of the organisation of business activities
across legal entities in order to be compliant with the relevant regulations.
In applying this approach, the Group has used the carrying amounts in Metro Bank PLC’s
consolidated financial statements at the date of transfer to determine the value of the assets
and liabilities transferred. These financial statements are therefore prepared as if Metro Bank
Holdings PLC had been the parent company throughout the current and prior years, to treat
the new structure as if it has always been in place. The comparative numbers in these financial
statements were included in the financial statements of Metro Bank PLC for the year ended
31 December 2022. Hedge accounting continues to be applied to the transferred designated
hedge relationships as if they had originally been designated by the Group.
Further details on the insertion of Metro Bank Holdings PLC can be found in note 26.
171
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
1.3 Functional and presentation currency
These financial statements are presented in pounds 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.
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 policies and presentational amendments
During the period there have not been any changes in any accounting policies or disclosures
that have had a material impact on our financial statements.
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. We have not adopted any standards early within these financial
statements.
1.7 Segmental reporting
IFRS 8 ‘Operating Segments’ 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 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 2023 are appropriate and that these consolidated financial statements
therefore present our financial position and results 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:
Area
Estimates
Judgements
Further details
Measurement of ECL
Multiple
Significant increase Note 30
forward-looking in credit risk
scenarios
Use of PMOs and PMAs
Impairment of non-
n/a
Key assumptions used for
Note 15
financial assets VIU calculations
Governance Additional informationStrategic report Financial statements 172Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated 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 POCI 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
2023 2022
£’million £’million
Cash and balances held with the Bank of England
120.9
33.0
Loans and advances to customers
599.9
462.2
Investment securities held at amortised cost
118.6
62.9
Investment securities held at FVOCI
6.8
4.7
Interest income calculated using the effective interest rate method
846.2
562.8
Derivatives in hedge relationships
9.5
0.9
Total interest income
855.7
563.7
Interest expense
2023 2022
£’million £’million
Deposits from customers
147.8
32.9
Deposits from central banks
161.3
55.5
Debt securities
55.7
48.7
Lease liabilities
13.1
14.4
Repurchase agreements
50.1
3.4
Interest expense calculated using the effective interest rate method
428.0
154.9
Derivatives in hedge relationships
15.8
4.7
Total interest expense
443.8
159.6
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
Nature, timing and satisfaction of performance obligations and payment terms
Service charges and other We levy a range of standard charges and fees for account maintenance
fee income 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.
Safe deposit box 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 the box.
ATM and
interchange fees
Where we earn fees from our ATMs or from interchange this is
recognised at the point the service is delivered.
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.
2023 2022
£’million £’million
Service charges and other fee income
36.8
30.9
Safe deposit box income
18.2
16.5
ATM and interchange fees
40.0
37.0
Fee and commission income
95.0
84.4
Fee and commission expense
(4.6)
(2.6)
Total net fee and commission income
90.4
81.8
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Metro Bank Holdings PLC Annual Report and Accounts 2023
4. Net gains on sale of assets
2023 2022
£’million £’million
Investment securities held at amortised cost
2.9
–
Loan portfolios
(0.2)
–
Total net gains on sale of assets
2.7
–
Disposal of investment securities
During the year some of our investment securities held at amortised cost were called early by
the issuers resulting in a gain being recognised on these assets.
Loan portfolio sales
During the year we sold a small portfolio of non-performing unsecured loans, which resulted in
net losses of £0.2m being recognised.
5. Other income
Accounting policy
Other income is accounted for as follows:
Product or service
Nature, timing and satisfaction of performance obligations and payment terms
Foreign currency Gains on foreign currency transactions is the spread earned on foreign
transactions 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 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.
Deferred grant income Deferred grant income relates to amounts recognised in relation to
the amounts drawn down against the Capability and Innovation Fund
(C&I) 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.
Other income Other income primarily consists of hedge ineffectiveness, foreign
currency differences arising on translation and movements in financial
assets and liabilities held at fair value through profit and loss.
2023 2022
£’million £’million
Foreign currency transactions
34.0
34.1
Rental income
1.1
0.7
Deferred grant income
2.4
1.5
Gain on debt extinguishment
100.0
–
Other
6.4
1.3
Total other income
143.9
37.6
Gain on debt extinguishment
As part of the capital package (see note 20), which completed in November 2023, a 40% haircut
was agreed with bondholders on our Tier 2 debt securities, which saw their £250 million of
existing notes replaced with £150 million of new notes. This resulted in a gain of £100 million.
The acceleration of unamortised issuance costs as well as the impacts from the breaking of the
hedge relationships of the refinanced debt has been shown within costs associated with capital
raise and refinancing in note 6, to better reflect the nature of the transaction.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 174Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
6. General operating expenses
2023 2022
£’million £’million
People costs (note 7)
241.2
236.6
Information technology costs
59.7
62.2
Occupancy costs
31.7
30.8
Money transmission and other banking-related costs
49.2
48.7
Transformation costs
20.2
3.3
Remediation costs
–
5.3
Capability and Innovation Fund costs
2.4
1.3
Legal and regulatory fees
7.0
7.0
Professional fees
23.2
38.4
Printing, postage and stationery costs
7.2
6.2
Travel costs
1.5
1.6
Marketing costs
7.7
5.0
Costs associated with capital raise and refinancing
26.0
–
Holding company insertion costs
1.8
1.8
Other
24.1
19.4
Total general operating expenses
502.9
467.6
1
2
1. C&I costs represent the non-capitalisable costs of delivering the C&I digital commitments. It includes £1.9 million
(2022: £0.9 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. Professional fees 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 licences, 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.
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.
Professional fees
Professional costs includes £7.3 million (2022: £15.0 million) of R&D costs not capitalised. 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 £25.1 million (2022: £47.5 million) on R&D costs
not capitalised.
Included within legal and regulatory fees is £0.1 million (2022: £0.1 million) in respect of the
Financial Services Compensation Scheme (FSCS) levy.
Transformation, remediation, Capability and Innovation Fund, costs associated
with capital raise and holding company insertion costs
Further details on transformation, remediation, Capability and Innovation Fund, costs associated
with capital raise and holding company insertion costs can be found on page 233.
Notes to the consolidated financial statements
Continued
175
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Metro Bank Holdings PLC Annual Report and Accounts 2023
7. People costs
2023 2022
£’million £’million
Wages and salaries
201.7
196.8
Social security costs
21.8
23.7
Pension costs
14.5
13.7
Equity-settled share-based payments
3.2
2.4
Total people costs
241.2
236.6
1
1
1
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 deferred grant income in note 5.
During the year £10.0 million (2022: £5.3 million) of people costs were capitalised as part of our
intangible assets (further details can be found in note 15).
The average monthly number of persons employed during the year was 4,286 (2022: 4,040).
2023
2022
Customer-facing
1,985
1,886
Non-customer-facing
2,301
2,154
Total number of persons employed
4,286
4,040
Pension costs
We operate a defined contribution pension scheme for our colleagues. Contributions to
colleagues’ individual personal pension plans are made on a contractual basis, with no further
payment obligations once the contributions have been paid. These contributions are recognised
as an expense when they fall due.
Payments were made amounting to £15.4 million (2022: £14.0 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 our
auditors, PricewaterhouseCoopers LLP:
2023
£’000
2022
£’000
Audit of the Group and Company financial statements 54 2,553
Audit of the financial statements of the Company’s subsidiaries 2,309 73
Audit-related assurance services 144 203
Other assurance services 555 115
Total fees payable to our auditors 3,062 2,944
Other
Other assurance services undertaken during the year includes work performed on the capital
raise and restructure.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 176Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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. We consider the history of recent losses and the extent to which there is convincing other evidence that sufficient taxable profits will be available against which the
unused tax losses or unused tax credits can be utilised.
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.
We offset deferred tax assets and liabilities where we have a legally enforceable right to offset 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.
Tax expense
The components of the tax expense for the year are:
2023 2022
£’million £’million
Current tax
Current tax
(0.1)
–
Total current tax expense
(0.1)
–
Deferred tax
Origination and reversal of temporary differences
(0.5)
(1.5)
Effect of changes in tax rates
(0.4)
(0.7)
Adjustment in respect of prior years
–
0.2
Total deferred tax expense
(0.9)
(2.0)
Total tax expense
(1.0)
(2.0)
Notes to the consolidated financial statements
Continued
177
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Metro Bank Holdings PLC Annual Report and Accounts 2023
9. Taxation Continued
Reconciliation of the total tax expense
The tax expense 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 and the accounting profit/(loss) multiplied by the UK corporation tax rate is as follows:
Effective Effective
2023 tax rate 2022 tax rate
£’million % £’million %
Accounting profit/(loss) before tax
30.5
(70.7)
Tax expense at statutory tax rate of 23.5% (2022: 19%)
(7. 2)
23.5%
13.4
19.0%
Tax effects of:
Non-deductible expenses – depreciation on non-qualifying fixed assets
(2.5)
8.3%
(2.5)
(3.5%)
Non-deductible expenses – investment property impairment
–
–
(0.1)
(0.1%)
Non-deductible expenses – remediation
–
–
(0.6)
(0.8%)
Non-deductible expenses – other
(0.8)
2.6%
(0.4)
(0.6%)
Impact of intangible asset write-off on research and development deferred tax liability
0.1
(0.3%)
0.3
0.4%
Share-based payments
(1.2)
3.9%
0.1
0.1%
Adjustment in respect of prior years
–
–
0.2
0.2%
Current year losses for which no deferred tax asset has been recognised
(15.4)
50.5%
(11.7)
(16.5%)
Losses offset against current year profits
1.1
(3.6%)
–
–
Movement in recognised DTA for unused tax losses
1.8
(5.9%)
–
–
Effect of changes in tax rates
(0.4)
1.3%
(0.7)
(1.0%)
Income not taxable
23.5
(77.0%)
–
–
Tax expense reported in the consolidated income statement
(1.0)
3.3%
(2.0)
(2.8%)
The effective tax rate for the period is 3.3% (2022: -2.8%). The main reasons for this, in addition to the reported accounting loss before tax for the year, are set out below:
Non-deductible expenses – other
This mainly relates to costs in setting up the Holding Company and the termination of onerous contracts following a discontinuation of trade.
Share-based payments
During the period the Metro Bank share price decreased from £1.21 to £0.37. This had the impact of decreasing the deferred tax asset held resulting in a deferred tax expense.
Adjustment in respect of prior years
Following the filing of our 2022 corporation tax return we reduced our R&D deferred tax liability following a decrease in qualifying capital R&D expenditure. This was partly offset by an increase in
our PPE deferred tax liability resulting from an increase in qualifying additions.
Losses for which no deferred tax asset has been recognised
The tax effected value of current year losses for which no deferred tax asset has been recognised is £15.4 million (2022: £11.7 million).
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 tax rate from 19% to 25% for taxable profits over
£250,000 (effective 1 April 2023) was substantively enacted on 24 May 2021.
Income not taxable
The credit arising from the haircut on the Tier 2 Instrument issued by Metro Bank PLC meets the conditions set out in section 323A of CTA 2009 exempting the transaction from taxation.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 178Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
9. Taxation Continued
Deferred tax assets
A deferred tax asset must be regarded as recoverable and therefore recognised only when, on the basis of all available evidence, it can be regarded as more likely than not there will be suitable tax
profits from which the future of the underlying timing differences can be deducted.
The following table shows deferred tax recorded in the statement of financial position and changes recorded in the tax expense:
31 December 2023
31 December 2022
Investment Investment
securities Share- Property, securities Share- Property,
Unused and based plant and Intangible Unused and based plant and Intangible
tax losses impairments payments equipment assets Total tax losses impairments payments equipment assets Total
£’million £’million £’million £’million £’million £’million £’million £’million £’million £’million £’million £’million
Deferred tax assets
14
2
1
–
–
17
12
3
1
–
–
16
Deferred tax liabilities
–
4
–
(29)
(5)
(30)
–
4
–
(26)
(6)
(28)
Deferred tax liabilities (net)
14
6
1
(29)
(5)
(13)
12
7
1
(26)
(6)
(12)
1 January
12
7
1
(26)
(6)
(12)
13
5
–
(23)
(7)
(12)
Income statement
2
(1)
–
(3)
1
(1)
(1)
–
1
(3)
1
(2)
Other comprehensive income
–
–
–
–
–
–
–
2
–
–
–
2
31 December
14
6
1
(29)
(5)
(13)
12
7
1
(26)
(6)
(12)
Offsetting of deferred tax assets and liabilities
We have presented all the deferred tax assets and liabilities above on a net basis within the balance sheet on page 168. This is on the basis that all our deferred tax assets and liabilities relate to
taxes levied by HMRC and we have a legally enforceable right to offset these. Further details on our offsetting of financial assets and liabilities can be found in note 33.
Unrecognised deferred tax assets
We have total unused tax losses of £912 million of which a deferred tax asset has not been recognised on £857 million. Accordingly, a deferred tax asset of £214 million has not been recognised on
unused tax losses. The impact of recognising the deferred tax asset in the future would be material.
Although there is an expectation for future profits in the near future, as we have a recent history of operating losses for tax purposes, we have taken the decision not to recognise a deferred tax
asset in respect of these losses at 31 December 2023. We will continue to reassess this decision as we move into 2024.
Due to unrealised investment property impairments of £11 million there is an unrecognised deferred tax asset of £2.7 million (2022: £2.6 million).
Notes to the consolidated financial statements
Continued
179
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Metro Bank Holdings PLC Annual Report and Accounts 2023
10. Financial instruments
Accounting policy
Repurchase agreements
Where we sell financial assets subject to sale and repurchase agreements, the financial
assets are retained in their respective balance sheet categories, however they become
encumbered and are not available for transfer or sale. 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.
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 124 to 157.
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 following tables.
Classification of financial instruments
31 December 2023
Fair value
through
profit and Amortised
loss FVOCI cost Total
£’million £’million £’million £’million
Assets
Loans and advances to customers
–
–
12,297
12,297
Investment securities
–
476
4,403
4,879
Derivative financial assets
36
–
–
36
Liabilities
Deposits from customers
–
–
15,623
15,623
Deposits from central bank
–
–
3,050
3,050
Debt securities
–
–
694
694
Repurchase agreements
–
–
1,191
1,191
31 December 2022
Fair value
through
profit Amortised
and loss FVOCI cost Total
£’million £’million £’million £’million
Assets
Loans and advances to customers
–
–
13,102
13,102
Investment securities
–
571
5,343
5,914
Financial assets held as fair value through profit and loss
1
–
–
1
Derivative financial assets
23
–
–
23
Liabilities
Deposits from customers
–
–
16,014
16,014
Deposits from central bank
–
–
3,800
3,800
Debt securities
–
–
571
571
Derivative financial liabilities
26
–
–
26
Repurchase agreements
–
–
238
238
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 180Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
10. Financial instruments Continued
Financial assets pledged as collateral
We have pledged £6,110 million (2022: £5,286 million) of the financial assets above as
encumbered collateral which can be called upon in the event of default. Of this, £1,311 million
(2022: £2,131 million) is made up of high-quality securities and £4,799 million (2022:
£3,141 million) is from our own loan portfolio.
This does not include cash balances pledged as collateral which are shown separately within
note 17.
LIBOR replacement
On 1 January 2022, SONIA (Sterling Overnight Index Average) replaced LIBOR (London
Inter-bank Offered Rate) as the industry standard sterling interest rate benchmark.
As at 31 December 2023 all of our market-facing derivative flows are executed against SONIA,
however we continue to hold £47 million (31 December 2022: £64 million) of mortgages that are
either exposed, or revert to synthetic LIBOR.
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 equivalents 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.
31 December 31 December
2023 2022
£’million £’million
Unrestricted balances with the Bank of England
3,642
1,761
Cash and unrestricted balances with other banks
191
136
Money market placements
58
59
Total cash and balances with the Bank of England
3,891
1,956
The expected credit loss held against cash and balances with the Bank of England is £0.1 million
(31 December 2022: less than £0.1 million).
Notes to the consolidated financial statements
Continued
181
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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’.
31 December 2023
31 December 2022
Gross Net Gross Net
carrying ECL carrying carrying ECL carrying
amount allowance amount amount allowance amount
£’million £’million £’million £’million £’million £’million
Consumer lending
1,297
(108)
1,189
1,480
(75)
1,405
Retail mortgages
7, 817
(19)
7,798
7,6 49
(20)
7,629
Commercial lending
3,382
(72)
3,310
4,160
(92)
4,068
Total loans and advances
to customers
12,496
(199)
12,297
13,289
(187)
13,102
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:
31 December 31 December
2023 2022
£’million £’million
Overdrafts
40
60
Credit cards
28
19
Term loans
1,219
1,401
Consumer auto-finance
10
–
Total consumer lending
1,297
1,480
Residential owner occupied
5,851
5,507
Retail buy-to-let
1,966
2,142
Total retail mortgages
7,817
7,649
Total retail lending
9,114
9,129
Professional buy-to-let
465
731
Bounce back loans
524
801
Coronavirus business interruption loans
86
127
Recovery loan scheme
328
385
Other term loans
1,341
1,578
Commercial term loans
2,744
3,622
Overdrafts and revolving credit facilities
172
122
Credit cards
4
4
Asset and invoice finance
462
412
Total commercial lending
3,382
4,160
Gross loans and advances to customers
12,496
13,289
Amounts include:
Repayable at short notice
244
156
1
1. Recovery loan scheme includes £70 million acquired from third parties under forward flow arrangements
(31 December 2022: £97 million). 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).
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 182Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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.
31 December 31 December
2023 2022
£’million £’million
Investment securities held at FVOCI
476
571
Investment securities held at amortised cost
4,403
5,343
Total investment securities
4,879
5,914
Investment securities held at FVOCI
31 December 31 December
2023 2022
£’million £’million
Sovereign bonds
220
215
Residential mortgage-backed securities
–
38
Covered bonds
112
152
Multi-lateral development bank bonds
144
166
Total investment securities held at FVOCI
476
571
Investment securities held at amortised cost
31 December 31 December
2023 2022
£’million £’million
Sovereign bonds
938
1,717
Residential mortgage-backed securities
954
1,095
Covered bonds
594
542
Multi-lateral development bank bonds
1,729
1,821
Asset backed securities
188
168
Total investment securities held at amortised cost
4,403
5,343
Further information on the ECL recognised on investment securities can be found in note 30.
Notes to the consolidated financial statements
Continued
183
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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
Lower of the remaining life of the lease or the
useful life of the asset
Freehold land
Not depreciated
Buildings
Up to 50 years
Fixtures, fittings and equipment
5 years
IT hardware
3 to 5 years
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.
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 ‘Leases’ (other than those of low value) 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 set out above.
2023
Freehold Fixtures,
Investment Leasehold land and fittings and
IT
Right-of-use
property improvements buildings equipment
hardware
assets Total
£’million £’million £’million £’million
£’million
£’million £’million
Cost
1 January 2023
12
261
372
22
8
283
958
Additions
–
–
9
1
2
–
12
Disposals
–
–
–
–
–
(4)
(4)
Transfers
–
(5)
5
–
–
–
–
31 December 2023
12
256
386
23
10
279
966
Accumulated depreciation
1 January 2023
8
69
34
20
2
77
210
Depreciation charge
–
13
5
1
2
13
34
Disposals
–
–
–
–
–
(1)
(1)
Transfers
–
(3)
3
–
–
–
–
31 December 2023
8
79
42
21
4
89
243
Net book value
4
177
344
2
6
190
723
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 184Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
14. Property, plant and equipment Continued
2022
Freehold Fixtures,
Investment Leasehold land and fittings and IT Right-of-use
property improvements buildings equipment hardware assets Total
£’million £’million £’million £’million £’million £’million £’million
Cost
1 January 2022
18
280
341
24
1
295
959
Additions
–
–
22
–
7
1
30
Disposals
–
–
–
–
–
(13)
(13)
Write-offs
–
(10)
–
(2)
–
–
(12)
Moved to held for sale
(6)
–
–
–
–
–
(6)
Transfers
–
(9)
9
–
–
–
–
31 December 2022
12
261
372
22
8
283
958
Accumulated depreciation
1 January 2022
12
68
28
19
–
67
194
Depreciation charge
–
12
5
3
2
13
35
Impairments
1
–
–
–
–
–
1
Disposals
–
–
–
–
–
(3)
(3)
Write-offs
–
(10)
–
(2)
–
–
(12)
Moved to held for sale
(5)
–
–
–
–
–
(5)
Transfers
–
(1)
1
–
–
–
–
31 December 2022
8
69
34
20
2
77
210
Net book value
4
192
338
2
6
206
748
Fair value of investment property
Our investment property typically consists of shops and offices which are located within the
same buildings as some of our stores, where we have acquired the freehold interest. As at
31 December 2023 our investment property had a fair value of £4 million (31 December 2022:
£4 million). The fair value has been provided by a qualified independent valuer.
Impairments
During the year impairment indicators were 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 of 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.
Transfers
Transfers represent costs associated with the improvements made to the one (2022: two)
previously leased stores which have been purchased during the year.
Contractual commitment for the acquisition of property, plant and equipment
As at 31 December 2023 we had no contractual commitments relating to the acquisition of
property, plant and equipment that are not reflected in the tables (31 December 2022: £nil).
Notes to the consolidated financial statements
Continued
185
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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 our 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
consist 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 ‘Intangible Assets’.
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 software up to 20 years
Other banking software
3 to 10 years
Software licences
licence period
Brands
5 years
1
All intangible assets are reviewed at the end of each reporting period for indicators
of impairment.
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.
2023
Goodwill Brands Software Total
£’million £’million £’million £’million
Cost
1 January 2023
10
2
338
350
Additions
–
–
26
26
Write-offs
–
–
(9)
(9)
31 December 2023
10
2
355
367
Accumulated amortisation
1 January 2023
–
–
134
134
Amortisation charge
–
1
43
44
Write-offs
–
–
(4)
(4)
31 December 2023
–
1
173
174
Net book value
10
1
182
193
2022
Goodwill Brands Software Total
£’million £’million £’million £’million
Cost
1 January 2022
10
2
336
348
Additions
–
–
24
24
Write-offs
–
–
(22)
(22)
31 December 2022
10
2
338
350
Accumulated amortisation
1 January 2022
–
–
105
105
Amortisation charge
–
–
42
42
Write-offs
–
–
(13)
(13)
31 December 2022
–
–
134
134
Net book value
10
2
204
216
Software
Software consists of both internally generated and externally acquired assets. As at
31 December 2023 externally acquired licences had a net book value of £9 million (31 December
2022: £9 million). Out of our total intangible assets, £34 million of software assets were under
the course of construction at 31 December 2023 (31 December 2022: £39 million).
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 186Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
15. Intangible assets Continued
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.
Contractual commitment for the acquisition of intangible assets
As at 31 December 2023 we had no contractual commitments relating to the acquisition of
intangible assets that are not reflected in the tables (31 December 2022: £nil).
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 2023 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).
31 December
2023
£’million
Asset and invoice finance business
4
Retail bank
6
Total
10
The recoverable amount for both CGUs was determined by a value in use (VIU) calculation in
accordance with IAS 36 impairment of assets. The application of the methodology, as described
below, is a critical accounting judgement. The VIU was higher than their carrying value and
therefore no impairment charge has been recognised for the current year (2022: £nil). The VIU
calculation is based on our Board-approved Long Term Plan which covers the five-year period
from 2024 to 2028 inclusive. Our Long-Term Plan is constructed using our best estimate of the
future performance of the business, adjusted for execution risk and encompasses commercially
sensitive estimates including lending and deposit yields and volumes, as well as costs forecasts
over the period. 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 49 to 50.
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) and certain cash flows which are not permitted to be included
under IAS 36, 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 ten at which point a terminal
growth rate of 2% (31 December 2022: 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). The VIU cash flows are compared to the carrying value of the CGUs, which exclude long
term debt.
A pre-tax discount rate of 14.7% (31 December 2022: 15.3%) has been used for the VIU
calculation. The discount rate is based on our post-tax weighted average cost of capital of 12.7%
(which is grossed up to a pre-tax rate), based on the cost of equity and long term debt,
weighted by the market value of the equity and debt.
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 amount of
either CGU to fall below its carrying amount.
Notes to the consolidated financial statements
Continued
187
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Metro Bank Holdings PLC Annual Report and Accounts 2023
16. Prepayments and accrued income
31 December 31 December
2023 2022
£’million £’million
Prepayments
42
32
Accrued income¹
75
52
VAT receivable
1
1
Total prepayments and accrued income
118
85
Current portion
118
85
Non-current portion
–
–
1. Includes accrued interest receivable.
17. Other assets
31 December 31 December
2023 2022
£’million £’million
Cash pledged as collateral
50
39
Other
1
58
34
Total other assets
108
73
Current portion
55
45
Non-current portion
53
28
1. Other balance primarily comprises customer transactions in process or items in the course of collection
over year end.
18. Deposits from customers
31 December 31 December
2023 2022
£’million £’million
Deposits from retail customers
8,943
7,851
Deposits from commercial customers
6.680
8,163
Total deposits from customers
15,623
16,014
31 December 31 December
2023 2022
£’million £’million
Demand: current accounts
5,696
7,888
Demand: savings accounts
7,827
7, 501
Fixed term: savings accounts
2,100
625
Total deposits from customers
15,623
16,014
19. Deposits from central banks
Deposits from central banks consist of amounts drawn down under the Bank of England’s Term
Funding Scheme with additional incentives for SMEs (TFSME).
31 December 31 December
2023 2022
£’million £’million
Amounts drawn down under TFSME
3,050
3,800
Deposits from central banks
3,050
3,800
TFSME was closed to further drawdowns in October 2021 and our drawdowns will mature in
2025 and 2027 in the amounts of £1,860 million and £1,390 million respectively.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 188Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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.
We assess the criteria for the modification and extinguishment of debt securities in
accordance with IFRS 9. A substantial modification of the terms of an existing financial
liability or a part of it is accounted for as an extinguishment of the original financial liability
and the recognition of a new financial liability. We determine a substantial modification by
performing a quantitative and qualitative prospective assessment.
Amount
issued Coupon Maturity
Name
Issue date
Currency
£’million
rate
Call date
date
Fixed rate reset callable
(MREL) notes
30/11/2023
GBP
525
12.00%
30/04/28
30/04/29
Fixed rate reset callable
subordinated (Tier 2) notes
30/11/2023
GBP
150
14.00%
30/04/29
30/04/34
2023 2022
£’million £’million
1 January
571
588
Issuances
675
–
Redemption
(500)
–
Haircut
(100)
–
Costs associated with issuance
(5)
–
Movements in micro hedging
50
(19)
Unwind of issuance costs
3
2
31 December
694
571
In November 2023, we completed the raising of £175 million of new MREL notes, in addition to
the refinancing of our existing debt securities. The refinancing comprised:
• The exchange of our existing £350 million of bail-in MREL notes for £350 million of new bail-in
MREL instruments.
• The exchange of our existing £250 million bail-in Tier 2 notes for £150 million of new bail-in
Tier 2 instruments.
As part of the refinancing, we incurred fees that were recognised in general operating expenses
(note 6) and a £100m gain on the Tier 2 haircut agreed with creditors (note 5).
The £500m redemption reflects the extinguishment of the old MREL and Tier 2 as the criteria
for substantially modified terms were met.
In December 2022 the existing MREL and Tier 2 notes had a coupon rate of 9.50% and 5.50%
respectively, with the latter repricing to 9.14% in June 2023.
Hedge accounting is applied to our debt securities to manage interest rate risk.
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
‘Financial Instruments: Recognition and Measurement’ as we often chose to employ dynamic
portfolio hedge accounting of interest rate risk across fixed rate financial assets and fixed
rate financial liabilities.
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 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).
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.
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.
Notes to the consolidated financial statements
Continued
189
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Metro Bank Holdings PLC Annual Report and Accounts 2023
21. Derivatives Continued
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 2023
31 December 2022
Notional
Carrying amount
Notional
Carrying amount
contract contract
amount Asset Liability amount Asset Liability
£’million £’million £’million £’million £’million £’million
Interest rate swaps – Designated as hedging instruments
1,205
36
–
902
21
(26)
Interest rate swaps – Designated as held at fair value through profit and loss
1,200
31
(31)
–
–
–
Foreign currency swaps – Designated as held at fair value through profit and loss
63
–
–
291
2
–
Total
2,468
67
(31)
1,193
23
(26)
Derivative netting
(1,200)
(31)
31
–
–
–
Grand total
1,268
36
–
1,193
23
(26)
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 benchmark interest rate risk. 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.
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 fair value hedges can occur due to a number of potential sources, such as a 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.
For the purposes of calculating ineffectiveness recognised in the profit or loss, the total movement in fair value due to the hedged risk on the hedged item and hedging instrument since
designation are considered. The total ineffectiveness on our fair value hedges is recognised in Other income within note 5.
Offsetting derivatives
The Tier 2 and MREL debt held until renegotiation in late 2023 were designated as hedged items in fair value hedge relationships to manage our exposure to interest rate risk. Following the renegotiation
of our debt in November 2023, these hedge relationships were de-designated. We entered into equal and opposite interest rate swaps with a notional of £600 million to fully offset the interest rate
swaps used to hedge the old MREL and Tier 2 debt securities. Cash flows are offset at a central clearing party and both sets of swaps will mature at the same time. Further details are included in note 33.
Debt issued through the capital package in late 2023 was designated within fair value hedge relationships, with new interest rate swaps designated as the hedging instruments.
Master netting arrangement and collateral
We either receive or provide collateral related to our hedging arrangements. As at 31 December 2023 we received collateral of £11.4 million.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 190Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
21. Derivatives Continued
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:
31 December 2023
31 December 2022
Notional Carrying amount Notional Carrying amount
contract contract
amount Asset Liability amount Asset Liability
£’million £’million £’million £’million £’million £’million
Interest rate swaps
1,205
36
–
902
21
(26)
Total derivatives designated as fair value hedges
1,205
36
–
902
21
(26)
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 2023
31 December 2022
Accumulated Accumulated
amount of fair amount of fair
value hedge value hedge
adjustments adjustments
included in the included in the
carrying amount of carrying amount of
Carrying amount
the hedged item
Carrying amount
the hedged item
Assets Liabilities Assets Liabilities
£’million
£’million
£’million
£’million
£’million
£’million
Fixed rate mortgages
–
–
–
129
–
–
Fixed rate debt issuance
–
(694)
(24)
–
(424)
26
Fixed rate investment securities at FVOCI
238
–
(7)
236
–
(20)
Fixed rate investment securities at amortised cost
271
–
1
59
–
(1)
Fixed rate loans
3
–
–
5
–
–
Total derivatives designated as fair value hedges
512
(694)
(30)
429
(424)
5
1
2
3
4
1
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 item and the cumulative fair value changes are recorded in investment securities held at FVOCI.
4. Hedged item and the cumulative fair value changes are recorded in investment securities held at amortised cost.
Summary of ineffectiveness from designated hedge relationships
Total hedge ineffectiveness recognised in profit or loss for the designated fair value hedge relationships is a gain of £5.6 million (2022: £nil).
Notes to the consolidated financial statements
Continued
191
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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 of 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 it 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 (other than those of low value) relate to our
stores and head office properties.
Lease liabilities
2023 2022
£’million £’million
1 January
248
269
Additions and modifications
–
1
Disposals
(4)
(11)
Lease payments made
(23)
(25)
Interest on lease liabilities
13
14
31 December
234
248
Current
22
23
Non-current
212
225
Right-of-use assets
All of our disclosures relating to right-of-use assets, including our accounting policy, can be
found in note 14.
Disposals
The disposals during the year relate to one store (2022: two stores) where we purchased the
freehold during the year. Following the purchase both the lease liabilities and right-of-use assets
relating to the stores were derecognised.
Minimum lease payments
Future undiscounted minimum payments under lease liabilities, exclusive of VAT, as at
31 December are as follows:
31 December 31 December
2023 2022
£’million £’million
Within one year
22
24
Due in one to five years
83
88
Due in more than five years
145
172
Total
250
284
Low value and short leases
During the year ended 31 December 2023 £0.3 million (2022: £0.2 million) was recognised in the
income statement with respect to assets of low value or a lease of less than 12 months.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 192Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
22. Leases Continued
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.
31 December 31 December
2023 2022
Receivable £’million £’million
Within one year
1
1
Due in one to five years
3
3
Due in more than five years
3
4
Total
7
8
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.
31 December 2023
31 December 2022
Total future Unearned Total future Unearned
minimum finance Present minimum finance Present
payments income value payments income value
£’million £’million £’million £’million £’million £’million
Within one year
6
(1)
5
6
(1)
5
Due in one to five years
10
(1)
9
9
(1)
8
Due in more than five years
–
–
–
–
–
–
Total
16
(2)
14
15
(2)
13
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.
2023 2022
£’million £’million
1 January
17
19
Released to the income statement
(1)
(2)
31 December
16
17
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.
Notes to the consolidated financial statements
Continued
193
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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
Description
Customer We are committed to doing the right thing but occasionally we identify
remediation 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 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
19
54. 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 Landlord and Tenant Act 1954, or sites within
the Landlord and Tenant Act 1954 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.
Legal and
regulatory
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.
Onerous Onerous contract provisions are recognised when the unavoidable costs of
contracts 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.
Restructuring Restructuring provisions are recognised at the point we have developed
a detailed formal paln and we have raised a valid expectation that it will
be implemented. This is typcially at the point the plan is announced to
affected colleagues.
Other
provisions
Other provisions consist of other sundry amounts that are provided for in
the ordinary course of our business.
2023
Customer Legal and Onerous Other
remediation Dilapidations regulatory contracts Restructuring provisions Total
£’million £’million £’million £’million £’million £’million £’million
1 January 2023
1
1
–
2
–
3
7
Additions
2
–
–
–
15
–
17
Released
–
–
–
–
–
(1)
(1)
Utilised
–
–
–
–
–
–
–
31 December 2023
3
1
–
2
15
2
23
2022
Customer Legal and Onerous Other
remediation Dilapidations regulatory contracts Restructuring provisions Total
£’million £’million £’million £’million £’million £’million £’million
1 January 2022
1
3
5
5
–
1
15
Additions
–
–
5
–
–
2
7
Released
–
(2)
–
(1)
–
–
(3)
Utilised
–
–
(10)
(2)
–
–
(12)
31 December 2022
1
1
–
2
–
3
7
No provision has been recognised in relation to any of the legal and regulatory matters set out
in note 32.
All additions for both the current and prior year have been recognised in the income statement.
Restructing provision
The restructuring provision provided for during the year relates the decision taken during the
year to reduce the number of colleagues across the business by 1,000. Affected colleagues left
the business in early 2024, with the associated provision being utilised.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 194Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
25. Other liabilities
31 December 31 December
2023 2022
£’million £’million
Trade creditors
1
1
Taxation and social security costs
8
9
Accruals
146
99
Deferred income
37
57
Other liabilities
75
64
Total other liabilities
267
230
Current portion
253
205
Non-current portion
14
25
1
1. Includes accrued interest payable.
26. Called-up share capital
Accounting policy
On issue of new shares, incremental directly attributable costs are shown in equity
as a deduction from the proceeds.
As at 31 December 2023, we had 672.7 million ordinary shares of 0.0001p (31 December 2022:
172.5 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
2023 our called-up share capital was £672.68 (31 December 2022: £172.54).
2023 2022
£’million £’million
1 January
–
–
Cancellation of Metro Bank PLC share capital
–
–
Issuance of Metro Bank Holdings PLC share capital
–
–
Bonus issuance
965
–
Capital reduction
(965)
–
Share issuance
–
–
31 December
–
–
1
1
2
1. The cancelled called-up share capital of Metro Bank PLC and new share capital of Metro Bank Holdings PLC
amount to £172 and as such have been rounded to £nil in the table above.
2. The called-up share capital of the equity issued during the year totalled £500 and as such has been rounded to
£nil in the table above.
Share premium
The share premium reserve is used to record the excess consideration of any shares we have
issued over the nominal share value.
2023 2022
£’million £’million
1 January
1,964
1,964
Cancellation of Metro Bank PLC share premium
(1,964)
–
Share issuance
150
–
Cost of share issuance
(6)
–
31 December
144
1,964
Redeemable preference shares
In addition to the share capital set out above Metro Bank Holdings PLC has £50,000 of
redeemable preference shares which were issued to Robert Sharpe (Chair) and Daniel Frumkin
(Chief Executive Officer) upon the initial incorporation of the legal entity on 29 September 2022.
These shares are in the process of being redeemed.
New holding company
As set out in note 1, on 19 May 2023, Metro Bank Holdings PLC became the listed entity and
new holding company of Metro Bank PLC. As part of the insertion of Metro Bank Holdings PLC,
the existing listed share capital and share premium of Metro Bank PLC was cancelled and the
share capital and share premium amounts transferred to retained earnings. Metro Bank PLC
subsequently issued the same number of new unlisted 0.0001p ordinary shares to Metro Bank
Holdings PLC. Each existing holder of Metro Bank PLC shares was issued with an equivalent
number of new shares in Metro Bank Holdings PLC, with the nominal value of 0.0001p, as part
of a share for share exchange.
The difference between the new nominal share capital in Metro Bank Holdings PLC and the
net assets of Metro Bank PLC was recognised in a merger reserve. This merger reserve was
capitalised through the allotment of 964,505,616 million special shares of 0.0001p each,
which were then subsequently reduced to provide the Metro Bank Holdings PLC with
distributable reserves.
Equity raise
In November 2023, we issued 500 million ordinary shares for consideration of £150 million.
Associated costs of £6 million have been offset against the amount raised.
Notes to the consolidated financial statements
Continued
195
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Metro Bank Holdings PLC Annual Report and Accounts 2023
27. Retained earnings
Retained earnings records our cumulative earnings since our formation, including the
accumulated earnings of our subsidiaries since they were acquired.
2023 2022
£’million £’million
1 January
(1,015)
(942)
Profit/(loss) for the year
29
(73)
Cancellation of Metro Bank PLC share capital and share premium
1,964
–
Issuance of Metro Bank Holdings PLC share capital
965
–
Capital reduction of Metro Bank Holdings PLC share capital
(965)
–
31 December
978
(1,015)
No dividends were paid or declared during the year (2022: none).
As at 31 December 2023 all of our retained earnings are distributable.
28. Other reserves
Merger reserve
2023 2022
£’million £’million
1 January
–
–
Issuance of Metro Bank Holdings PLC share capital
965
–
Bonus issuance
(965)
–
31 December
–
–
Share option reserve
The share option reserve is used to record movements in relation to share options awarded
under our Deferred Variable Reward and LTIP.
2023 2022
£’million £’million
1 January
20
18
Equity-settled share-based payment charges (note 7)
3
2
31 December
23
20
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.
2023 2022
£’million £’million
1 January
(13)
(5)
Changes in fair value
3
(10)
Deferred tax movements
(1)
2
31 December
(11)
(13)
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. 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 2022: less than £1 million) and therefore has not been separately disclosed as a
component of reserves due to its immaterial size.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 196Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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 Black-Scholes
and Monte Carlo models. 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 DVRP and 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 People and Remuneration
Committee. Standard share options are granted for no consideration, are not pensionable and
carry no voting rights.
Long Term Incentive Plan
The LTIP is the primary long-term incentive scheme for the members of our ExCo. 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 for senior
managers, primarily consisting of members of the our ExCo and other Material Risk Takers.
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. 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 in relation to both the DVRP and LTIP is available within the Remuneration Report.
Awards outstanding
The table below summarises the movements in the number of options outstanding and their
weighted average exercise price:
2023
2022
Weighted Weighted
average average
Number exercise Number exercise
of options price of options price
‘000 £ ‘000 £
Outstanding at 1 January
13,326
6.61
10,477
8.72
Granted
3,429
0.00
4,787
0.00
Exercised
(259)
0.03
(222)
0.00
Lapsed
(261)
10.46
(1,716)
1.96
Outstanding at 31 December
16,235
5.24
13,326
6.61
Exercisable at 31 December
7,931
10.54
6,658
12.35
1
1
1
1. Nominal price awards with exercise price of 0.0001p.
The average share price during 2023 was 94p (2022: 88p). For share options exercised during
the period, the weighted average share price at the date of exercise was 118p (2022: 93p).
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 are satisfied via the
issuance of new shares.
Total share-based compensation charges totalled £3.2 million in the year ended 2023 (2022:
£2.4 million).
Notes to the consolidated financial statements
Continued
197
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Metro Bank Holdings PLC Annual Report and Accounts 2023
29. Share-based payments Continued
Fair value of options granted
The number of options outstanding at year end was as follows:
2023
2022
Weighted Weighted
average average
Number remaining Number remaining
of options contractual of options contractual
Exercise price ‘000 life years ‘000 life years
£0.00
10,255
8.7
6,997
9.0
£0.93
2,011
6.3
2,116
7. 3
£7.94
654
5.2
660
6.2
£12.00
–
0.0
235
0.8
£13.00
60
0.2
60
1.2
£13.50
616
0.8
616
1.8
£14.00
194
n/a
194
n/a
£16.00
611
n/a
611
n/a
£20.00
444
2.2
444
3.2
£32.73
633
3.2
633
4.2
£35.36
757
4.2
760
5.2
Total
16,235
7. 3
13,326
7.3
1
1. Nominal price awards with exercise price of 0.0001p.
Notes to the consolidated financial statements
Continued
The total fair value of options granted in 2023 was £3.4 million (2022: £4.3 million), based on the
following assumptions:
2023
awards
Risk-free interest rate
3.44% to 4.03%
Expected life
1 to 7 years
Volatility
166%
Expected dividend yield
nil
Share price at grant date
£1.06
Exercise price
0.0001p
Volatility has been estimated by taking our share price volatility 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 awards granted post 2022, as these were only made to members of the
ExCo and other Material Risk Takers, the lapse assumption has been set at 0%. The fair value
charges recognised in the income statement for these scheme are adjusted annually to reflect
actual lapses. For all other schemes the lapse assumption is updated annually.
Governance Additional informationStrategic report Financial statements 198Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses
Accounting policy
We assess on a forward-looking basis the 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 the credit risk of loans and securities, with a provision for lifetime ECL recognised where the risk of default of an instrument has increased
significantly. Risk of default and ECL 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. ECL are calculated by multiplying three main components, being the PD, LGD and the EAD, discounted at the original
effective interest rate.
Key model inputs, judgements and estimates include:
• Consideration of when a SICR occurs.
• PD, LGD and EAD as well as their modelled impact.
• Macroeconomic scenarios and weightings applied.
Significant increase in credit risk
IFRS 9 requires a higher level of ECL to be recognised for underperforming loans. This is considered based on a staging approach:
Stage
Description
ECL recognised
Stage 1 Financial assets that have had no significant increase in credit risk since initial 12-month ECL
recognition or that have low credit risk (high quality investment securities only) at Total losses expected on defaults which may occur within the next 12 months.
the reporting date. Losses are adjusted for probability-weighted macroeconomic scenarios.
Stage 2 Financial assets that have had a significant increase in credit risk since initial Lifetime ECL
recognition but that do not have objective evidence of impairment. Losses expected on defaults which may occur at any point in a loan’s lifetime.
Losses are adjusted for probability-weighted macroeconomic scenarios.
Stage 3 Financial assets that are credit impaired at the reporting date. Lifetime ECL
A financial asset is credit impaired when it has met the definition of default. We Losses expected on defaults which may occur at any point in a loan’s lifetime.
Losses are adjusted for probability-weighted macroeconomic scenarios.
define default to have occurred when a loan is greater than 90 days past due or
where the borrower is considered unlikely to pay. Interest income is calculated on the carrying amount of the loan net of credit
allowance.
POCI Financial assets that have been purchased and had objective evidence of being Lifetime ECL
non-performing or credit impaired at the point of purchase. At initial recognition, POCI assets do not carry an impairment allowance. Lifetime
ECL are incorporated into the calculation of the asset’s effective interest rate.
Subsequent changes to the estimate of lifetime ECL are recognised as a loss
allowance.
Notes to the consolidated financial statements
Continued
199
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Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Accounting policy Continued
A SICR may be identified in a number of ways:
• Quantitative criteria — where the numerically calculated PD 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 either:
• A modification of the previous terms and conditions of the loan which the borrower is not considered able to comply with.
• 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
PD 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 PD is calculated for all loans based on historical 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.
Notes to the consolidated financial statements
Continued
Governance Additional informationStrategic report Financial statements 200Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Accounting policy Continued
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.
• 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 EAD.
PD, LGD and EAD are calculated and applied at an individual account level for secured lending. For unsecured lending, PD and EAD 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 ECL 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 four scenarios. These represent a ‘most likely outcome’, (the ‘Baseline’ scenario) and three, less likely, ‘Outer’ scenarios, referred to as an ‘Upside’, a
‘Downside’ and a severe downside scenario respectively. The Baseline scenario captures the most likely economic future; the Downside and severe downside scenarios reflect adverse economic
conditions; and the Upside scenario presents more favourable economic conditions.
Notes to the consolidated financial statements
Continued
201
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Accounting policy Continued
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 as at 31 December 2023 and 31 December 2022:
• UK interest rates (five-year mortgage rate).
• UK unemployment rates.
• UK HPI changes, year on year.
• UK GDP changes, year on year.
• UK commercial real estate index, year on year.
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, share 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 2023
is as follows:
• Baseline scenario: 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: 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: 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: 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 2023 were Baseline – 50%, Upside – 20%, Downside – 25% and Severe downside scenario – 5% (31 December 2022: Baseline – 50%,
Upside – 20%, Downside – 25% and Severe downside scenario – 5%).
Governance Additional informationStrategic report Financial statements 202Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Accounting policy Continued
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December 2023 and 31 December 2022 are as follows:
31 December 2023
31 December 2022
2024
2025
2026
2027
2023
2024
2025
2026
Interest rates (%) – Baseline
5.1%
4.7%
4.3%
4.2%
5.5%
4.4%
4.0%
4.0%
five-year mortgage rate Upside
5.3%
4.7%
4.3%
4.2%
5.3%
4.3%
4.0%
4.0%
Downside
3.7%
2.7%
2.6%
2.6%
5.5%
4.4%
3.6%
3.1%
Severe downside
3.3%
2.2%
2.2%
2.2%
5.8%
4.0%
3.4%
3.0%
UK unemployment (%) Baseline
4.6%
4.7%
4.7%
4.8%
4.3%
4.5%
4.5%
4.6%
Upside
4.1%
3.8%
3.9%
4.2%
3.9%
3.6%
3.7%
4.0%
Downside
6.5%
7.4%
7.4%
7.0%
6.2%
7. 2%
7.2%
6.8%
Severe downside
7.7%
8.5%
8.4%
8.1%
7.4%
8.3%
8.2%
7.9%
UK HPI – Baseline
(6.2%)
3.1%
4.7%
2.6%
(4.4%)
2.3%
4.8%
2.9%
% change year-on-year Upside
7.0%
6.3%
2.1%
(1.5%)
9.0%
5.4%
2.1%
(1.2%)
Downside
(16.5%)
(6.3%)
4.0%
5.4%
(14.9%)
(7.0%)
4.0%
5.7%
Severe downside
(22.2%)
(10.3%)
4.4%
4.1%
(20.7%)
(10.9%)
4.4%
4.3%
UK GDP – Baseline
0.4%
1.0%
1.3%
1.4%
(0.8%)
1.2%
1.4%
1.2%
% change year-on-year Upside
3.9%
1.2%
1.3%
1.4%
1.9%
1.2%
1.1%
1.2%
Downside
(5.6%)
1.3%
2.6%
1.4%
(6.9%)
1.3%
2.5%
1.2%
Severe downside
(7.1%)
(0.2%)
4.2%
2.4%
(8.3%)
(0.3%)
3.5%
2.1%
UK commercial real estate index, year-on-year – Baseline
(4. 2%)
0.8%
1.7%
(0.4%)
(8.2%)
(6.0%)
2.0%
1.4%
% change Upside
10.1%
3.3%
(1.3%)
(4. 3%)
3.2%
(3.6%)
(0.3%)
(2.2%)
Downside
(18.7%)
(5.3%)
3.0%
3.4%
(23.2%)
(11.9%)
5.1%
4.2%
Severe downside
(26.9%)
(7.4%)
4.9%
2.6%
(30.5%)
(14.8%)
6.9%
3.5%
Following the initial four-year projection period, the Upside, Downside and Severe 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 ECL 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.
Notes to the consolidated financial statements
Continued
203
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
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 ECL to be recognised for under-performing 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 SICR 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 SICR 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 SICR 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 expected 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.
Use of post model adjustments and overlays
We have applied expert judgement to the measurement of the ECL in the form of PMOs and PMAs.
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 account level.
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 70).
ECL assessment
We have applied Post Model Adjustments (PMAs) and Post Model Overlays (PMOs) in the assessment of ECL. PMAs supplement the models to account for where there are limitations in model
methodology or data inputs and PMOs accounts for downsides risks which are not fully captured through the economic scenarios. The appropriateness of PMAs and PMOs is subject to rigorous
review and challenge, including review by our Model Governance, Impairment Committee and Audit Committee.
The level of PMAs and PMOs has reduced in 2023 with the total percentage of ECL stock standing at 12% as at 31 December 2023 (31 December 2022: 16%).
No PMAs have been held as at 31 December 2023 as outstanding IFRS9 models have been implemented in production in 2023 resulting in previously held PMAs being removed:
• IFRS 9 retail mortgage secured LGD model (31 December 2023: £nil ; 31 December 2022: £0.1 million).
• IFRS 9 commercial business loans lifetime PD model scope extended to commercial Revolving facilities (31 December 2023: £nil ; 31 December 2022: £0.3 million).
PMOs have been reassessed during the period to ensure an appropriate level of ECL to account for the high level of macroeconomic uncertainty, following the cost of living pressures and stable
yet high interest rates, and anticipated property price falls.
Governance Additional informationStrategic report Financial statements 204Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Critical accounting judgement Continued
PMOs make up £23.4 million of the ECL stock as at 31 December 2023 (31 December 2022: £30.5 million) and comprise:
• High inflation environment and cost-of-living risks – Management overlays were introduced in 2022 to reflect high inflation and cost of living pressures, which are not fully captured through
the economic scenarios and IFRS9 models (31 December 2023: £16.0 million; 31 December 2022: £22.5 million). The reduction in 2023 is driven by underlying credit risk profile movements on
some individual cases resulting in previously held overlays now being released. This reflects the associated risks across the consumer and commercial portfolios. For commercial, the inflation
PMO has been assessed based on potential future individual customer migration of current Stage 1 lending migrating into Stage 2 and 3, based on an inflationary stress scenario. The overlay
assigned for the mortgage portfolio has been removed as it is now reflected in the new IFRS9 model as part of the model enhancement overlay mentioned below.
• Significant increase in credit risk (SICR) adjustment overlay – A negative overlay introduced in 2022 is still being held at December 2023. The SICR model for these portfolios is resulting in a
significant overstatement of stage 2 assets and the negative PMO is in place to account for this. These overlays will be removed once the IFRS9 PD Annual Model Reviews for both portfolios
are validated and implemented into production (scheduled in H1 2024) (31 December 2023: £7.4 million; 31 December 2022: £3.4 million).
• HPI and CRE adjustment – An overlay raised in 2022 is still being held at 31 December 2023 to reflect further downside risk in property price indices beyond the latest scenarios for the retail
mortgage and commercial property portfolios (31 December 2023: £3.4 million; 31 December 2022: £6.1 million). This overlay has been reduced in 2023 to offset the observed reduction in
HPI. However, management has continued to maintain an overlay to reflect the risk of further deterioration in property price falls (across HPI and CRE) as high base rates continue to be held
flat by the Bank of England.
• Climate change impact – An expert judgement overlay originally raised in 2021 has been revised for FY 2023 and reflects the impact of climate change on property values for the mortgage
and commercial portfolios (31 December 2023: £3.2 million; 31 December 2022: £3.5 million). The slight reduction in the overlay since December 2022 is due to the updated balance
movements for all portfolios across the period.
• Mortgage model enhancements – A PMO has been introduced in FY 2023 to reflect the new IFRS9 Mortgage PD and Staging models. This overlay will be removed once the IFRS9 PD and
Staging Annual Model Reviews are validated and implemented into production (scheduled in Q1 2024) (31 December 2023: £4.7 million; 31 December 2022: £nil).
• Commercial model enhancements – An overlay is held in anticipation of remaining model adjustments for the commercial portfolio (31 December 2023: £3.5 million; 31 December 2022:
£1.2 million). The increase in the overlay over the period is to reflect the impact from the anticipated new IFRS9 Commercial PD model and the Enhanced Business Overdrafts portfolio which
utilises the IFRS9 Commercial models as a proxy for ECL assessment.
We review our PMOs on an ongoing basis and reassess these based on the evolving economic outlook and observation of performance data.
All PMOs impact the ECL measurement, however not all adjust the staging.
Notes to the consolidated financial statements
Continued
205
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
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 ECL of a range of possible outcomes, calculated on a probability-weighted basis, based on a number of economic scenarios,
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.
• UK commercial real estate index, year on year.
The weightings applied to each scenario at 31 December 2023 and 31 December 2022 are:
31 December 31 December
2023 2022
Baseline
50%
50%
Upside
20%
20%
Downside
25%
25%
Severe downside
5%
5%
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):
Stage 1 Stage 2 Stage 3 Total
£’million £’million £’million £’million
Baseline
57
37
93
187
Upside
49
31
92
172
Downside
79
57
98
234
Severe downside
90
72
100
262
Weighted
63
43
93
199
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.
PMOs and individually assessed provisions are reflected in the above sensitivities as are any resulting movements in staging allocation.
Governance Additional informationStrategic report Financial statements 206Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Expected credit loss expense
2023 2022
£’million £’million
Retail mortgages
(1)
1
Consumer lending
33
33
Commercial lending
(20)
(16)
Investment securities
1
1
Write-offs and other movements
20
21
Total expected credit loss expense
33
40
1
1
1
1. Represents the movement in ECL allowance during the year and therefore excludes write-offs which are shown separately.
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 2023,
the loss allowance included within the FVOCI reserve is £0.1 million (31 December 2022: £0.1 million).
All investment securities held at amortised cost are deemed to be in Stage 1. The total ECL expense recognised for these assets at 31 December 2023 is £0.9 million (31 December 2022: £0.7 million).
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 2023, 80% (31 December
2022: 79%) of our loans consisted of retail mortgages and commercial term loans secured on collateral, with average DTV of 58% (31 December 2022: 56%) and 55% (31 December 2022: 55%)
respectively. A further 4% (31 December 2022: 6%) of our lending portfolio consists of BBLS, which although they do not have any collateral are 100% guaranteed by the Government. Further
details on the collateral of our loans can be found in the Risk report.
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. The modifications have not led to any material modification gains or losses being recognised.
Notes to the consolidated financial statements
Continued
207
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
The following tables explain the changes in both the gross carrying amount and loss allowances of our loans and advances during the year.
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2023
10,849
2,088
352
–
13,289
(66)
(51)
(70)
–
(187)
10,783
2,037
282
–
13,102
Transfers to/(from) Stage 1
872
(857)
(15)
–
–
(15)
15
–
–
–
857
(842)
(15)
–
–
Transfers to/(from) Stage 2
(581)
589
(8)
–
–
4
(6)
2
–
–
(577)
583
(6)
–
–
Transfers to/(from) Stage 3
(170)
(71)
241
–
–
3
4
(7)
–
–
(167)
(67)
234
–
–
Net remeasurement due to transfers
–
–
–
–
–
12
(13)
(38)
–
(39)
12
(13)
(38)
–
(39)
New lending
2,060
239
16
–
2,315
(18)
(6)
(6)
–
(30)
2,042
233
10
–
2,285
Repayments, additional drawdowns and
interest accrued
(685)
(172)
(40)
–
(897)
–
–
–
–
–
(685)
(172)
(40)
–
(897)
Derecognitions
(1,749)
(305)
(157)
–
(2,211)
13
10
26
–
49
(1,736)
(295)
(131)
–
(2,162)
Changes to model assumptions
–
–
–
–
–
4
4
–
–
8
4
4
–
–
8
31 December 2023
10,596
1,511
389
–
12,496
(63)
(43)
(93)
–
(199)
10,533
1,468
296
–
12,297
Off-balance sheet items
Commitments and guarantees
718
–
718
1
2
3
4
5
6
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2022
10,071
1,925
462
1
12,459
(47)
(49)
(73)
–
(169)
10,024
1,876
389
1
12,290
Transfers to/(from) Stage 1
517
(504)
(13)
–
–
(13)
13
–
–
–
504
(491)
(13)
–
–
Transfers to/(from) Stage 2
(45 1)
458
(7)
–
–
2
(2)
–
–
–
(449)
456
(7)
–
–
Transfers to/(from) Stage 3
(124)
(73)
197
–
–
1
7
(8)
–
–
(123)
(66)
189
–
–
Net remeasurement due to transfers
–
–
–
–
–
10
(10)
(15)
–
(15)
10
(10)
(15)
–
(15)
New lending
3,157
742
31
–
3,930
(30)
(15)
(11)
–
(56)
3,127
727
20
–
3,874
Repayments, additional drawdowns and
interest accrued
(604)
(107)
(26)
(1)
(738)
–
–
–
–
–
(604)
(107)
(26)
(1)
(738)
Derecognitions
(1,717)
(353)
(292)
–
(2,362)
7
10
34
–
51
(1,710)
(343)
(258)
–
(2,311)
Changes to model assumptions
–
–
–
–
–
4
(5)
3
–
2
4
(5)
3
–
2
31 December 2022
10,849
2,088
352
–
13,289
(66)
(51)
(70)
–
(187)
10,783
2,037
282
–
13,102
Off-balance sheet items
Commitments and guarantees
1,120
–
1,120
1
2
3
4
5
6
1. Represents stage transfers prior to any ECL remeasurements.
2. Represents the remeasurement between the 12-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.
6. Represents undrawn lending facilities. Further details can be found in note 31.
Governance Additional informationStrategic report Financial statements 208Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Retail mortgages
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2023
6,195
1,343
111
–
7,649
(6)
(11)
(3)
–
(20)
6,189
1,332
108
–
7,629
Transfers to/(from) Stage 1
745
(737)
(8)
–
–
(6)
6
–
–
–
739
(731)
(8)
–
–
Transfers to/(from) Stage 2
(193)
199
(6)
–
–
–
–
–
–
–
(193)
199
(6)
–
–
Transfers to/(from) Stage 3
(38)
(29)
67
–
–
–
–
–
–
–
(38)
(29)
67
–
–
Net remeasurement due to transfers
–
–
–
–
–
5
(2)
(2)
–
1
5
(2)
(2)
–
1
New lending
1,195
147
1
–
1,343
(1)
(1)
–
–
(2)
1,194
146
1
–
1,341
Repayments, additional drawdowns and
interest accrued
(177)
(18)
–
–
(195)
–
–
–
–
–
(177)
(18)
–
–
(195)
Derecognitions
(840)
(121)
(19)
–
(980)
1
1
–
–
2
(839)
(120)
(19)
–
(978)
Changes to model assumptions
–
–
–
–
–
–
1
(1)
–
–
–
1
(1)
–
–
31 December 2023
6,887
784
146
–
7,817
(7)
(6)
(6)
–
(19)
6,880
778
140
–
7,798
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2022
5,546
1,063
114
–
6,723
(2)
(12)
(5)
–
(19)
5,544
1,051
109
–
6,704
Transfers to/(from) Stage 1
293
(281)
(12)
–
–
(4)
4
–
–
–
289
(277)
(12)
–
–
Transfers to/(from) Stage 2
(199)
205
(6)
–
–
–
–
–
–
–
(199)
205
(6)
–
–
Transfers to/(from) Stage 3
(16)
(22)
38
–
–
–
1
(1)
–
–
(16)
(21)
37
–
–
Net remeasurement due to transfers
–
–
–
–
–
4
(1)
–
–
3
4
(1)
–
–
3
New lending
1,666
549
1
–
2,216
(3)
(7)
–
–
(10)
1,663
542
1
–
2,206
Repayments, additional drawdowns and
interest accrued
(130)
(22)
(5)
–
(157)
–
–
–
–
–
(130)
(22)
(5)
–
(157)
Derecognitions
(965)
(149)
(19)
–
(1,133)
(1)
2
3
–
4
(966)
(147)
(16)
–
(1,129)
Changes to model assumptions
–
–
–
–
–
–
2
–
–
2
–
2
–
–
2
31 December 2022
6,195
1,343
111
–
7,649
(6)
(11)
(3)
–
(20)
6,189
1,332
108
–
7,629
Notes to the consolidated financial statements
Continued
209
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Consumer lending
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2023
1,180
250
50
–
1,480
(21)
(12)
(42)
–
(75)
1,159
238
8
–
1,405
Transfers to/(from) Stage 1
34
(34)
–
–
–
(2)
2
–
–
–
32
(32)
–
–
–
Transfers to/(from) Stage 2
(182)
182
–
–
–
2
(2)
–
–
–
(180)
180
–
–
–
Transfers to/(from) Stage 3
(35)
(9)
44
–
–
1
2
(3)
–
–
(34)
(7)
41
–
–
Net remeasurement due to transfers
–
–
–
–
–
2
(6)
(28)
–
(32)
2
(6)
(28)
–
(32)
New lending
311
78
7
–
396
(9)
(4)
(6)
–
(19)
302
74
1
–
377
Repayments, additional drawdowns and
interest accrued
(217)
(111)
(10)
–
(338)
–
–
–
–
–
(217)
(111)
(10)
–
(338)
Derecognitions
(185)
(42)
(14)
–
(241)
3
2
12
–
17
(182)
(40)
(2)
–
(224)
Changes to model assumptions
–
–
–
–
–
(2)
2
1
–
1
(2)
2
1
–
1
31 December 2023
906
314
77
–
1,297
(26)
(16)
(66)
–
(108)
880
298
11
–
1,189
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2022
786
82
21
1
890
(18)
(8)
(16)
–
(42)
768
74
5
1
848
Transfers to/(from) Stage 1
19
(19)
–
–
–
(2)
2
–
–
–
17
(17)
–
–
–
Transfers to/(from) Stage 2
(96)
96
–
–
–
1
(1)
–
–
–
(95)
95
–
–
–
Transfers to/(from) Stage 3
(21)
(6)
27
–
–
1
2
(3)
–
–
(20)
(4)
24
–
–
Net remeasurement due to transfers
–
–
–
–
–
2
(3)
(15)
–
(16)
2
(3)
(15)
–
(16)
New lending
806
156
12
–
974
(15)
(7)
(9)
–
(31)
791
149
3
–
943
Repayments, additional drawdowns and
interest accrued
(144)
(41)
(6)
(1)
(192)
–
–
–
–
–
(144)
(41)
(6)
(1)
(192)
Derecognitions
(170)
(18)
(4)
–
(192)
5
1
1
–
7
(165)
(17)
(3)
–
(185)
Changes to model assumptions
–
–
–
–
–
5
2
–
–
7
5
2
–
–
7
31 December 2022
1,180
250
50
–
1,480
(21)
(12)
(42)
–
(75)
1,159
238
8
–
1,405
Governance Additional informationStrategic report Financial statements 210Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
30. Expected credit losses Continued
Commercial lending
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2023
3,474
495
191
–
4,160
(39)
(28)
(25)
–
(92)
3,435
467
166
–
4,068
Transfers to/(from) Stage 1
93
(86)
(7)
–
–
(7)
7
–
–
–
86
(79)
(7)
–
–
Transfers to/(from) Stage 2
(206)
208
(2)
–
–
2
(4)
2
–
–
(204)
204
–
–
–
Transfers to/(from) Stage 3
(97)
(33)
130
–
–
2
2
(4)
–
–
(95)
(31)
126
–
–
Net remeasurement due to transfers
–
–
–
–
–
5
(5)
(8)
–
(8)
5
(5)
(8)
–
(8)
New lending
554
14
8
–
576
(8)
(1)
–
–
(9)
546
13
8
–
567
Repayments, additional drawdowns and
interest accrued
(291)
(43)
(30)
–
(364)
–
–
–
–
–
(291)
(43)
(30)
–
(364)
Derecognitions
(724)
(142)
(124)
–
(990)
9
7
14
–
30
(715)
(135)
(110)
–
(960)
Changes to model assumptions
–
–
–
–
–
6
1
–
–
7
6
1
–
–
7
31 December 2023
2,803
413
166
–
3,382
(30)
(21)
(21)
–
(72)
2,773
392
145
–
3,310
Gross carrying amount
Loss allowance
Net carrying amount
£’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
1 January 2022
3,739
780
327
–
4,846
(27)
(29)
(52)
–
(108)
3,712
751
275
–
4,738
Transfers to/(from) Stage 1
205
(204)
(1)
–
–
(7)
7
–
–
–
198
(197)
(1)
–
–
Transfers to/(from) Stage 2
(156)
157
(1)
–
–
1
(1)
–
–
–
(155)
156
(1)
–
–
Transfers to/(from) Stage 3
(87)
(45)
132
–
–
–
4
(4)
–
–
(87)
(41)
128
–
–
Net remeasurement due to transfers
–
–
–
–
–
4
(6)
–
–
(2)
4
(6)
–
–
(2)
New lending
685
37
18
–
740
(12)
(1)
(2)
–
(15)
673
36
16
–
725
Repayments, additional drawdowns and
interest accrued
(330)
(44)
(15)
–
(389)
–
–
–
–
–
(330)
(44)
(15)
–
(389)
Derecognitions
(582)
(186)
(269)
–
(1,037)
3
7
30
–
40
(579)
(179)
(239)
–
(997)
Changes to model assumptions
–
–
–
–
–
(1)
(9)
3
–
(7)
(1)
(9)
3
–
(7)
31 December 2022
3,474
495
191
–
4,160
(39)
(28)
(25)
–
(92)
3,435
467
166
–
4,068
Notes to the consolidated financial statements
Continued
211
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
30. Expected credit losses Continued
Credit risk exposures
Total lending
31 December 2023
31 December 2022
£’million
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Up to date
10,553
1,342
123
12,018
10,819
1,943
103
12,865
1 to 29 days past due
43
54
15
112
30
59
12
101
30 to 89 days past due
–
115
43
158
–
86
40
126
90+ days past due
–
–
208
208
–
–
197
197
Gross carrying amount
10,596
1,511
389
12,496
10,849
2,088
352
13,289
Retail mortgages
31 December 2023
31 December 2022
£’million
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Up to date
6,885
695
37
7,617
6,194
1,289
33
7, 516
1 to 29 days past due
2
28
10
40
1
21
7
29
30 to 89 days past due
–
61
16
77
–
33
15
48
90+ days past due
–
–
83
83
–
–
56
56
Gross carrying amount
6,887
784
146
7,817
6,195
1,343
111
7,649
Consumer lending
31 December 2023
31 December 2022
£’million
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Up to date
900
297
3
1,200
1,172
235
3
1,410
1 to 29 days past due
6
2
–
8
8
2
–
10
30 to 89 days past due
–
15
7
22
–
13
5
18
90+ days past due
–
–
67
67
–
–
42
42
Gross carrying amount
906
314
77
1,297
1,180
250
50
1,480
Commercial lending
31 December 2023
31 December 2022
£’million
Stage 1
Stage 2
Stage 3
Total
Stage 1
Stage 2
Stage 3
Total
Up to date
2,768
350
83
3,201
3,453
419
67
3,939
1 to 29 days past due
35
24
5
64
21
36
5
62
30 to 89 days past due
–
39
20
59
–
40
20
60
90+ days past due
–
–
58
58
–
–
99
99
Gross carrying amount
2,803
413
166
3,382
3,474
495
191
4,160
Governance Additional informationStrategic report Financial statements 212Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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 2023, we had undrawn facilities granted to retail and commercial customers of
£718 million (31 December 2022: £1,120 million).
As part of our retail and commercial operations, this includes commitments of £327 million
(31 December 2022: £250 million) for 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.
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. This is because,
based on the facts currently known, it is not practicable to predict the outcome, if any, of these
matters or reliably estimate any financial impact. Their inclusion does not constitute any
admission of wrongdoing or legal liability.
Financial crime
The FCA is currently undertaking enquiries regarding our financial crime systems and controls.
We continue to engage and co-operate fully with the FCA in relation to these matters, and the
FCA’s enquiries remain ongoing.
Magic Money Machine litigation
In 2022 Arkeyo LLC, a software company based in the United States, filed a civil suit with a
stated value of over £24 million against us in the English High Court alleging, among other
matters, that we infringed their copyright and misappropriated their trade secrets relating to
money counting machines (i.e. our Magic Money Machines).
We believe Arkeyo LLC’s claims are without merit and are vigorously defending the claim.
Notes to the consolidated financial statements
Continued
213
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
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 2023
31 December 2022
Effects of offsetting Effects of offsetting
on the balance sheet on the balance sheet
Net amounts Net amounts
Gross amounts presented Gross amounts presented
Gross offset in the in the balance Gross offset in the in the balance
amount balance sheet sheet amount balance sheet sheet
Assets £’million £’million £’million £’million £’million £’million
Loans and advances to customers
12,297
–
12,297
13,102
–
13,102
Investment securities
1
4,879
–
4,879
5,914
–
5,914
Derivative financial assets
67
(31)
36
–
–
–
Deferred tax assets
17
(17)
–
16
(16)
–
Other assets
108
–
108
73
–
73
Liabilities
Derivative financial liabilities
31
(31)
–
26
–
26
Repurchase agreements
1,191
–
1,191
238
–
238
Deposits from central banks
3,050
–
3,050
3,800
–
3,800
Deferred tax liabilities
30
(17)
13
28
(16)
12
1
2
1
1
1. We have pledged £6,110 million (2022: £5,286 million) against repos, deposits from central banks and other assets as encumbered collateral which can be called upon in the event of default.
2. Includes £50 million (2022: £39 million) pledged as cash collateral. None of the cash collateral has been offset in the Balance Sheet.
Governance Additional informationStrategic report Financial statements 214Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
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, and 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 inputs that are significant to the measurement as whole.
31 December 2023
31 December 2022
With With
Quoted Using significant Quoted Using significant
market observable unobservable market observable unobservable
Carrying price inputs inputs Total fair Carrying price inputs inputs Total fair
value Level 1 Level 2 Level 3 value value Level 1 Level 2 Level 3 value
£’million £’million £’million £’million £’million £’million £’million £’million £’million £’million
Assets
Loans and advances to customers
12,297
–
–
12,156
12,156
13,102
–
–
12,321
12,321
Investment securities held at fair value through other comprehensive income
476
476
–
–
476
571
533
38
–
571
Investment securities held at amortised cost
4,403
3,143
1,072
–
4,215
5,343
3,834
1,135
40
5,009
Financial assets held at fair value through profit and loss
–
–
–
–
–
1
–
–
1
1
Derivative financial assets
36
–
36
–
36
23
–
23
–
23
Liabilities
Deposits from customers
15,623
–
–
15,622
15,622
16,014
–
–
16,004
16,004
Deposits from central bank
3,050
–
–
3,050
3,050
3,800
–
–
3,800
3,800
Debt securities
694
–
585
–
585
571
423
–
–
423
Derivative financial liabilities
–
–
–
–
–
26
–
26
–
26
Repurchase agreements
1,191
–
–
1,191
1,191
238
–
–
238
238
Notes to the consolidated financial statements
Continued
215
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
34. Fair value of financial instruments Continued
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 tables. Their carrying amount is a reasonable approximation of fair value.
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 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. They are measured at the fair value of the
amounts that we expect to recover on these loans.
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 either short-dated or are on a variable rate
which aligns to the current market rate.
Derivative financial assets and liabilities
The fair values of derivatives are obtained from discounted cash flow models as appropriate.
35. Related parties
Related persons
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 ExCo are considered to be the key management personnel for
disclosure purposes.
Controlling shareholder
Following the completion of our capital raise in November 2023, Jaime Gilinski Bacal, via Spaldy
Investments Limited, a company of which he is the sole director and shareholder, became the
controlling shareholder of Metro Bank Holdings PLC (see note 7 to the Company financial
statements for further details). Given his control over the Group, Jaime Gilinski Bacal, Spaldy
Investments Limited and persons connected to them are also considered to be related parties
as at 31 December 2023.We have a relationship agreeement with our controlling shareholder
which be viewed on our website. More information on the independence of our controlling
shareholder can be found on page 122.
Key management compensation
Total compensation cost for key management personnel for the year by category of benefit was
as follows:
2023 2022
£’million £’million
Short-term benefits
5.4
6.2
Post-employment benefits
0.1
0.1
Share-based payment costs
0.9
1.8
Termination benefits
0.9
0.3
Total compensation for key management personnel
7. 3
8.4
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 ‘Share-based Payment’ charge for the
year which includes awards granted in prior years that have not yet vested.
Termination benefits includes the costs assocaited with the exit of key management personnel
agreed and fully provided for as at the year-end, even where this was paid after the balance
sheet date.
Banking transactions with key management personnel
We provide banking services to Directors and other key management personnel and persons
connected to them.
Governance Additional informationStrategic report Financial statements 216Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
35. Related parties Continued
Deposit transactions during the year and the balances outstanding as at 31 December 2023 and
31 December 2022 were as follows:
2023 2022
£’million £’million
Deposits held at 1 January
1.5
1.5
Deposits relating to persons and companies newly considered
related parties
–
0.2
Deposits relating to persons and companies no longer considered
related parties
(0.5)
(0.3)
Net amounts deposited/(withdrawn)
–
0.1
Deposits held as at 31 December
1.0
1.5
Loan transactions during the year and the balances outstanding as at 31 December 2023 and
31 December 2022 were as follows:
2023 2022
£’million £’million
Loans outstanding at 1 January
2.1
3.2
Loans issued during the year
–
0.2
Net repayments during the year
–
(1.3)
Loans outstanding as at 31 December
2.1
2.1
Interest received on loans (£’000)
35
60
There were two (31 December 2022: two) loans outstanding at 31 December 2023 totalling
£2.1 million (31 December 2022: £2.1 million). Both are residential mortgages secured on
property; 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 as at 31 December 2023 and 31 December 2022 were
as follows:
2023 2022
£’000 £’000
Credit cards outstanding as at 31 December
3
7
As with all of our lending we recognise an ECL on loans and credit card balances outstanding
with key management personnel. As at 31 December 2023 the only ECL recognised on the
balances above was our standard modelled ECL with no individual impairments recognised
(31 December 2022: £nil). We have not written off any balances to key management personnel
in either 2022 or 2023.
36. Earnings per share
Basic earnings per share is calculated by dividing the profit/(loss) attributable to our ordinary
equity holders by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share has been calculated by dividing the profit/(loss) attributable to our
ordinary equity holders 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 were loss making during the year
ended 31 December 2022 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 earnings per share for 2022.
In the year ended 31 December 2023, 6.5 million share options were excluded from the weighted
average number of shares due to these being antidilutative.
2023
2022
Profit/(loss) attributable to ordinary equity holders (£’million)
29.5
(72.7)
Weighted average number of ordinary shares in issue (thousands)
–
Basic
214,297
172,464
Adjustment for share awards
6,459
–
Diluted
220,756
172,464
Earnings per share (pence)
Basic
13.8
(42.2)
Diluted
13.4
(42. 2)
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 loss per share.
Notes to the consolidated financial statements
Continued
217
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the consolidated financial statements
Continued
37. Non-cash items
The table below sets out the non-cash items included in profit/(loss) before tax. These have
been adjusted for in the cash flow statements on page 170.
2023 2022
£’million £’million
Interest receivable
(856)
(564)
Interest paid
444
160
Depreciation and amortisation
78
77
Impairment and write-offs of property, plant, equipment
and intangible assets
5
10
Expected credit loss expense
33
40
Share option charge
3
2
Grant income recognised in the income statement
(2)
(2)
Amounts provided for (net of amounts released)
16
4
Haircut on Tier 2 debt
(100)
–
Gain on sale of assets
3
–
Total adjustments for non-cash items
(376)
(273)
38. Post balance sheet events
There have been no material post balance sheet events.
Governance Additional informationStrategic report Financial statements 218Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Years ended 31 December
Notes
2023
£’million
2022
£’million
Cash and balances with the Bank of England 2 –
Financial assets held at fair value through profit and loss 2 585 –
Investment in subsidiaries 3 682 –
Prepayments and accrued income 7 –
Total assets 1,276 –
Debt securities 4 670 –
Other liabilities 33 –
Total liabilities 703 –
Called-up share capital 5 – –
Share premium 5 144 –
Retained earnings 406 –
Share option reserve 23 –
Total equity 573 –
Total equity and liabilities 1,276 –
1. The Company loss for the year was £536.5 million (2022: £nil).
The accompanying notes form an integral part of these financial statements. They were approved by the Board of Directors on 16 April 2024 and signed on its behalf by:
Robert Sharpe Daniel Frumkin
Chair Chief Executive Officer
Company balance sheet
As at 31 December 2023
219
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Company statement of changes in equity
For the year ended 31 December 2023
Called-up
share
capital
£’million
Share
premium
£’million
Merger
Reserve
£’million
Retained
earnings
£’million
Share
option
reserve
£’million
Total
equity
£’million
Balance as at 1 January 2023 – – – – – –
Loss and total comprehensive loss for the year – – – (537) – (537)
Net share option movements – – – – 1 1
Cancellation of Metro Bank PLC share capital and share premium – – – – – –
Issuance of Metro Bank Holdings PLC share capital – – 965 – – 965
Bonus issuance 965 – (965) – – –
Capital reduction of Metro Bank Holdings PLC share capital (965) – – 965 – –
Transfer of share option reserve – – – (22) 22 –
Shares issued – 150 – – – 150
Cost of shares issued – (6) – – – (6)
Balance as at 31 December 2023 – 144 – 406 23 573
Company incorporated on 29 September 2022 – – – – –
Issuance of shares – – – – –
Balance as at 31 December 2022 – – – – –
Notes 5 5
The accompanying notes form an integral part of these financial statements.
Governance Additional informationStrategic report Financial statements 220Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Years ended 31 December
2023
£’million
2022
£’million
Reconciliation of loss before tax to net cash flows from operating activities:
Loss before tax (537) –
Adjustments for non-cash items
Interest receivable (24) –
Interest paid 25 –
Fair value movements 88 –
Impairment loss on investment in subsidiary 428 –
Interest received 17 –
Interest paid (16) –
Changes in other operating assets (7) –
Changes in other operating liabilities 33 –
Net cash inflows from operating activities 7 –
Cash flows from investing activities
Issuance of equity to subsidiary (144) –
Issuance of debt to subsidiaries (175) –
Net cash outflows from investing activities (319) –
Cash flows from financing activities
Share issuance 150 –
Cost of share issuance (6) –
Debt issuance 175 –
Cost of debt issuance (5) –
Net cash inflows from financing activities 314 –
Net increase in cash and cash equivalents 2 –
Cash and cash equivalents at start of year – –
Cash and cash equivalents at end of year 2 –
The accompanying notes form an integral part of these financial statements.
Company cash flow statement
For the year ended 31 December 2023
221
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Notes to the company
financial statements
1. Basis of preparation and significant accounting policies
1.1 General information
The separate financial statements of the Company are presented as required by the Companies
Act 2006. The basis of preparation and principal accounting policies adopted are the same as
those set out in within the Group’s consolidated financial statements, aside from the accounting
policy in relation to share-based payments. For the Company, the cost of the awards are
recognised on a straight-line basis to investment in subsidiaries (with a corresponding increase
in the share-based payment reserve within equity) over the vesting period in which the
employees become unconditionally entitled to the awards.
Incorporation of Metro Bank Holdings PLC
The Company was incorporated on 29September 2022 as MB Group TopCo PLC with £50,000
of redeemable preference shares and £2 of ordinary shares, which were issued to Robert Sharpe
(Chair) and Daniel Frumkin (Chief Executive Officer). On 12December 2022, the Company
changed its name to Metro Bank Holdings PLC. The Company remained a dormant company
with no trading activities until the 19May 2023, when it was inserted as the new ultimate holding
company and listed entity of the Group.
The Company’s main activity consists of holding the Group’s external regulatory debt and share
capital which is then downstreamed to Metro Bank PLC to meet the Bank of England’s resolution
requirements.
The Company adopted the predecessor value method with an investment in subsidiary of
MetroBank PLC being the book value of the balance sheet in Metro Bank PLC at the date of
insertion. As part of this the share option reserve was transferred from Metro Bank PLC to the
Company at its carrying amount on the same day.
1.2 Critical accounting 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 2023 are appropriate and that these financial statements
therefore present our financial position and results 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:
Area Estimates Judgements Further details
Impairment of
investments in
subsidiaries
Key assumptions used
for VIU calculations
n/a Note 3
2. Financial assets held at fair value through profit and loss
The financial assets held at fair value through profit and loss consist solely of intercompany
loans used for downstreaming regulatory debt issued by the Company to Metro Bank PLC.
In line with resolution requirements these internal agreements incorporate the Bank of England’s
Statement of Policy giving the Bank of England power to write down the par value of the loans
or convert the loans into equity. As such the intercompany loans fail the ‘solely payments of
principal and interest’ test under IFRS 9 and have a mandatory classification of fair value
through profit andloss.
The measurement of these assets is consistent with the measurement approach used to
determine the fair value of the debt securities as set out in note 34 to the Group’s consolidated
financial statements.
Governance Additional informationStrategic report Financial statements 222Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
3. Investment in subsidiaries
Accounting policy
The Company’s only directly held subsidiary is that of Metro Bank PLC, which was recognised
on 19 May 2023. The value of the subsidiary was recognised using the predecessor value
method as set out in note 1.
At the end of each reporting period, the investment in the subsidiary is tested for impairment
when there is an indication that the investment may be impaired. An impairment is
recognised when the carrying amount exceeds the recoverable amount for that investment.
The recoverable amount is the higher of the investment’s fair value less costs of disposal and
its VIU, in accordance with the requirements of IAS 36. The VIU is calculated by discounting
management’s cash flow projections for the investment. The cash flows represent the free
cash flows based on the subsidiary’s binding capital requirements.
Critical accounting estimate
Impairment of investment in subsidiary
The review identified that the carrying amount exceeded the VIU and that an impairment
in the investment in Metro Bank PLC, the Company’s only directly held subsidiary, of
£428million was required, which reduced the carrying amount to £682 million.
Key assumptions used for VIU calculations
The rate used to discount the cash flows is based on the cost of capital related to the
investment, which is derived using a capital asset pricing model and market implied cost of
equity. A discount rate of 17.50% (31 December 2022: n/a) has been used in the VIU. In
determining the discount rate, management has used judgement and applied the Group’s
cost of equity, as this represents a proxy for the subsidiary’s cost of equity given it represents
substantially all of the Group.
The impairment assessment is most sensitive to the discount rate. A 2% increase or decrease in
the discount rate would increase and decrease the impairment amount by £119 million and
£160million respectively. Reducing the discount rate to 13.2% eliminates the impairment entirely.
The profitability and growth rates applied are consistent with those used in the Group’s
impairment assessment as set out in note 15 to the Group’s consolidated financial statements.
Increasing the free cash flows used in the VIU calculation by 10% would reduce the
impairment by £68 million and decreasing the free cash flows used in the VIU calculation by
10% would increase the impairment by £68 million.
As the investment is eliminated upon consolidation within the Group’s financial statements, it
has no impact on the Group’s capital position or regulatory ratios.
The Company had the following subsidiaries at 31December 2023:
Name
Country of
incorporation
and place of
business Nature of business
Proportion
of ordinary
shares
directly
held by the
Parent (%)
Proportion
of ordinary
shares
directly
held by the
Group (%)
Metro Bank PLC UK Retail banking 100% –
SME Invoice Finance Limited UK Invoice financing – 100%
SME Asset Finance Limited UK Asset financing – 100%
RDM Factors Limited UK Dormant – 100%
All of the Company’s subsidiaries have their registered address at One Southampton Row, London, WC1B 5HA.
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.
On implementation of the Holding company, the group adopted predecessor accounting as
explained on page 222. The investment in Metro Bank PLC was recorded at the carrying value
ofthe net assets of the bank on acquisition which was £965 million. In November 2023, the
Company issued 500.0 million ordinary shares for consideration of £150 million, with associated
costs of £6 million having been offset against the amount raised (see note 26 to the Group’s
financial statements for further details). In line with the resolution requirements, Metro Bank PLC
issued 500.0 million new shares for consideration of £144 million to the Company to allow the
proceeds of the capital raised to be downstreamed. An impairment of £428 million was
recognised at year end.
Notes to the company
financial statements
Continued
223
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Metro Bank Holdings PLC Annual Report and Accounts 2023
3. Investment in subsidiaries Continued
Transactions between the Company and Group subsidiaries
In addition to the intercompany loans used for downstreaming regulatory debt set out in note 2,
Metro Bank PLC provides the Company with a small amount of operational funding. The
amounts outstanding as at 31December 2023, primarily relate to the costs of the capital raise
inNovember 2023 which were paid by Metro Bank PLC on the Company’s behalf.
As at 31December 2023 Metro Bank PLC had £7million of accrued interest payable to the
Company on the internal debt instruments used for downstreaming the regulatory debt. The
timing of interest payments on these internal instruments is aligned to the interest payment
dates on the external debt securities (see note 4).
2023
£’million
2022
£’million
Amounts owed by Metro Bank PLC 7 –
Amounts owed to Metro Bank PLC 24 –
The transactions above are eliminated upon consolidation within the Group’s financial statements.
4. Debt securities
Details of the Company’s debt securities in issue can be found in note 20 to the Group’s
consolidated financial statements.
Hedge accounting is not applicable to the debt securities in issue at the Company level.
5. Called-up share capital
As set out in note 1 the Company was incorporated on 29September 2022 with £50,000 of
redeemable preference shares and £2 of ordinary shares. The £2 of ordinary shares have since
been redeemed with the £50,000 of preference shares in the process of being redeemed.
As at 31December 2023 the Company had 672.7million ordinary shares of 0.0001p authorised
and in issue. Further details on the Company’s called-up share capital can be found in note 26 to
the Group’s consolidated financial statements.
6. Directors and employees
The Company has no employees. Metro Bank PLC provides the Company with employee
services and bears the costs, associated with the Directors of the Company. These costs are not
recharged to the Company.
7. Controlling party
As at 31December 2023 the controlling party of Metro Bank Holdings PLC was Jaime Gilinski
Bacal, through Spaldy Investments Limited a company registered in the British Virgin Islands
and of which he is the sole director and shareholder.
The registered office of Spaldy Investments Limited is at the offices of Aleman, Cordero,
Galindo & Lee Trust (BVI) Limited, 3rd Floor, Yamraj Building, Market Square, P.O. Box 3175,
Road Town, Tortola, British Virgin Islands.
Notes to the company
financial statements
Continued
Governance Additional informationStrategic report Financial statements 224Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
In this section
226 Country-by-country report
227 Independent auditors’ report to the Directors of
Metro Bank Holdings PLC (on country-by-country
information)
229 Other disclosures
230 Alternative performance measures
235 Abbreviations
236 Shareholder information
Additional information
225
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Country-by-country report
The reporting obligations set out in the 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 Group 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:
UK
Number of employees (average full-time equivalent) 4,286
Turnover (£’million) 648.9
Profit before tax (£’million) 30.5
Tax expense (£’million) (1.0)
Corporation tax paid (£’million) 0.8
No public subsidies were received during the year.
Basis of preparation
Country
Metro Bank Holdings PLC and its subsidiaries only operate within the UK and are all UK
registeredentities.
Full-time equivalent employees
FTE employees 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 FTE employee, all of which were employed in the UK.
Turnover and profit before tax
Turnover and loss before tax are compiled from the Metro Bank Holdings PLC consolidated
financial statements for the year ended 31December 2023, which are prepared in accordance
withIFRS. 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
2023. 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.
• Brought forward losses from previous years that were used to extinguish a portion
ofitstaxable profits.
• Other differences between when income and expenses are accounted for under IFRS and
when they become taxable.
Governance Additional informationStrategic report Financial statements 226Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report to the
directorsofMetroBank Holdings PLC
Report on the audit of the country-by-country information
Opinion
In our opinion, Metro Bank Holdings plc’s (the “Group”) country-by-country information for
theyear ended 31 December 2023 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 2023 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:
• Understanding the Directors’ going concern assessment process, including the preparation
and approval of the budget. We obtained management’s Board approved forecast covering
the period of the going concern assessment to 30 June 2025. We evaluated the forecasting
method adopted by the Directors in assessing going concern;
• Evaluation of management’s financial and regulatory capital forecasts. We checked the
mathematical accuracy of the model and evaluated the key assumptions using our
understanding of the Group and external evidence where appropriate. We used our Prudential
Regulatory experts to review the Bank’s risk weighted assets and forecast capital requirement
assumptions. We also performed a comparison of the 2023 budget and the actual results to
assess the accuracy of the budgeting process;
• Evaluation of the appropriateness of management’s severe but plausible scenario using our
firm’s economics experts and our understanding of the Bank and the external environment.
We evaluated management’s assumptions by performing an independent stress test to
determine whether a reasonable alternative stressed scenario would result in a breach of
minimum regulatory requirements;
• Considering the mitigating actions that management identified, including the reduction of
costs and slowing down the origination of new loans and advances, and assessing whether
these were in the control of management and possible in the going concern period of
assessment;
• Reviewing management’s stress testing of liquidity and evaluation of the impact on liquidity of
past stress events. We substantiated the liquid resources held, and liquidity facilities available
to the group, for example, with the Bank of England. We also reconciled Metro Bank Holdings
PLC’s liquidity position to its regulatory liquidity reporting returns;
• Reviewing correspondence between the Bank and its regulators and we met with the PRA
during the audit and understood the PRA’s perspectives on the Bank’s risks and its capital and
liquidity position; and
• Assessing the adequacy of disclosures in the Going Concern statement in note 1 of the
Consolidated and Company Financial Statements and within the Assessment of going
concern section of the Viability statement on page 50 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 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.
227
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Independent auditors’ report to the directors
ofMetroBank Holdings PLC
Continued
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) and Prudential Regulatory Authority (PRA) 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 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 and holding discussions 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 respect of the
determination of allowance for expected credit losses on loans and advances to customers,
the carrying value of non-financial assets and the carrying value of the investment in
subsidiary; and
• Identifying and testing journal entries including those posted by infrequent or unexpected
users, related to significant one off or unusual transactions, as well as year-end provisions or
write downs 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.
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
16 April 2024
Governance Additional informationStrategic report Financial statements 228Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Other disclosures (unaudited)
Reconciliation of statutory balance sheet to risk-weighted asset
31December 2023 31December 2022
Financial
statements
£’million
Average risk
density
%
Risk-
weighted
assets
£’million
Financial
statements
£’million
Average risk
density
%
Risk-
weighted
assets
£’million
Cash and balances with the Bank of England 3,891 1% 44 1,956 2% 30
Loans and advances to customers 12,297 46% 5,597 13,102 45% 5,949
Investment securities held at FVOCI 476 2% 11 571 4% 20
Investment securities held at amortised cost 4,403 4% 187 5,343 4% 215
Financial assets held at fair value through profit and loss – – – 1 – –
Derivative financial assets 36 – – 23 – –
Property, plant and equipment 723 100% 723 748 100% 748
Intangible assets 193 – – 216 – –
Prepayments and accrued income 118 43% 51 85 47% 40
Deferred tax assets¹ 3 267% 8 1 100% 1
Other assets 108 96% 104 73 89% 65
Total assets 22,248 30% 6,725 22,119 32% 7,073
Off-balance sheet assets 79 169
Credit risk (excluding counterparty credit risk) 6,804 7, 242
Counterparty credit risk 26 9
Market risk – –
Operational risk 703 739
Total risk-weighted assets 7,533 7,990
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.
229
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Metro Bank Holdings PLC Annual Report and Accounts 2023
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 under which we report. Thesemeasures are
consistent with those used by management to assess underlying performance.
These alternative performance measures have been defined below:
Metric KPI
Scorecard
measure LTIP Definition
Cost of deposits Yes No No Interest expense on customer deposits divided by the average deposits
from customers for the year.
2023
£’million
2022
£’million
Interest on customer deposits (note 2) 147.8 32.9
Average deposits from customer 15,237 16,351
Cost of deposits 0.97% 0.20%
Cost of risk Yes Yes No Expected credit loss expense divided by average gross loans.
2023
£’million
2022
£’million
Expected credit loss expense (note 30) 33.2 39.9
Average gross lending 12,778 12,611
Cost of risk 0.26% 0.32%
Coverage ratio No No No Expected credit losses as a percentage of gross loans.
2023
£’million
2022
£’million
Expected credit losses (note 12) 199 187
Gross loans and advances to customers (note 12) 12,496 13,289
Coverage ratio 1.59% 1.41%
Retail mortgages
2023
£’million
2022
£’million
Expected credit losses – retail mortgages (note 12) 19 20
Gross retail mortgage lending (note 12) 7,817 7,649
Coverage ratio 0.24% 0.26%
Consumer
2023
£’million
2022
£’million
Expected credit losses – consumer (note 12) 108 75
Gross consumer lending (note 12) 1,297 1,480
Coverage ratio 8.33% 5.07%
Commercial
2023
£’million
2022
£’million
Expected credit losses – commercial (note 12) 72 92
Gross commercial lending (note 12) 3,382 4,160
Coverage ratio 2.13% 2.21%
Governance Additional informationStrategic report Financial statements 230Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
Metric KPI
Scorecard
measure LTIP Definition
Loan-to-deposit ratio Yes No No 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.
2023
£’million
2022
£’million
Net loans and advances to customers (note 12) 12,297 13,102
Deposits from customer (note 18) 15,623 16,014
Loan-to-deposit ratio 79% 82%
Net interest margin No No No Net interest income as a percentage of average interest-earning assets.
2023
£’million
2022
£’million
Net interest income (note 2) 411.9 404.1
Average interest-earning assets 20,786 21,029
Net interest margin 1.98% 1.92%
Non-performing loan ratio No No No Gross balance of loans in stage 3 (non-performing loans) as a percentage of gross loans as at year end.
Total book
2023
£’million
2022
£’million
Stage 3 loans (note 30) 389 352
Loans and advances to customers (note 12) 12,496 13,289
Non-performing loan ratio 3.11% 2.65%
Retail mortgages
2023
£’million
2022
£’million
Stage 3 loans – retail mortgages (note 30) 146 111
Gross retail mortgage lending (note 12) 7,817 7,649
Non-performing loan ratio – retail mortgages 1.87% 1.45%
Consumer
2023
£’million
2022
£’million
Stage 3 loans – consumer (note 30) 77 50
Gross consumer lending (note 12) 1,297 1,480
Non-performing loan ratio – consumer 5.94% 3.38%
Commercial
2023
£’million
2022
£’million
Stage 3 loans – commercial (note 30) 166 191
Gross commercial lending (note 12) 3,382 4,160
Non–performing loan ratio - commercial 4.91% 4.59%
231
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
Metric KPI
Scorecard
measure LTIP Definition
Return on tangible equity Yes No Yes Statutory profit after tax as a percentage of average tangible equity
(average total equity less intangible assets).
2023
£’million
2022
£’million
Statutory profit after tax (Consolidated statement of comprehensive income) 29.5 (72.7)
Average tangible equity 795 749
Return on tangible equity 4% (10%)
Statutory cost:income ratio Yes Yes No Statutory total operating expenses as a percentage of statutory total income.
2023
£’million
2022
£’million
Total operating expenses (Consolidated statement of comprehensive income) 585.2 554.3
Total income (Consolidated statement of comprehensive income) 648.9 523.5
Statutory cost:income ratio 90% 106%
Total shareholder return Yes No Yes Total capital gains and dividends returned to investors over a three-year rolling period.
2023 2022
Share price at the start of the three-year period 126p 205p
Share price at the end of the three-year period 37p 121p
Total shareholder return¹ (71%) (41%)
1. No dividends were paid in either period
Underlying cost:income ratio No No No Underlying total operating expenses as a percentage of underlying total income.
2023
£’million
2022
£’million
Total underlying operating expenses (page 234) 530.2 532.8
Total underlying income (page 234) 546.5 522.1
Underlying cost:income ratio 97% 102%
Underlying loss Yes Yes No 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.
Details of the calculation of underlying loss can be found on pages 233 to 234.
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.
Governance Additional informationStrategic report Financial statements 232Risk report
Non-underlying item Description Reason for exclusion
Impairment and
write-offs of property,
plant, equipment
andintangibleassets
The costs associated with non-current assets that are either no longer
being used by or are no longer generating future economic benefit for the
business.
The impairments and write-offs relating to property, plant, equipment and
intangible assets are 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.
Net C&I 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.
The commitments under the Capability and Innovation Fund continue through
to 2025. The costs associated with fulfilling 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.
Remediation costs Remediation costs consists of money spent in relation to the RWA
adjustment including the associated investigations by the PRA and FCA
(2022 only) as well as work undertaken in relation to financial crime.
The remediation costs are felt to be time limited and will disappear once the
investigations have concluded, as such these are removed to allow greater
comparability between periods.
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.
The transformation costs are seen as a nonrecurring cost stream aimed at
addressing the challenges the business faces. These are therefore removed in
order to prevent year-on-year distortion.
Holding company
insertion costs
Costs associated with the establishment and insertion of a
holding company (Metro Bank Holdings PLC) above the operating
company(MetroBank PLC) to meet regulatory requirements.
During 2022 we started work on implementing our new holding company,
which we sucessfully completed in May2023. As such no further associated
costs will be recognised in 2024.
Capital raise and
refinancing
(2023 only)
In November 2023 shareholders approved a £925 million capital package
which consisted of £150 million of new equity, £175 million of new MREL-
eligible debt and £600 million of debt refinancing. Costs associated
with the refinancing were expensed to the income statement, including
the impact of discontinuing the previous hedge relationships. Alongside
this a £100 million gain was recognised on the haircut agreed by Tier 2
bondholders.
The nature of the capital package meant it was both significant and one-off and
as such will not see any additional costs recur in relation to this.
Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
233
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Alternative performance measures (unaudited)
Continued
A reconciliation from statutory profit/(loss) before tax to underlying loss before tax is set out below.
Year ended 31December 2023
Statutory
basis
£’million
Impairment
and write-off of
property, plant,
equipment
and intangible
assets
£’million
Net C&I
costs
£’million
Transformation
costs
£’million
Remediation
costs
£’million
Holding
company
insertion costs
£’million
Capital
raise and
refinancing
£’million
Underlying
basis
£’million
Net interest income 411.9 – – – – – – 411.9
Net fee and commission income 90.4 – – – – – – 90.4
Net gains on sale of assets 2.7 – – – – – – 2.7
Other income 143.9 – (2.4) – – – (100.0) 41.5
Total income 648.9 – (2.4) – – – (100.0) 546.5
General operating expenses (502.9) – 2.4 20.2 – 1.8 26.0 (452.5)
Depreciation and amortisation (77.7) – – – – – (77.7)
Impairment and write-offs of property, plant, equipment and intangible assets (4. 6) 4.6 – – – – – –
Total operating expenses (585.2) 4.6 2.4 20.2 – 1.8 26.0 (530.2)
Expected credit loss expense (33.2) – – – – – – (33.2)
Profit/(loss) before tax 30.5 4.6 – 20.2 – 1.8 (74.0) (16.9)
Year ended 31December 2022
Statutory
basis
£’million
Impairment
and write-off of
property, plant,
equipment
and intangible
assets
£’million
Net C&I
costs
£’million
Transformation
costs
£’million
Remediation
costs
£’million
Holding
company
insertion costs
£’million
Capital
raise and
refinancing
£’million
Underlying
basis
£’million
Net interest income 404.1 – 0.1 – – – – 404.2
Net fee and commission income 81.8 – – – – – – 81.8
Net gains on sale of assets – – – – – – – –
Other income 37.6 – (1.5) – – – – 36.1
Total income 523.5 – (1.4) – – – – 522.1
General operating expenses (467.6) – 1.4 3.3 5.3 1.8 – (455. 8)
Depreciation and amortisation (77.0) – – – – – (77.0)
Impairment and write-offs of property, plant, equipment and intangible assets (9.7) 9.7 – – – – – –
Total operating expenses (554.3) 9.7 1.4 3.3 5.3 1.8 – (532.8)
Expected credit loss expense (39.9) – – – – – – (39.9)
Loss before tax (70.7) 9.7 – 3.3 5.3 1.8 – (50.6)
Governance Additional informationStrategic report Financial statements 234Risk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Abbreviations
AGM Annual General Meeting
ALCO Asset and Liability Committee
ATM Automated teller machine
BAME Black, Asian and Minority Ethnic
BBLS Bounce Back Loan Scheme
BCR Banking Competition Remedies
BEIS Department of Business, Energy and Industrial Strategy
bps Basis points
C&I Capability and Innovation Fund
CEO Chief Executive Officer
CET1 Common Equity Tier 1 Capital
CFO Chief Financial Officer
CMA Competition and Markets Authority
CRD Capital Requirements Directive
CRO Chief Risk Officer
D&I Diversity and inclusion
DNED Designated Non-Executive Director for Colleague Engagement
DTR Disclosure Guidance and Transparency Rules
DTV Debt-to-value
DVRP Deferred Variable Reward Plan
EAD Exposure at default
ECL Expected credit losses
EPC Energy Performance Certificate
ERC Executive Risk Committee
ESG Environmental, social, and governance
ExCo Executive Committee
FCA Financial Conduct Authority
FRC Financial Reporting Council
FSQS Financial Services Qualification System
FTE Full time equivalent
FVOCI Fair value through other comprehensive income
GDP Gross domestic product
GHG Greenhouse gases
HMRC His Majesty’s Revenue and Customs
HPI House price index
IAS International Accounting Standards Board
ICAAP Internal Capital Adequacy Assessment Process
IFRS International Financial Reporting Standards
ILAAP Internal Liquidity Adequacy Assessment Process
IRB Internal ratings-based
KPI Key performance indicator
LGBTQ+ Lesbian, gay, bisexual, transgender, queer plus
LGD Loss given default
LIBOR London Inter-Bank Offered Rate
LTI Loan-to-income
LTIP Long Term Incentive Plan
LTV Loan-to-value
MPs Members of Parliament
MREL Minimum requirement for own funds and eligible liabilities
MSc Master of Science
NED Non-Executive Director
NICs National insurance contributions
NPL Non-performing loan
OFAC Office of Foreign Assets Control
PAYE Pay as you earn
PCAF Partnership for Carbon Accounting Financials
PD Probability of default
PMA Post model adjustments
PMO Post model overlays
POCI Purchased or originated credit impaired
PRA Prudential Regulation Authority
PwC PricewaterhouseCoopers LLP
REGO Renewable Energy Guarantee of Origin
RLS Recovery Loan Scheme
ROC Risk Oversight Committee
RWAs Risk-weighted assets
SBTi Science-Based Targets Initiative
SICR Significant increase in credit risk
SME Small or medium-sized enterprise
SONIA Sterling Overnight Index Average
TCFD Task Force on Climate-related Financial Disclosures
TFSME Term Funding Scheme with additional incentives for SMEs
UK United Kingdom
VAT Value added tax
VIU Value in use
235
Governance Additional informationStrategic report Financial statementsRisk report
Metro Bank Holdings PLC Annual Report and Accounts 2023
Shareholder information
Annual General Meeting
Our 2024 AGM will be held on 21 May 2024. Full details for the arrangements for the AGM and
details of the resolutions to be proposed, together with explanatory notes, will be set out in the
Notice of AGM to be published on our website.
Shareholder profile
Shareholder profile by size of holding as at 31December 2023
Range
Total
number of
holdings
Percentage
of holders
Total number
of shares held
at 31December
2023
Percentage
of total
0-100 203 25.73% 8,067 0.00%
101-500 122 15.46% 32,525 0.01%
501-5,000 196 24.84% 344,346 0.05%
5,001-100,000 153 19.39% 4,331,319 0.64%
100,001-500,000 56 7.10% 12,820,897 1.91%
500,000+ 59 7.48% 655,139,393 97. 39%
Total 789 100.00% 672,676,547 100.00%
Shareholder profile by category as at 31December 2023
Category
Number of
holders
Percentage
of holders
within type
Shares held at
31December
2023
Percentage
of issued
share capital
Private shareholders 501 63.50% 1,083,970.00 0.16%
Banks 2 0.25% 66,183 0.01%
Nominees and other
institutional investors 286 36.25% 671,526,394 99.83%
Total 789 100% 672,676,547 100%
Forward-looking statements
This Annual Report and Accounts 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 and Accounts are based
onour current expectations and, by their nature, forward-looking statements are subject to
anumber of risks and uncertainties, many of which are beyond our control, that could cause
our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 and Accounts will
berealised. We undertake no obligation to release the results of any revisions to any forward-
looking statements in this Annual Report and Accounts that may occur due to any change
initsexpectations or to reflect events or circumstances after the date of this announcement
andwe disclaim any such obligation.
Registrars
We have appointed Equiniti Limited to maintain our register of members. Shareholders should
contact Equiniti using the details below in relation to all general enquiries concerning their
shareholding:
Equiniti Limited
1,2
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.
Registered and other offices
Our registered office and head office is:
One Southampton Row
London
WC1B 5HA
Telephone: 0345 08 08 500/0345 08 08 508
Website: metrobankonline.co.uk
Unsolicited mail
We are required by law to make our 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: mpsonline.org.uk
Governance Additional informationStrategic report Financial statements 236Risk report
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Metro Bank Holdings PLC Annual Report and Accounts 2023
Metro Bank Holdings PLC
metrobankonline.co.uk
Governance Additional informationStrategic report Financial statements 238Risk report