Exclusive: FSA Blocks New Metro Bank Chair
Britain's first new high street bank for more than a century has become embroiled in a spat with the City regulator over the appointment of an American billionaire as its new chairman.
I have learned that the Financial Services Authority (FSA) has raised objections to plans to appoint Vernon Hill, Metro Bank's founder and vice-chairman, as Anthony Thomson's successor.
Mr Thomson, who has chaired Metro Bank since its launch in 2010, officially steps down at the end of the year, and the fledgling lender said in September that it would appoint his replacement by January next year.
Sources close to the FSA said that Metro Bank had sought permission from it to appoint Mr Hill to the role several months ago and said discussions were continuing.
The FSA's objections are understood to be rooted in a probe carried out by American regulators several years ago into Commerce Bank, a US-based institution also founded by Mr Hill. In 2007, the Office of the Comptroller of the Currency, which helps regulate US banks, issued a cease-and-desist order against Commerce amid an investigation into real-estate deals among the bank, Mr Hill, his family and other entities.
The row is a repetition of a dispute between the bank and the FSA three years ago. Metro Bank wanted to appoint Mr Hill as its chairman ahead of its launch but was forced to install Mr Thomson instead in order to persuade the FSA to award it a banking licence.
One person close to the talks said it was conceivable that the FSA would soften its position but added that Metro Bank was likely to appoint a chairman from its existing line-up of non-executive directors if the obstacles to Mr Hill's appointment cannot be overcome.
The latest row between Metro Bank and the FSA will reignite the debate about the City regulator's regime for authorising new lenders as the Government seeks fresh competitors to Britain's established high street banks.
FSA officials are expected to publish in the new year a revised framework to make it easier for new entrants to the retail banking sector to secure licences. The overhaul is expected to include lightening the capital requirements for new lenders.
It is unclear exactly why the FSA regards Mr Hill as a suitable vice-chairman and board director of Metro Bank but has such significant reservations about him assuming the role of chairman. People close to the regulator said the FSA would only object to the appointment of a bank chairman if it had sound reasons for doing so.
Since opening its first branch in central London in July 2010, Metro Bank has become a prominent player in the debate over reform of high street banking despite having opened less than a dozen 'stores'. The bank has recruited thousands of customers on the promise of excellent service and longer opening hours rather than especially competitive savings rates.
Earlier this year, Metro Bank raised £125m from investors including Moore Capital and Steven Cohen, the hedge fund manager whose firm, SAC Capital Advisors, has been drawn into an insider trading scandal in the US.
Metro Bank is targeting a stock market listing by the end of 2014.
Mr Hill started Commerce Bank with $1.5m in capital at the age of 27, selling it 34 years later to Canada's TD bank for $8.5bn in the week that the Dow Jones index reached an all-time high. He attributed the timing in an interview with the Financial Times to "half luck and half planning".
The Metro Bank founder is also a majority shareholder in two banks in Pennsylvania, one of which has the same name and the other which is called Republic Bank. He is understood to be planning to merge the two.
Metro Bank said the process to appoint a new chairman was ongoing but declined to comment on Mr Hill or the FSA. The City regulator also refused to comment.