[2025] UKUT 00185 (TCC)

On 24 April 2018, the Bank published its Q1 results for 2018; the announcement included a statement that a further debt issuance was anticipated. After the results, the Bank’s share price fell 12%.

On the following day, Mr Sutherland held his regular monthly catchup call with Mr Arden and Ms Gillan, and asked for their view as to the reasons for the share price fall, and Mr Arden said that investors had not expected the Bank to need more capital. Mr Sutherland also asked for an update on the CRE remediation work, and was told that this was in progress; that KPMG were helping, and that the Bank would update the PRA at the end of May.

On 16 May 2018, Mr Lane, Mr Sadler and Mr Cheyne of Linklaters gave an Update Presentation on the MAR to Mr Arden, Ms Roberts, Ms James and Ms Conway. It included an explanation of what was meant by “precise” and “significant effect on price” in Article 7, see §§31-32.

On 18 May 2018, Ms Iovino emailed Mr Maclean, Ms Orrell and others, and copied Mr Arden, Ms Gillan, Mr Richardson, Mr Somers and Mr Costa. She began by saying that following a meeting with KPMG, “some potential gaps in the RWA calculation” had been identified. She attached a paper written by the Credit Risk and Analytics team led by Mr Somers and Mr Costa, which referred to certain types of PBTL loans, and said (where T24 is a reference to the Bank’s main computer system):

“Credit Risk and analytics have performed some analysis and, based on the requirements set out by CRR [Article] 125, we propose the following to be applied and communicated to the teams with immediate effect:

1.

The following collaterals need to be classified as commercial propertyin T24 (currently they are classed as retail property):

o Housing Association Properties

o Houses in Multiple Occupation

o Student Accommodation.”

The paper went on to say that the above types of mortgages were currently risk weighted as residential at 35%, but should have been risk-weighted at 100% as commercial property. At or around the same time, KPMG produced draftsof their decision trees, which stated that “exposure secured by mortgages on immovable property” were required to be given a risk-weighting of 100%, and this included PBTL.

On 31 May 2018, Mr Richardson emailed Mr Costa, saying:

“Talking to Suzie Orell and KPMG yesterday, it has come to light that we don’t think we are using the right standardised risk weight for commercial mortgages…in effect all loans secured on commercial property should have a 100% RW – we are still using 50% for our ‘trading business’ loans.”

Mr Richardson said his “quick and dirty estimate” suggested there was “something like £250m of extra RWA required (=£20m of extra capital)”.