Upper Tribunal Tax and Chancery Chamber

[2025] UKUT 00185 (TCC)

Fecha: 09-Abr-2025

Findings of fact

Findings of fact

396.

We have already found the following facts:

(1)

On 12 July 2018, the Bank issued its half year update, which included a statement that its Pillar 2A requirement of 1.7% was “currently under review with the PRA” and the Bank “anticipated receiving capital relief from the PRA as part of the Pillar 2A Offset”.

(2)

On 10 September 2018, the Bank received the PSM letter, which stated that the PRA was “somewhat frustrated” that the Bank had referred publicly to the discussions on the Pillar 2A offset and said “we would not wish to see a repeat” of this type of public disclosure, see §132.

(3)

The PSM letter also said that, as the Bank was remediating the classification of commercial risk weights, and this “will likely increase the Pillar 1 risk weighted assets”, the PRA was “uncertain about the materiality of any prospective adjustment to [the Bank’s] capital position”. It continued:

“Until this matter is satisfactorily resolved, and we have received reassurance that Metro is holding sufficient Pillar 1 capital against its commercial assets, we will not apply Policy Statement 22/17 which allows the offsetting of certain Pillar 2a variable add-ons.”.

(4)

At the meeting with the PRA on 12 September 2018, Mr Salmon agreed to a discussion about the offset once the mistake had been corrected, noting that the PRA would need to understand how the mistake had occurred and to be assured there was no read-across to other reporting aspects, see §137.

(5)

In the October 2018 Board meeting, the Bank noted and took as read the 2019 budget estimate, which had included the benefit of the Pillar 2A offset of £50m as being actioned “by the end of Q1 2019”, see §223.

(6)

On 8 January 2019, Ms Gillan emailed the PRA to arrange a meeting to discuss the outcomes of the Deloitte work on the RWA issue, and added “we hope this will then allow us to revisit earlier conversations with Supervision about application of the Pillar 2A off-set approach”, see §250.

397.

Mr Arden accepted in cross-examination that he “didn’t believe at any stage that there was a promise” by the PRA that once the RWA issue had been remediated, the Bank would allow a Pillar 2A offset, and he also said that it “was not going to be on the table until [the Bank] had got the RWAs right”. Mr Donaldson similarly accepted that discussions about the Pillar 2A offset could not begin until after the remediation of the RWAs.

398.

On the basis of all the above, we find as further facts that:

(1)

the PRA did not promise that the Bank would obtain the Pillar 2A offset; and

(2)

the PRA would not consider whether or not to allow the offset until after the RWA issue had been remediated.

399.

In relation to quantum, Mr Donaldson said in his witness statement that if the Bank had obtained the offset, it “would have reduced its overall capital by over £100 million; a reduction of an equivalent of well over £1 billion of RWAs”. However, under cross- examination he was unable to explain the basis for that figure. In re-examination, his attention was drawn to the £50m in the 2019 Budget paper, and asked whether this helped him with the value of the proposed Pillar 2A offset. He responded:

“I think, therefore , it is the 100 plus million that we had in the work that we had done, and it must be offsetting the overs and unders with the worst case that we considered we would get post the Deloitte work”

400.

We understand him to mean that he thought the £50m in the 2019 Budget paper was a net figure after the RWA capital adjustment of some £40-50m had been deducted from his £100m estimate. However, that is not what the paper says. We prefer to rely on the contemporaneous evidence, and find as a fact that at the relevant time, the Bank’s estimate of the effect of a Pillar 2A adjustment was £50m.