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Mr Arden
Mr Arden
We find as a fact that Mr Arden knew that the CLIP loans had been wrongly risk weighted at 50% and should have been risk-weighted at 100%, on the basis of our earlier findings summarised below.
He had received the email of 24 August 2018 from Mr Somers and the attached PowerPoint presentation, see §118.
He attended the meeting with Mr Stokes and others on 3 September 2018, at which the PowerPoint presentation was discussed, and where the minutes recorded that KPMG had confirmed that CLIP loans should be risk weighted at 100% rather than 50%, see §§128-129.
He received the email from Mr MacLean on 11 September 2018, which said that Deloitte had given a second opinion that the CLIP loans should be risk-weighted at 100%.
He had participated in the meeting with the PRA on 12 September 2018 at which the PRA were told about the incorrect risk-weighting, see §137.
He attended the September CRPAC meeting which approved the KPMG decision trees; these included the higher risk-weighting for CLIP loans, see §§141-142, and at which an information pack on commercial lending set out the consequences, see §146.
He attended the September Audit Committee at which Ms Gillan explained the errors, see §148.
He attended the September Board Meeting, at which Ms Gillan explained the issues with the classification of commercial mortgages, and he outlined the process for remediating the errors, see §§151-153.
He received the RWA Report before the October CRPAC meeting, see §174; this stated that correcting the CLIP loan issue would increase the risk-weighting by £574m and that “any further adjustments to calculations are not expected to be material”. He also attended the meeting at which the Report was discussed, and expressed no doubts about the information in that Report, see §185.
He attended the October ROC meeting, at which the RWA Report was also tabled and discussed.
- Heading
- Introduction
- The jurisdiction of the Tribunal
- The burden and standard of proof
- The PRA and capital requirements
- The Bank’s lending
- CRE loans
- CLIP loans
- PBTL loans
- COREP reporting
- The Authority
- Listing Rule 1.3.3R
- The MAR
- The evidence
- Approach to the evidence
- Mr Arden
- Mr Donaldson
- Ms Gillan
- Ms Roberts
- Mr Somers and Mr Dransfield
- Mr Sutherland
- Mr Lane
- Mr Brierley
- Individuals who were not called as witnesses
- Findings of fact
- The early years
- Linklaters
- Key personnel during the period from March 2018
- Relationship with the PRA and the Authority
- 2016 and 2017
- The COREP audit and the CRE loans
- Mr Arden, the Board and the committees
- KPMG appointed
- April to June 2018
- July 2018
- The 2018 capital raise and half year results
- August 2018: PBTL and CLIP
- Communicating with the PRA
- KPMG decision trees
- PBTL classification
- Annual Review of Commercial Lending
- September Audit Committee
- September NEDs meeting
- September Board meeting
- Engagement of Deloitte
- Internal work in support
- Communications with the PRA
- Meeting with Linklaters
- Disclosure Committee meeting
- Mr Somers’ email
- Meetings with Mr Hill and Mr Bernau
- The October CRPAC meeting
- RWA Report
- Business and Commercial Lending
- The October Audit Committee meeting
- The Q3 Update
- Accounting, reporting and control report
- The October ROC meeting
- Chief Risk Officer’s Report
- The RWA Report
- Business and Commercial Lending Review
- The October Board meeting
- Linklaters Governance Update
- Audit Committee Update
- The Q3 Update
- 2019 Budget Paper
- Whether the RWA issue was discussed
- Chief Risk Officer’s Report
- Response to PSM Letter
- The Q3 Update and analyst calls
- Deloitte’s reports
- Discussions with Linklaters
- Discussions with the PRA and the January announcement
- Subsequently
- The PRA
- The Authority
- Mr Donaldson’s and Mr Arden’s careers
- The common ground
- The Parties’ cases
- The Authority’s case
- The Applicants’ case
- ISSUE ONE: WHETHER THE BANK BREACHED LR 1.3.3R
- The PRA and the COREP Returns
- Findings of fact
- The Applicants’ position
- The Tribunal’s view
- The PRA and confidentiality
- Findings of fact
- The Applicants’ position
- The Authority’s position
- The Tribunal’s view
- Mr Lane’s advice
- Findings of fact not in dispute
- Who was at the meeting
- How long was the meeting
- Linklaters’ practice when giving advice
- Knowledge of the impending Q3 Update
- What was said by Mr Arden at the meeting
- Confidential matter?
- The Tribunal’s finding
- The purpose of the meeting
- Reasonable to rely?
- Overall conclusion on legal advice
- No breach if uncertain and under investigation?
- Mr Jaffey’s submissions
- Mr Stanley’s submissions
- The Tribunal’s view
- No material breach if unknown
- The knowledge issue
- Key findings already made
- The Authority’s overall position on the knowledge issue
- The Applicants’ overall position on the knowledge issue
- Rules on classification
- Data issues
- Nature of the data issues
- Extent of the data issues
- Effect on materiality
- SME supporting factor
- Residential property
- Conclusion on data issues
- The mitigants overall
- The AIRB application
- Pillar 2A Offset
- Submissions
- Findings of fact
- Conclusion on Pillar 2A offset
- Phasing in
- PRA discretion
- Taking all the above into account
- Overall conclusion on the Knowledge Issue
- The PBTL Loans
- Findings of fact
- Submissions and the Tribunal’s view
- Whether the alternatives were unreasonable
- The Applicants’ position
- The Authority’s submissions
- The Tribunal’s view
- Reliance on the board and the Committees
- Findings of fact
- September
- October Audit Committee
- October ROC meeting
- October Board meeting
- The position of the parties
- The Tribunal’s view
- The Audit Committee
- The Board
- Reliance on Ms James
- Findings of fact
- Submissions
- Discussion
- Overall conclusion on Issue one
- The legal principles
- The statutory provisions
- Burton v Bevan
- Scandex
- Capital Alternatives
- Avacade
- Ferreira
- Submissions on Ferreira
- The words of the provision
- The ratio of Ferreira
- The corporate veil
- Forster: meaning of “knowingly concerned”
- Forster: reliance on legal advice
- The Applicants’ submissions
- The Authority’s submissions
- The Tribunal’s view
- The principles summarised and the issues remaining
- Mr Arden
- Mr Donaldson
- The position of the parties
- The Tribunal’s view
- ISSUE THREE: PENALTIES
- The Tribunal’s approach
- The DEPP
- The Authority’s position
- The Applicants’ position
- The Tribunal’s view
- The penalty framework
- Applying the Steps
- Step 2(1)-(3): Earnings
- The Tribunal’s view
- Step 2(4)-(7): Seriousness
- Step 3: Mitigation
- DEPP
- Submissions and discussion
- Co-operation
- Remediation
- Compliance with the PRA’s requirements
- Communications with the Authority
- No negative factors
- Other consequences
- Difference between the Applicants?
- Conclusions