“ INTERESTINGLY, BUT I SUPPOSE NOT ENTIRELY SURPRISINGLY, THE FSA DECLINED TO COMMENT ON WHICH BANKS FACED ENFORCEMENT ACTION – QUITE BIZARRE BUT MAYBE A REFLECTION THAT WHILE ALL FINANCIAL INSTITUTIONS ARE EQUAL IN THE EYES OF THE REGULATOR, SOME ARE PERHAPS MORE EQUAL THAN OTHERS”
but themselves and hide behind the company.
eleCtriFyiNg CoNsequeNCes
To my mind, this is no longer acceptable and as regulated individuals we all have to accept that there will be consequences should we act inappropriately or with poor judgement, particularly when it comes to actions which make the situation at the
The Financial Services Authority fined David Baker, former deputy chief executive of Northern Rock Plc, £504,000 and Richard Barclay, former managing credit director at NR, £140,000.
Baker has also been prohibited from performing any function in relation to any regulated activity. And Barclay has been prohibited from performing any significant influence function at an FSA- regulated firm.
DAVID BAKER
As deputy chief executive, between January 2004 and March 2008, one of Baker’s responsibilities was accurate internal and external reporting at Northern Rock. He had overall responsibility for much of this time for the firm’s debt management unit (DMU) which managed its secured loan book. Despite becoming aware in January 2007 that there were 1,917 loans omitted from the mortgage arrears figures, Baker failed to escalate the information internally and agreed a course of action which resulted in the loans not being reported.
He also made misleading statements
company look better than it actually in order to maximise the size of the individual’s bonus or pay rise. We have regulation so that those at the sharp end of sharp practices are protected and eventually compensated be it for poor advice or poor decisions. It is time we all held our hands up, accept the responsibilities we have and accept what comes our way. This whole process would be aided by a regulator prepared to act against
regarding these impaired loans to external stakeholders, including market analysts, quoting inaccurate figures. If the 1,917 loans had been reported as being in arrears, the figures would have increased by approximately 50%. Alternatively if the loans had been reported as in possession, the number would have increased from 662 to 2,579 cases.
RICHARD BARCLAY
As managing credit director of the DMU, Barclay was directly responsible for the provision of accurate management information concerning loan arrears and property possessions. He knew that the firm’s arrears position enabled senior management within Northern Rock, analysts and the FSA to form a view of Northern Rock’s asset quality, but failed to ensure that the management information reported by the DMU was accurate despite warning signs at an early stage.
Although it is not possible to calculate
the exact extent of this mis-reporting, if the correct figure had been reported, the arrears figures would have been significantly worse and closer to the
those who until now have not been willing to accept the consequences of their actions. In this regard the FSA has big fish to fry; if it were to make its presence felt here it would help create a much fairer, responsible and highly regarded financial services profession for the
future. n
Bob Young is managing director of CHL Mortgages
Council of Mortgage Lenders average over an extended period of time. Margaret Cole, FSA director of enforcement and financial crime, said: “Baker and Barclay both failed to meet the standards we require of senior individuals within FSA-regulated firms. They both held senior positions of trust within the firm but they provided inaccurate information to the Northern Rock board and to the market. “The fines we have imposed on them leave no doubt that we will take action against individuals who either fail to act with integrity or who fail to perform their roles to a high standard – this is a loud and clear message that we are serious about taking action against senior directors where they step over the line.”
Both Baker and Barclay admitted their misconduct at an early stage and co-operated fully with the FSA. Both therefore received a 30% discount for early settlement. Were it not for this discount, Baker would have been fined £720,000. In addition, Barclay’s fine was reduced on the grounds of hardship. Were it not for these matters Barclay’s fine would have been £300,000.
moRtgage intRoduceR JUNE 2010 23
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