Key Governance Developments - October 2019

Discover our latest key governance news!


 Metro Bank chairman to leave at year-end amid investor pressure

Vernon Hill, the founder of Metro Bank, will step down as chairman and leave the company’s board at the end of this year. The bank's share price has fallen by 89% since it revealed a major accounting discrepancy involving risk weightings for its lending portfolio, and is currently under investigation by UK regulators while struggling to attract fresh capital after a 250m-pound bond issue initially failed. If the bank were unable to raise new money, it would fall short of its minimum requirement for own funds and eligible liabilities of 21.5% for January 2020 set by the Bank of England. However, following the announcement of Hill's departure, Metro relaunched the bond with a higher yield of 9.5%, which was nearly 60% oversubscribed, and the bank's share price rebounded by 31%.

Best source: Reuters

See also: Risk (subscription required)

 

German regulator publishes broad definition of sustainability risk

German regulator BaFin has published a broad definition of sustainability risk for the country's banks, including not only climate change issues, but also other environmental and social factors. The document says banks should take account of all environmental, social and governance risks, including those stemming from executive remuneration and protection for whistle-blowers that entail possible reputational damage.

Best source: Börsen-Zeitung (subscription required, in German)

 

UK investment body issues shareholder guidance on excessive executive pensions

The UK's Investment Association has issued new guidelines for institutional shareholders on voting for or against executive pension packages at companies they invest in. The Investment Association, which represents 250 asset managers and other institutional investors, says public companies with existing directors' pension contributions worth more than 25% of their salary will prompt the highest level of warning. The changes will apply from the 2020 annual general meeting season.

Best source: Financial Times (subscription required)

 

French regulator to focus on shareholder dialogue in governance issues

French regulator Autorité des Marchés Financiers says its campaign for improved governance will focus on a dialogue with shareholders. The emergence of activist shareholders in other countries has not been observed in France, and the regulator would like to foster greater engagement, according to Astrid Milsan, the AMF's deputy secretary-general for governance. The regulator is considering a new threshold of 3% for disclosure of a stake, and requiring shareholders with a 5% shareholding to declare their intentions.

Best source: Agefi (subscription required, in French)

 

UK regulator warns of stricter enforcement of peer-to-peer lending rules

Following the recent collapse of two major peer-to-peer lenders, Lendy and Collateral, the UK's Financial Conduct Authority has warned executives in the sector that it will intervene quickly and firmly if it detects non-compliance with regulatory requirements. Stricter rules coming into effect in December will place restrictions on marketing and impose heightened governance standards. The regulator says it has already launched reviews of firms in the sector, pinpointing failings especially in property lending.

Best source: Financial Times (subscription required)