The Financial Conduct Authority (FCA) has fined Christopher Willford, the former finance director of Bradford & Bingley (B&B) £30,000 for failing to provide the board with up-to-date information about B&B’s financial position, including profits, mortgage arrears and re-possessions, ahead of its 2008 rights issue.
On 16 May 2008, Willford received information that suggested that B&B’s financial outlook might be weaker than expected. As B&B was preparing to raise capital through a rights issue, this should have immediately been raised with B&B’s board and investigated to ensure that the information provided to shareholders about the rights issue on 19 May was correct.
Tracey McDermott, the FCA’s director of financial crime and enforcement, said:
“Willford failed to identify and investigate potentially material risks, or alert the board, at a crucial time for the firm. His conduct fell short of the FCA’s standards – senior managers should expect the FCA to take action if they fail to show due skill, care and diligence.”
The information Willford received was out of kilter with previous forecasts, and showed that bad mortgage debts (impairments), arrears and repossessions had all risen, whilst the difference between the interest rates B&B paid to, and received from, its customers (net interest margin) had fallen. This is particularly significant as it suggested B&B could have fallen short of forecast profit for the year.
The FCA seeks to ensure market integrity and appropriate consumer protection. As the finance director, Willford was responsible for escalating and investigating these issues and ensuring material provided to shareholders on B&B’s financial position was correct. The FCA did not find that Willford’s conduct caused the failure of the rights issue, or B&B’s subsequent nationalisation. The size of the fine reflects the length and timing of the misconduct, which took place over three days during the height of the financial crisis.
Notes for editors
- The Final Notice
- Willford was B&B’s finance director between October 2005 and June 2009. He was approved by the FCA’s predecessor, the Financial Services Authority and subject to the regulator’s Statements of Principle and code of conduct for approved persons.
Statement of Principle 6 sets out that approved persons must exercise due skill, care and diligence in managing the firm’s business.
- Bradford and Bingley decided to undertake a rights issue to raise capital on 13 May 2008.
- On 16 May 2008, Willford received information that showed:
• Money set aside against bad mortgage debts (impairments) had reached £35.7 million, 63% of £56.5 million the forecast for that year.
• Arrears and repossessions over the last three months had risen to 2.16% from 2.00% in March 2008.
• The difference between the interest rates B&B charged to, and received from, its customers (net interest margin) fell to 0.9%, compared to 1.06% in March 2008.
• Underlying profit before tax accumulated between January 2008 and April 2008 was only 24.3% of the total forecast for the year.
- On the 1 April 2013 the FCA became responsible for the conduct supervision of all regulated financial firms and the prudential supervision of those not supervised by the Prudential Regulation Authority (PRA).
- The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has three operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
- Find out more information about the FCA, as well as how it is different to the PRA.