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FSA fines and bans former Northern Rock deputy chief executive

The Financial Services Authority has today 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.

As deputy chief executive, between January 2004 and March 2008, one of Baker’s responsibilities was accurate internal and external reporting at NR.

He had overall responsibility for much of this time for the firm’s debt management unit 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 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.

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 NR, analysts and the FSA to form a view of NR’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 Council of Mortgage Lenders average over an extended period of time.

Margaret Cole, FSA director of enforcement and financial crime, says: “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.  


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  • darius 13th April 2010 at 12:27 pm

    I wonder if the FSA will fine their former FSA collegaues Clive Briault (Head of Retail) & David Strachan (Supervising large retail firms)? Of course not!

    These were the guys who were in charge of Northern Rock and have got blood on their hands too along with the NR Executives.

    I think the FSA are trying rack up as many fines as they can before the Tory Government drop them like hot potato.

    I wonder what is Adam Applegarth doing these days?

  • John Gilbert 13th April 2010 at 11:18 am

    It always seems to be the position that lenders come out under the CML figure when reporting arrears and repossessions. This case does make one wonder what independent audit tests are applied to mortgage arrears and repossession figures. Time for a CML League Table and a review of the mortgage book auditing processes?

  • Ian Day 13th April 2010 at 11:09 am

    Just remind me, when did Northern Rock get into trouble. Horse and stable door!

  • John O'Hearne 13th April 2010 at 11:01 am

    I hope they aren’t letting Fred Goodwin & Andy Hornby off the hook, both should be fined and banned from ever working within Financial Services again!