TIDMMTRO

RNS Number : 3887T

Metro Bank PLC

24 March 2021

Legal Entity Identifier: 213800X5WU57YL9GPK89

METRO BANK PLC (the "Company")

PUBLICATION OF ANNUAL REPORT AND ACCOUNTS

Following the release on 24 February 2021 of the Company's preliminary results for the financial year ended 31 December 2020 (the "Preliminary Announcement"), the Company is pleased to announce that it has today published its Annual Report and financial statements for the financial year ended 31 December 2020 (the "2020 Annual Report and Accounts") and is available for viewing in the Investor Relations section of the Company's website at www.metrobankonline.co.uk .

The 2021 Annual General Meeting of Shareholders is currently scheduled to take place on 18 May 2021. An announcement with further details including publication of the 2021 Notice of Annual General Meeting will be circulated in due course.

Hard copies of the 2020 Annual Report and Accounts will be mailed in due course to those shareholders who have elected to receive them. Copies of the 2020 Annual Report and Accounts have also been submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism.

The Disclosure Guidance and Transparency Rules (DTR) require that an announcement of the publication of an annual report should include the disclosure of such information from the annual report as is of a type that would be required to be disseminated in a half-yearly report in compliance with the DTR 6.3.5(2) disclosure requirement, in unedited full text through a Regulatory Information Service . Accordingly, these disclosures are made in the Appendix below.

The Appendix to this announcement contains the following additional information for the purposes of compliance with DTR 6.3.5 only:

a description of the principal risks and uncertainties relating to the Company;

indication of important events during the year;

a note on related party transactions; and

directors' responsibilities statement.

The Preliminary Announcement included a set of condensed financial statements. Together these constitute the material required by DTR 6.3.5 to be communicated to the media in unedited full text through a Regulatory Information Service.

Enquiries

For further information on this announcement, please contact:

Metro Bank PLC

Investor Relations

Jo Roberts

+44 (0)20 3402 8900

IR@metrobank.plc.uk

Media Relations

Tina Coates / Abigail Whittaker

+44 (0)7811 246016 / +44 (0)7989 876136

pressoffice@metrobank.plc.uk

Teneo

Charles Armitstead / Haya Herbert -- Burns

+44 (0) 7703 330269 / +44 (0) 7342 031051

Metrobank@teneo.com

APPIX

References to page numbers and notes to the accounts made in the Appendix refer to page numbers and notes to the accounts in the 2020 Annual Report and Accounts. This announcement should be read in conjunction with, and is not a substitute for reading, the full 2020 Annual Report and Accounts.

PRINCIPAL RISKS AND UNCERTAINTIES

The principal risks and uncertainties relating to the Company are set out on pages 26-53 of the 2020 Annual Report and Accounts . The following is extracted in full and unedited text from the 2020 Annual Report and Accounts :

Changes in principal risks and risk profile

In line with the UK Corporate Governance Code requirements, we have performed a robust assessment of the principal and emerging risks we face, including those that could result in events or circumstances that might threaten our business model, future performance, solvency or liquidity, and reputation. In deciding on the classification of principal risks, we considered the potential impact and probability of the related events and circumstances and the timescale over which they may occur. The principal risk categories remain similar to those outlined in the Annual Report and Accounts 2019, with changes relating to the identification of capital risk as a principal risk and the recognition of climate risk as a cross-cutting risk, which manifests through the existing principal risk framework.

An overview of the principal risks and how they have changed over the year are set out on pages 28 to 29. While further information on all of the principal risks can be found on pages 30 to 51 of the Risk report.

During the year, we have been working hard to support our customers and minimise the impact of COVID-19 for businesses and households across the UK, maintaining our customer service operations and store distribution with minimal interruption. We have also participated in the various UK Government-backed loan schemes for businesses, in addition to offering payment holidays to mortgage, personal and business customers.

Our response to the pandemic demonstrates the robustness of our approach to risk management and mitigation as we continue to successfully manage these events. Like many businesses, COVID-19 has, however, increased our risk profile. The measures introduced to support the economy create new operational, conduct and financial risks for the Bank. These risks are being managed and will be monitored over time.

The table below summarises the changes in our principal risks since 2019 and the key risk implications of the pandemic.

 
Principal risk                  Risk Movement in 2020                 Impact of COVID-19 
------------------------------  ------------------------------------  -------------------------------- 
1. Credit risk                                                        We have participated in 
 The risk of financial            Although the impacts                 regulatory and government 
 loss should our borrowers        on our retail and business           support schemes, with 
 or counterparties fail           credit portfolios are                a priority focus on supporting 
 to fulfil their contractual      yet to fully manifest,               existing customers through 
 obligations in full              it is clear that the                 COVID-19. Capital repayment 
 and on time.                     level of risk has increased,         holidays, interest free 
                                  with levels of defaults              overdrafts (for retail 
                                  expected to increase                 customers) and extensions 
                                  over time, particularly              of credit, as well as 
                                  once government support              other flexible supporting 
                                  schemes come to an end.              measures, continue to 
                                                                       be provided and monitored. 
 
                                                                       Policies, risk appetite, 
                                                                       credit decisioning and 
                                                                       supporting frameworks 
                                                                       have been reviewed and 
                                                                       updated to reflect the 
                                                                       changing environment and 
                                                                       risk profiles. 
------------------------------  ------------------------------------  -------------------------------- 
2. Operational risk                                                   COVID-19 brought heightened 
 The risk that events             The risk has increased,              people risk as some of 
 arising from inadequate          driven by increased                  our colleagues worked 
 or failed internal               remote working, the                  to keep our stores open, 
 processes, people and            implementation of new                whilst others worked from 
 systems, or from external        processes and pressure               home. It also necessitated 
 events cause regulatory          on customer support                  changes to working practices, 
 censure, reputational            areas arising from changing          which are managed closely 
 damage, financial loss,          customer needs, which                via an enhanced governance 
 service disruption               could lead to increased              structure. We are now 
 and/or detriment to              errors or delays and                 investigating permanent 
 our FANS.                        subsequent losses.                   improvements that can 
                                                                       be made. 
------------------------------  ------------------------------------  -------------------------------- 
3. Liquidity and funding                                              The impact of COVID-19 
 risk                             Liquidity and funding                has resulted in an overall 
 The risk that we fail            risk has decreased during            improvement to our overall 
 to meet our short-term           the year, increasing                 liquidity profile through 
 obligations as they              stability.                           improved deposit balances 
 fall due.                                                             and participation in the 
                                                                       Bounce Back Loan Scheme, 
 The risk that we cannot                                               with clients placing funds 
 fund assets that are                                                  drawn-down on deposit, 
 difficult to monetise                                                 prior to their utilisation. 
 at short notice (i.e.                                                 This effect has been observed 
 illiquid assets) with                                                 across the industry and 
 funding that is behaviourally                                         is anticipated will be 
 or contractually long                                                 temporary in nature. 
 term (i.e. stable funding). 
------------------------------  ------------------------------------  -------------------------------- 
4. Market risk                                                        Not directly impacted 
 The risk of loss arising         Market risk has remained             by COVID-19, we are able 
 from movements in market         stable through the year.             to manage and hedge interest 
 prices. Market risk                                                   rate risk through different 
 is the risk posed to                                                  rate environments. 
 earnings, economic 
 value or capital that 
 arises from changes 
 in interest rates, 
 market prices or foreign 
 exchange rates. 
------------------------------  ------------------------------------  -------------------------------- 
5. Financial crime                                                    New government support 
 risk                             The risk has decreased               schemes have provided 
 The risk of financial            during the year due                  opportunities for fraudsters 
 loss or reputational             to enhancements made                 and we have implemented 
 damage due to regulatory         to our AML and Sanctions             controls to counter their 
 fines, restriction               controls through the                 attempts. 
 or suspension of business,       Financial Crime Improvement 
 or cost of mandatory             Programme. 
 corrective action as 
 a result of failing              Overall fraud attacks 
 to comply with prevailing        continue to significantly 
 legal and regulatory             increase in line with 
 requirements relating            what is being seen across 
 to financial crime.              the industry, year on 
                                  year; albeit, in 2020, 
                                  fraud losses have reduced 
                                  from 2019. 
------------------------------  ------------------------------------  -------------------------------- 
6. Regulatory compliance                                              We have deployed multiple 
 risk                             We remain exposed to                 new policies and processes 
 The risk of: failing             regulatory and compliance            to implement government, 
 to understand and comply         risk as a result of                  regulatory and central 
 with relevant laws               significant ongoing                  bank COVID-19 support 
 and regulatory requirements;     and new regulatory change.           measures. Additional regulatory 
 not keeping regulators           We will seek to comply               and compliance risks are 
 informed of relevant             with all regulations                 associated with adherence 
 issues; not responding           as they evolve, and                  to both COVID-19-specific 
 effectively to information       as customer expectations             regulatory guidance and 
 requests or failing              continue to develop.                 with existing regulation. 
 to meet regulatory                                                    Consequently, additional 
 deadlines; or obstructing                                             risk assessments, governance 
 the regulator.                                                        processes and assurance 
                                                                       activities have been deployed 
                                                                       across the Bank. 
------------------------------  ------------------------------------  -------------------------------- 
7. Conduct risk                                                       COVID-19 has generally 
 The risk of treating                                                  had a detrimental impact 
 customers unfairly               The risk has increased               on customers' financial 
 and delivering poor              driven by the impact                 stability and affordability 
 outcomes that lead               of the external environment,         due to income loss caused 
 to customer detriment,           namely COVID-19 and                  by furlough and/or complete 
 such as financial loss           the UK economy, where                job loss. This has resulted 
 and/or distress and              customers are increasingly           in increased reliance 
 inconvenience. This              more vulnerable to dramatic          on savings, inability 
 can also result in               income changes, job                  to meet repayment demands 
 wider adverse impacts,           losses and behavioural               and the need for the regulator 
 for example, loss of             changes driven by social/political   and lenders to introduce 
 our FANS, reputational           agendas.                             enhanced forbearance measures, 
 damage, regulatory                                                    such as payment deferrals. 
 and/or legal action.                                                  We have now sought to 
                                                                       include some of these 
                                                                       measures as part of our 
                                                                       ongoing collections strategy. 
------------------------------  ------------------------------------  -------------------------------- 
8. Model risk                                                         The uncertain economic 
 The risk of potential            The risk has increased               environment has affected 
 loss and regulatory              as a result of the rapid             all model components including 
 non-compliance due               application of COVID-19              input data, default markers, 
 to decisions that could          model adjustments.                   outputs, model accuracy 
 be principally based                                                  and performance. 
 on the output of models, 
 due to errors in the 
 development, implementation 
 or use of such models. 
------------------------------  ------------------------------------  -------------------------------- 
9. Capital risk                                                       There have been several 
 The risk that we fail            Our capital ratios were              regulatory capital developments 
 to meet minimum regulatory       broadly flat year-on-year.           in the UK and Europe in 
 capital (and MREL)               We took action to strengthen         response to COVID-19, 
 requirements. Management         our MREL resources through           which have reduced certain 
 of capital is essential          the sale of a portfolio              capital requirements for 
 to the prudent management        of owner occupied residential        banks across the industry. 
 of our balance sheet,            mortgages, which is                  Additionally, in order 
 ensuring our resilience          in line with our strategy            to provide operational 
 under stress, and the            to enhance risk-adjusted             capacity for banks to 
 maintenance of the               returns on capital through           respond to the immediate 
 confidence of our current        the ongoing focus on                 financial stability priorities 
 and potential creditors          balance sheet optimisation.          resulting from the impact 
 (including bondholders,          We also purchased the                of COVID-19, both the 
 the bond market, and             peer-to-peer lender                  PRA and Basel communicated 
 customers) and key               RateSetter, to provide               revised timelines across 
 stakeholders in the              unsecured personal loans             key regulatory initiatives. 
 pursuit of our business          direct to customers. 
 strategy. 
------------------------------  ------------------------------------  -------------------------------- 
 

Further information on our principal risks are set out on pages 30 to 51.

 
 1. Credit risk 
 Definition                                        Change since 2019: 
  Credit risk is the risk of financial              Increased 
  loss should our borrowers or counterparties 
  fail to fulfil their contractual obligations 
  in full and on time. 
                                                  ------------------- 
 
 

Appetite

We have a moderate appetite for credit risk. As part of our strategic priorities we are rebalancing our lending mix, increasing the proportion of unsecured lending which will lead to an increased level of credit risk. Our tolerance for credit loss has been set within our ability to meet our capital requirements but also reflects the increased level of risks associated with COVID-19. Our metrics, and how we monitor them, will allow for informed decisions and meaningful risk management action to take place to ensure our capital and other resources are adequate in order to achieve our long-term strategic objectives.

Mitigation

Lending and collateral

Our foremost exposure to credit risk is through the loans, limits and advances we make available to our customers. We primarily mitigate credit risk through holding collateral against our residential mortgage and commercial term loan portfolios. Collateral is usually held in the form of real estate, guarantees, debentures and other liens that we can call upon in the event of the borrower defaulting. At 31 December 2020, 84% (31 December 2019: 95%) of our loans consisted of retail mortgages and commercial term loans secured on collateral, with average debt-to-value of 56% (2019: 59%) and 56% (2019: 60%) respectively.

Our exposure to loans of greater than 100% debt to value (or where no real estate collateral is present) remains low at less than 1% of retail mortgage lending (31 December 2019: less than 1%) and 12% of commercial term lending (31 December 2019: 11%). In the retail mortgage lending portfolio, these loans have principally been part of portfolios we have acquired. For commercial term lending, additional forms of collateral (such as debentures or unsupported guarantees giving recourse to our customers) are excluded from these debt-to-value figures, so the true credit risk exposure on these loans is lower and is underwritten on the strength of all types of collateral.

Table 1: Retail mortgage lending by DTV

 
                                       31 December 2020                            31 December 2019 
                                          GBP'million                                 GBP'million 
                        ---------------------------------------------  --------------------------------------- 
 
 Audited                          Retail        Retail   Total retail      Retail        Retail   Total retail 
                          owner occupied    buy-to-let      mortgages       owner    buy-to-let      mortgages 
                                                                         occupied 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 DTV ratio 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 Less than 50%                     1,855           502          2,357       2,647           464          3,111 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 51-60%                              842           390          1,232       1,383           393          1,776 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 61-70%                              836           533          1,369       1,422           505          1,927 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 71-80%                            1,084           407          1,491       1,813           554          2,367 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 81-90%                              359             4            363       1,201            13          1,214 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 91-100%                              74             -             74          23             -             23 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 More than 100%                        1             5              6           4             8             12 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 Total retail mortgage 
  lending                          5,051         1,841          6,892   8,493       1,937         10,430 
                        ----------------  ------------  -------------  ----------  ------------  ------------- 
 

Table 2: Commercial term lending by DTV (excluding BBLS)

 
                                31 December 2020                           31 December 2019 
                                   GBP'million                                GBP'million 
                   -----------------------------------------  ----------------------------------------- 
 
 Audited            Professional    Other   Total commercial   Professional    Other   Total commercial 
                      buy-to-let     term         term loans     buy-to-let     term         term loans 
                                    loans                                      loans 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 DTV ratio 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 Less than 50%               353      876              1,229            363      911              1,274 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 51-60%                      261      546                807            283      535                818 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 61-70%                      351      255                606            404      343                747 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 71-80%                      133      100                233            135       86                221 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 81-90%                        9       51                 60             10       31                 41 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 91-100%                       6       13                 19             12       37                 49 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 More than 100%                4      411                415             12      384                396 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 Total commercial 
  term loans               1,117    2,252              3,369          1,219    2,327              3,546 
                   -------------  -------  -----------------  -------------  -------  ----------------- 
 

We have developed an automated credit approval process for consumer lending and retail mortgages utilising credit scorecards, affordability calculators and policy rules. This is supported by a team of skilled manual underwriters for more complex decisions, who operate within agreed delegated lending authorities, and a clear Credit Policy and Lending Standards.

All commercial lending is individually reviewed. This is undertaken by Relationship Managers and a specialist team of commercial underwriters, reviewing these proposals in accordance with agreed delegated lending authorities. It is underpinned by a commercial lending policy supported by sector specific standards and guidelines.

Undrawn commitments

At 31 December 2020, we had undrawn loan facilities of GBP769 million (2019: GBP726 million). This includes commitments of GBP351 million (2019: GBP296 million) in respect of credit card and overdraft facilities. These commitments represent agreements to lend in the future, subject to certain conditions. Such commitments are cancellable, subject to notice requirements, and given their nature are not expected to be drawn down to the full level of exposure. We mitigate credit risk in respect of these undrawn balances by regular customer monitoring to allow undrawn limits to be removed if we observe credit quality deterioration. We also have exposure to Invoice Finance assets (GBP36 million drawn on limits of GBP138 million) where the amount drawn is capped both by the discounted value of available invoices and a set relationship cap. Similarly, we have a small exposure to Commercial Real Estate Development Finance, where a limit to draw down is agreed in principle and funds are released in stages, throughout the development and following satisfactory surveyor reports. In commercial lending, undrawn commitments are regularly reviewed to ensure relationship caps remain appropriate. This has been particularly evident during 2020 as we continue to support customers through COVID-19.

Interest-only lending

We have exposure to refinance risk. This is the risk from loans to customers who are subject to a bullet or balloon payment at contractual maturity but who find themselves unable to refinance or otherwise make this payment. At 31 December 2020, this risk arises principally in the mortgage book where the exposure to interest-only loans stands at GBP4.1 billion (31 December 2019: GBP4.4 billion). There is further exposure to refinance risk in the Commercial Book of GBP1.3 billion (31 December 2019: GBP1.5 billion) from interest-only loans and a portion of amortising term loans.

All borrowers of interest-only lending are assessed as being able to refinance the lending at the end of the term or have an appropriate repayment plan in place. These loans are also appropriately collateralised (see lending and collateral section on page 30), ensuring we have a first charge in the event of default by the borrower. The reduction in owner occupied mortgages is as a result of the GBP3.1 billion retail mortgage sale, agreed in December 2020.

Table 3: Retail mortgage lending by repayment type

 
 Audited                             31 December 2020                         31 December 2019 
                                        GBP'million                              GBP'million 
                         ---------------------------------------  --------------------------------------- 
                             Retail        Retail   Total retail      Retail        Retail   Total retail 
                              owner    buy-to-let      mortgages       owner    buy-to-let      mortgages 
                           occupied                                 occupied 
                         ----------  ------------  -------------  ----------  ------------  ------------- 
 Repayment 
                         ----------  ------------  -------------  ----------  ------------  ------------- 
 Interest                     2,337         1,751          4,088       2,573         1,834          4,407 
                         ----------  ------------  -------------  ----------  ------------  ------------- 
 Capital and interest         2,714            90          2,804       5,920           103          6,023 
                         ----------  ------------  -------------  ----------  ------------  ------------- 
 Total retail mortgage 
  lending                     5,051         1,841          6,892       8,493         1,937         10,430 
                         ----------  ------------  -------------  ----------  ------------  ------------- 
 

Table 4: Commercial term lending (excluding BBLS)

 
 Audited                             31 December 2020                           31 December 2019 
                                        GBP'million                                GBP'million 
                        -----------------------------------------  ----------------------------------------- 
                         Professional    Other   Total commercial   Professional    Other   Total commercial 
                           buy-to-let     term         term loans     buy-to-let     term         term loans 
                                         loans                                      loans 
                        -------------  -------  -----------------  -------------  -------  ----------------- 
 Repayment 
                        -------------  -------  -----------------  -------------  -------  ----------------- 
 Interest                       1,058      281              1,339          1,155      328              1,483 
                        -------------  -------  -----------------  -------------  -------  ----------------- 
 Capital and interest              59    1,971              2,030             64    1,999              2,063 
                        -------------  -------  -----------------  -------------  -------  ----------------- 
 Total commercial 
  term loans                    1,117    2,252              3,369          1,219    2,327              3,546 
                        -------------  -------  -----------------  -------------  -------  ----------------- 
 

Sector exposure

We manage the level of credit risk concentration based on individual borrowing entities and sector. Our credit risk appetite includes limits for high risk sectors and/or high levels of concentration.

Within commercial lending we set credit risk policy and lending standards for key sectors. We have specialist sector lending teams including in healthcare, hospitality, and property.

Over 2020, we have observed that some sectors have been more severely impacted by COVID-19 lockdowns. Hospitality has experienced a more significant reduction in income than other sectors, and as a consequence we are seeing higher levels of COVID-19 support required by these customers.

Table 5: Commercial term lending by sector exposure (excluding BBLS)

 
 Audited                                  31 December 2020                           31 December 2019 
                                             GBP'million                                GBP'million 
                             -----------------------------------------  ----------------------------------------- 
                              Professional    Other   Total commercial   Professional    Other   Total commercial 
                                buy-to-let     term         term loans     buy-to-let     term         term loans 
                                              loans                                      loans 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Industry sector 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Real estate (rent, 
  buy and sell)                      1,117    1,032              2,149          1,219    1,155              2,374 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Hospitality                             -      376                376              -      308                308 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Health and social 
  work                                   -      248                248              -      263                263 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Legal, accountancy 
  and consultancy                        -      208                208              -      236                236 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Retail                                  -      107                107              -      100                100 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Real estate (development)               -       60                 60              -       62                 62 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Recreation, cultural 
  and sport                              -       53                 53              -       51                 51 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Construction                            -       36                 36              -       35                 35 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Education                               -       30                 30              -       30                 30 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Real estate (management 
  of)                                    -       10                 10              -       11                 11 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Investment and 
  unit trusts                            -        9                  9              -        8                  8 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Other                                   -       83                 83              -       68                 68 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 Total commercial 
  term loans                         1,117    2,252              3,369          1,219    2,327              3,546 
                             -------------  -------  -----------------  -------------  -------  ----------------- 
 

Geographic exposure

We also manage our lending exposure by region. Our current residential mortgage and commercial term lending is concentrated within London and the South East, which is broadly representative of our current customer base and store footprint. We are expanding our footprint over time to reduce geographical concentration of lending. All of our current loans' exposures are secured on UK-based collateral. A geographic analysis of the location of retail mortgage collateral and commercial term loan (excluding BBLS) collateral is set out below:

Table 6: Retail mortgages by geographic exposure

 
 Audited                                31 December 2020                            31 December 2019 
                                           GBP'million                                 GBP'million 
                            ---------------------------------------  --------------------------------------------- 
                                Retail        Retail   Total retail            Retail        Retail   Total retail 
                                 owner    buy-to-let      mortgages    owner occupied    buy-to-let      mortgages 
                              occupied 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Region 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Greater London                  2,213         1,147          3,360             3,424         1,197          4,621 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 South East                      1,157           309          1,466             2,094           337          2,431 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 South West                        433            91            524               738            97            835 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 East of England                   298            73            371               570            76            646 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 North West                        265            63            328               482            66            548 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 West Midlands                     179            58            237               340            62            402 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Yorkshire and the Humber          139            37            176               275            37            312 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 East Midlands                     131            25            156               243            26            269 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Wales                             102            21            123               169            21            190 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 North East                         62            10             72                93            11            104 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Scotland                           72             7             79                65             7             72 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 Total retail mortgage 
  lending                        5,051         1,841          6,892             8,493         1,937         10,430 
                            ----------  ------------  -------------  ----------------  ------------  ------------- 
 

Table 7: Commercial term loans by geographic exposure (excluding BBLS)

 
 Audited                         31 December 2020                           31 December 2019 
                                    GBP'million                                GBP'million 
                    -----------------------------------------  ----------------------------------------- 
                     Professional    Other   Total commercial   Professional    Other   Total commercial 
                       buy-to-let     term         term loans     buy-to-let     term         term loans 
                                     loans                                      loans 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Region 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Greater London               780    1,358              2,138            850    1,414              2,264 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 South East                   205      399                604            224      424                648 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 South West                    31      156                187             52      156                208 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 East of England               48       67                115             35      104                139 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 North West                    20      146                166             21      115                136 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 West Midlands                 10       66                 76             11       49                 60 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Yorkshire and 
  the Humber                    3       13                 16             11       26                 37 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 East Midlands                 11       18                 29              5       12                 17 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Wales                          5       10                 15              4       10                 14 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 North East                     3       18                 21              4        9                 13 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Scotland                       1        -                  1              1        3                  4 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Northern Ireland               -        1                  1              1        5                  6 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 Total commercial 
  term loans                1,117    2,252              3,369          1,219    2,327              3,546 
                    -------------  -------  -----------------  -------------  -------  ----------------- 
 

Investment securities

As well as our loans and advances, the other main area where we are exposed to credit risk is within our Treasury portfolio. At 31 December 2020 we held GBP3.4 billion (31 December 2019: GBP2.6 billion) of investment securities, which are used for balance sheet and liquidity management purposes, of which GBP3.4 billion (31 December 2019: GBP2.4 billion) is eligible as collateral at the BoE.

We hold investment securities at amortised cost or fair value through other comprehensive income depending on our intentions regarding each asset. We do not hold investment securities at fair value through profit and loss.

Table 8: Investment securities by credit rating

 
                           31 December 2020                    31 December 2019 
                              GBP'million                         GBP'million 
                 -----------------------------------  ---------------------------------- 
 Audited           Investment    Investment    Total    Investment    Investment   Total 
                   securities    securities             securities    securities 
                      held at       held at                held at       held at 
                    amortised         FVOCI              amortised         FVOCI 
                         cost                                 cost 
                 ------------  ------------  -------  ------------  ------------  ------ 
 Credit rating 
                 ------------  ------------  -------  ------------  ------------  ------ 
 AAA                    2,184           385    2,569         1,943           156   2,099 
                 ------------  ------------  -------  ------------  ------------  ------ 
 AA- to AA+               456           388      844           144           255     399 
                 ------------  ------------  -------  ------------  ------------  ------ 
 A- to A+                   -             -        -            67             -      67 
                 ------------  ------------  -------  ------------  ------------  ------ 
 Lower than A-              -             -        -             -             -       - 
                 ------------  ------------  -------  ------------  ------------  ------ 
 Total                  2,640           773    3,413         2,154           411   2,565 
                 ------------  ------------  -------  ------------  ------------  ------ 
 

We have a robust securities investment policy which requires us to invest in high-quality liquid debt instruments. At 31 December 2020, 75% of our investment securities were rated as AAA (31 December 2019: 82%) with a further 25% (31 December 2019: 16%) rated AA- or higher.

Additionally, we hold GBP3.0 billion (31 December 2019: GBP3.0 billion) in cash balances, which is either held by ourselves or at the BoE, where there is minimal credit exposure.

Oversight

Credit risk is overseen by the Chief Risk Officer (supported by the Chief Credit Officer), Executive Risk Committee and Risk Oversight Committee.

The Credit Risk function reports to the Chief Risk Officer and is led by the Chief Credit Officer. It is responsible for:

   --           Recommending and overseeing credit risk appetite limits. 
   --           Maintaining credit risk policies and standards. 
   --           Overseeing credit risk strategies in accordance with policies and risk appetite. 

-- Providing an independent review of individual commercial credit proposals and renewals of loan facilities.

-- Monitoring credit risk performance and reporting to the Executive Risk Committee and Risk of Committee.

   --           Developing and monitoring credit risk models. 
   --           Ensuring appropriate IFRS 9 credit provisions. 
   --           Developing and overseeing of retail collections and recoveries strategies. 
   --           Managing commercial collections and recoveries strategy and activities. 

In addition, our Treasury Risk team, which is led by the Director of Prudential Risk and reports to the Chief Risk Officer, supports the development and implementation of applicable policies and procedures and monitors the credit risk aspects of the Treasury portfolio.

Measurement

Economic weightings

We measure credit quality for impairment purposes under IFRS 9. We have taken a cautious approach to assessing our impairment provisions in order to set aside appropriate portfolio provision coverage for the anticipated economic deterioration and increase in credit losses that is expected over the coming period.

Our IFRS9 models utilise a blend of several economic scenarios provided by Moody's Analytics. The weightings of these scenarios reflect the UK economic outlook arising from COVID-19 and Brexit. The macroeconomic assumptions applied can be found on page 208. Our credit risk models are subject to internal model governance including independent validation. We undertake annual model reviews and have regular model performance monitoring in place.

The impairment provisions recognised during the year reflect our best estimate of the level of provisions required for future credit losses as calibrated under our conservative weighted economic assumptions and following the application of expert credit risk judgement overlays.

Use of Post Model Adjustments and Post Model Overlays

To supplement the models, we also applied expert credit risk judgement through post model adjustments and post model overlays.

Post Model Adjustments refer to increases/decreases in ECL to address known model limitations, either in model methodology or model inputs. These rely on analysis of model inputs and parameters to determine the change required to improve model accuracy. These may be applied at an aggregated level, however they will usually be applied at account level.

Post Model Overlays reflect management judgement. These rely more heavily on expert judgement and will usually be applied at an aggregated level. For example, where recent changes in market and economic conditions have not yet been captured in the macroeconomic factor inputs to models (e.g. industry specific stress event).

The appropriateness of post model adjustments and post model overlays is subject to rigorous review and challenge, including review by the Audit Committee (see page 94).

Further details on our use of post model adjustments and post model overlays can be found on page 210.

Regulatory measurement

As of 31 December 2020, all exposures are measured under the standardised approach for credit risk for regulatory capital. We are parallel-running the AIRB rating system for residential mortgages and have rolled out use of commercial rating and slotting models during 2020.

Monitoring

We monitor credit risk performance through a suite of reports covering performance against risk appetite limits and key credit risk metrics, including: new business flow; portfolio quality; early warning indicators; arrears and recovery performance; sector and geographical concentration; and exceptions to lending policy. Reports are provided to ERC, the ROC and the Board on a monthly basis. Credit risk performance is supported by portfolio reviews and deep dives on material portfolios and key credit risk themes.

Early Warning and Non-performing loans

In line with IFRS 9, we allocate all loans into Stages 1, 2 and 3 to reflect likelihood of loss.

-- Stage 1 includes those loans where the credit risk has not increased significantly since the loan was originally agreed.

-- Stage 2 includes those loans where the credit risk has increased significantly, but which are not impaired.

   --           Stage 3 includes loans which are non-performing. 

The risk of loss increases through these stages. Under IFRS 9, the potential for a loan to default is calculated on a 12-month horizon at Stage 1, and a lifetime horizon at Stages 2 and 3.

COVID-19 has been a significant factor in customers' ability to make payments. We have worked with customers to assist with how best to manage repayments, and have provided payment deferral options as an option, in line with regulatory guidance. This customer support package has kept arrears lower, and is expected to make return to repayment easier for most customers - a trend we have seen as customers have begun to roll off payment holidays.

We expect to see increasing numbers of customers experiencing financial difficulties, as restrictions continue to impact trading, liquidity is used up, and repayments start to fall due on government support loans. Commercial customers are managed through early warning categorisation where there are early signs of financial difficulty. The overriding objective is to identify, at an early stage, those customers for whom we believe repayment difficulties may develop, thereby allowing timely engagement and appropriate corrective action to be taken. Early Warning categorisation supports IFRS 9 Stage Allocation.

In Retail, we monitor for early signs of financial difficulty to enable appropriate customer support.

COVID-19 has also materially impacted the volume of lending in Early Warning categories over 2020. The main sector exposures within Early Warning categories reflect the key commercial term lending industry sectors: Real Estate; Hospitality; Recreation, Cultural and Sport are particularly affected. The majority of customers in Early Warning categories have received COVID-19 support including payment holidays or government backed loans, and we anticipate an increase in the number of customers requiring further COVID support.

Non-performing loans

Non-performing loans are loans that have more than three instalments unpaid (90+ days past due) or where the debtor is assessed as unlikely to pay our credit obligations in full without recourse to legal action to recover the debts in full, regardless of the existence of any past-due amount or of the number of days past due. All non-performing loans are included within Stage 3.

Where a debtor is facing difficulties meeting financial commitments, Metro Bank is able to offer forbearance. Forbearance is a concession either through a change to the terms and conditions of the loan, or a refinance of the loan. To be forborne, the customer is in or is about to face financial difficulties. Loans which have been renegotiated within existing credit policy where the customer is not in financial difficulties are not forborne. All forborne loans are included within Stage 3. Customers who have sought COVID support in the form of payment deferrals or temporary conversion to interest only payments are not considered forborne, by virtue of having sought that support. However, this may be a contributing factor for an account to be allocated in Stage 2.

Commercial loans in Stage 3 are individually assessed with consideration for the collateral provided against the loan. Provisions are reported and overseen through Impairment Committee to Executive Risk Committee.

COVID

COVID-19 has and will continue to materially impact the volume of lending classified as Stage 2 and Stage 3. In anticipation of this, a number of model adjustments have been put in place to reflect those losses, the full extent of which has yet to materialise.

Table 9: Non-performing loans

 
 Group                                    31 December 2020                      31 December 2019 
                                ------------------------------------  ------------------------------------ 
                                     Non-performing   Non-performing       Non-performing   Non-performing 
                                  loans GBP'million       loan ratio    loans GBP'million       loan ratio 
                                -------------------  ---------------  -------------------  --------------- 
 Retail-residential mortgages                   118            1.70%                   25            0.24% 
                                -------------------  ---------------  -------------------  --------------- 
 Retail-consumer and other                       13            6.13%                   10            4.30% 
                                -------------------  ---------------  -------------------  --------------- 
 Commercial (including asset 
  and invoice finance)                          127            2.48%                   42            1.12% 
                                -------------------  ---------------  -------------------  --------------- 
 Total                                          258            2.10%                   77            0.53% 
                                -------------------  ---------------  -------------------  --------------- 
 

The deterioration of the non-performing loan ratio from 31 December 2019 to 31 December 2020 for all portfolios is primarily driven by customers who have received temporary COVID-19 support measures and now require further forbearance support which has been classified as unlikeliness to pay criteria in the definition of default.

Cost of risk

Cost of risk is credit impairment charges expressed as a percentage of average gross lending. The increase has been primarily driven by COVID-19. There has been a significant deterioration in macroeconomic scenarios as well as increases in arrears and forbearance. This has driven an overall increase in the ECL expense.

Table 10: Cost of risk

 
 Group                                                2020    2019 
 Retail-residential mortgages                        0.19%   0.00% 
                                                    ------  ------ 
 Retail-consumer and other                           5.97%   1.92% 
                                                    ------  ------ 
 Commercial (including asset and invoice finance)    1.99%   0.11% 
                                                    ------  ------ 
 Average cost of risk                                0.86%   0.08% 
                                                    ------  ------ 
 

Regulatory and Government support schemes

We have remained focused on supporting customers through COVID-19 and have participated in the various Government support schemes. Payment deferrals and temporary payment conversion to interest-only for loans, interest-free overdrafts, and extensions of credit have all been made available.

We have provided BBLS to our customers with loans of between GBP2,000 and GBP50,000. These are available for up to 10 years, with no repayments due in the first year, at a fixed rate. Changes made as part of the 'Pay as you Grow' scheme allow customers to apply for an interest only payment period of six months (up to a maximum of three periods) with an additional payment deferral period, for both capital and interest, also up to six months. These loans are 100% guaranteed by the government.

CBILS allows for loans of over GBP50,000 to a maximum of GBP5 million. These have been made available at variable rates of lending with no arrangement fees and 0% interest for the first 12 months. The Government has guaranteed 80% of the loss and pays the fees as well as the interest for the first 12 months. The maximum term of these loans is six years.

CLBILS provides loans of over GBP50,000, up to a maximum of GBP200 million. These have also been made available at a variable rate of lending, with terms ranging between three months and three years. The government guarantees 80% of any loss on these loans.

At 31 December 2020 we have GBP1.35 billion of loans for BBLS, GBP114 million (with a further GBP19 million approved) in CBILS and GBP27 million (with further GBP3 million approved) in CLBILS. Whilst these loans are guaranteed by the government, costs to collect are expected, and the risks associated from these loans is being closely monitored and reassessed where necessary, particularly as new government guidance is made available.

Table 11: COVID-19 Government Backed Loans

 
 Group      Number of   Drawn Balance        Average 
            Customers     GBP'million    Loan Amount 
                                             GBP'000 
 BBLS          36,139           1,353             37 
          -----------  --------------  ------------- 
 CBILS            277             114            411 
          -----------  --------------  ------------- 
 CLBILS             3              27          9,122 
          -----------  --------------  ------------- 
 Total         36,419           1,494             41 
          -----------  --------------  ------------- 
 

COVID-19 support measures

COVID-19 support measures including payment deferrals and temporary payment conversions to interest only have been made available as part of our commitment to support our customers through COVID-19.

Less than 1% of mortgage customers currently have part or full payment deferrals. 22% of all mortgage customers have been granted deferrals in 2020 and 1% of customers remain. Of those customers who took a payment deferral, 90% have returned to full contractual payments with only 6% moving into arrears or requiring additional support.

7% of commercial customers currently have COVID-19 support measures in place, predominantly capital and interest payment holidays. 75% of commercial customers who have previously been granted COVID-19 support have now returned to full contractual terms.

Of our retail unsecured customers, 1% of customers have currently been granted payment deferral; 8% have taken a payment deferral over 2020 with 85% of those returning to contractual payments. Of those that have returned, 33% have moved into arrears or require additional support.

Table 12: COVID-19 support

 
                             Granted to Date              31 December 2020 
                      ----------------------------  ---------------------------- 
 Group                 Total Balances   % of Total   Total Balances   % of Total 
                          GBP'million     Balances      GBP'million     Balances 
                      ---------------  -----------  ---------------  ----------- 
 Retail Mortgages               1,540          22%               68           1% 
                      ---------------  -----------  ---------------  ----------- 
 Commercial Lending             1,011          29%              251           7% 
                      ---------------  -----------  ---------------  ----------- 
 Retail Unsecured                  13           8%                2           1% 
                      ---------------  -----------  ---------------  ----------- 
 Total                          2,564          24%              321           3% 
                      ---------------  -----------  ---------------  ----------- 
 
 
 2. Operational risk 
 Definition                                           Change since 2019: 
  Operational risk is the risk that events             Increased 
  arising from inadequate or failed internal 
  processes, people and systems, or from external 
  events cause regulatory censure, reputational 
  damage, financial loss, service disruption 
  and/or detriment to our FANS. 
                                                     ------------------- 
 
 

Appetite

We maintain a low appetite for Operational Risk. We aim to minimise incidents and losses arising from operational risk issues by maintaining a resilient infrastructure, including robust systems, employing and training the right colleagues, minimising the impact of external events and having a framework in place to ensure that operational risks are captured, monitored and mitigated.

Mitigation

Policies

We have detailed policies, procedures and controls in place that are designed to mitigate operational risks both through minimising impacts suffered in the normal course of business (expected losses) and to avoid or reduce the likelihood of suffering a large extreme (or unexpected) loss.

Cyber and information security

Our Chief Information Security Officer (CISO) is responsible for ensuring robust cyber and information security. We continuously invest in our cyber and information security infrastructure in order to improve services, protect customer data and minimise the risk of disruption. We also take pre-emptive actions to safeguard the end-to-end resilience of critical processes. We continue to enhance the control environment, recognising the changing cyber landscape and the increased focus on digital capabilities and reliance on home working, as well as the changing risk profile of the business.

Operational resilience

Operational resilience is demonstrated in the mitigation of risks that impact our people, technology, third parties, and premises. By identifying critical end-to-end processes, focus can be given to those processes and the controls in place, including management of the technology upon which they rely, to minimise disruption. The need for strong operational resilience is inherent in the provision of services to customers. As customer expectations and use of services evolves we will need to maintain focus on the resilience of services. COVID-19 highlights the ongoing exposure to external risks and threats that can be unpredictable in nature and widespread in impact. Our response to COVID-19 to date has ensured that critical services have continued in the safest manner possible for both customers and colleagues. The ongoing nature of the pandemic will continue to present risks to our resilience and these are monitored continually.

Culture and training

As we evolve, we aim to do so safely through continued investment in training our colleagues. This enables them to deliver the right outcomes to our FANS, whilst maintaining a safe, reliable and resilient banking operation.

Measurement

Material operational risk events are identified, reviewed and escalated in line with criteria set out in the Risk Management Framework. Root cause analysis is undertaken and action plans are implemented. Losses may result from both internal and external events, and are categorised using risk categories aligned to Basel II. We also measure operational risk using a number of quantitative metrics. These KRIs are defined, reported against and escalated to the Business Risk Committees, Executive Risk Committee and Risk Oversight Committee.

We also develop and maintain a suite of operational risk scenarios using internal and external data. These scenarios provide insights into the stresses the business could be subject to given extreme circumstances. Scenarios cover all material operational risks including execution of change, failures to core processes or contagion risk from a third party. Scenarios are owned by senior management custodians with review and challenge provided by the Risk function, Executive Risk Committee and Risk Oversight Committee, as part of the ICAAP process.

Monitoring

We have built detection capabilities to monitor and alert us about system attacks and we use incident management procedures and playbooks to respond to attacks accordingly.

We continuously develop and embed our approach to the management of operational risks, with the aim of maintaining robust operational processes, systems and controls, including conducting Risk and Control Self-Assessments across the Bank.

Operational risk is overseen by the CRO, Business Risk Committees, Executive Risk Committee and Risk Oversight Committee.

 
 3. Liquidity and funding risk 
 Definition                                          Change since 2019: 
  Liquidity Risk is the risk that we fail             Decreased 
  to meets our short-term obligations as they 
  fall due. 
  Funding Risk is the risk that we cannot 
  fund assets that are difficult to monetise 
  at short notice (i.e. illiquid assets) with 
  funding that is behaviourally or contractually 
  long term (i.e. stable funding). 
                                                    ------------------- 
 
 

Appetite

We have a moderate appetite for Liquidity Risk and Funding Risk. We shall be able to survive a combined name-specific and market-wide liquidity stress event for at least three months, at a level of severity determined by our internal stress test, utilising our Liquidity Pool. Equally, we shall maintain a prudent funding profile by using stable funding to fund illiquid assets, without reliance

on wholesale funding markets, whilst ensuring that funding is not inappropriately concentrated by customer, sector, or term,

as identified during our liquidity stress testing.

Mitigation

Deposit-funded approach

We aim to attract deposits that are diverse and are low cost, which are less sensitive to competition within the deposit market. At 31 December 2020, 44.3% of our deposits came from commercial customers (31 December 2019: 40%) with the remaining 56% (31 December 2019: 60%) coming from retail customers. Additionally, 39% of deposits at year end (31 December 2019: 29%) were

in the form of current accounts, with the remainder split between a combination of instant access and fixed-term savings products. In 2020 our cost of deposits was 0.65% (2019: 0.78%).

Our deposit base during the year and at year end remains stable and resilient throughout the pandemic, with retail deposits forming a higher portion of our balance sheet than commercial deposits.

Liquidity management

We continue to hold a prudent level of liquidity to cover unexpected outflows, ensuring that we are able to meet financial commitments for an extended period. We recognise the potential difficulties in monetising certain assets, so set higher-quality targets for liquid assets for the earlier part of a stress period. We have assessed the level of liquidity necessary to cover both systemic and idiosyncratic risks and maintain an appropriate liquidity buffer at all times. Our Liquidity Coverage Ratio ensures

that we comply with our own risk appetite as well as regulatory requirements.

Our liquidity portfolio consists of cash and balances at the BoE as well as high-quality liquid assets (HQLAs) that are available to monetise in the event of stress.

The tables on page 41 set out the maturity structure of our financial assets and liabilities by their earliest possible contractual maturity date; this differs from the behavioural maturity characteristics in both normal and stressed conditions. The behavioural maturity of customer deposits is much longer than their contractual maturity. On a contractual basis, these are repayable on demand or at short notice; however, in reality, they are static in nature and provide long-term stable funding for our operations and liquidity. Equally, our loans and advances to customers - specifically mortgages - are lent on longer contractual terms; however, are often redeemed or remortgaged earlier.

The total balances depicted in the analysis do not reconcile with the carrying amounts as disclosed in the Consolidated Balance Sheet. This is because the maturity analysis incorporates all the expected future cash flows (including interest), on an undiscounted basis.

Recovery planning

The Recovery Plan details a series of indicators that would tend to suggest a stress event may be in train. It assigns responsibilities and actions to key individuals, specifies timeframes, and establishes the Recovery Committee chaired by the CFO, which sits as required in the event of a liquidity stress.

Term Funding Scheme repayments

Term Funding Scheme (TFS) closed to further drawdowns in February 2018. Our drawdowns of GBP3,801 million will mature in 2020, 2021 and 2022 in the amounts of GBP543 million, GBP2,778 million and GBP480 million respectively. In March 2020, the Bank of England announced a revised TFS with additional incentives for SMEs. In December 2020, TFSME drawdowns were undertaken for GBP550 million with an expected maturity of 2024. We intend to continue to utilise the TFSME scheme in 2021 while our existing TFS drawings will be repaid using a combination of excess liquidity and by utilising TFSME.

Table 13: Contractual maturity

 
 Audited         Carrying     Repayable         Up to    3-6 months   6-12 months     1-5 years        Over 5            No         Total 
                    value     on demand      3 months   GBP'million   GBP'million   GBP'million         years   contractual   GBP'million 
                            GBP'million   GBP'million                                             GBP'million      maturity 
                                                                                                                GBP'million 
 31 December 
  2020 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Cash and 
  balances 
  with the 
  Bank of 
  England           2,993         2,993             -             -             -             -             -             -         2,993 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Loans and 
  advances 
  to 
  customers        12,385             -           332           281           634         4,551        11,424           284        17,506 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Investment 
  securities        3,413             -            87           233           221         2,768           140            59         3,508 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other assets       3,788             -         2,568             -             -             -             -         1,220         3,788 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total assets      22,579         2,993         2,987           514           855         7,319        11,564         1,563        27,795 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Deposits 
  from 
  customers      (16,072)      (12,550)         (641)         (864)       (1,233)         (702)             -         (119)      (16,109) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Deposits 
  from 
  central 
  banks           (3,808)             -         (692)         (588)       (1,500)       (1,033)             -             -       (3,813) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Debt 
  securities        (600)             -             -          (23)          (24)         (719)             -             -         (766) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Repurchase 
  agreements        (196)             -             -             -          (49)         (155)             -             -         (204) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Lease 
  Liabilities       (327)             -           (7)           (7)          (15)         (115)         (273)             -         (417) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other 
  liabilities       (287)             -             -             -             -             -             -         (287)         (287) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total 
  liabilities    (21,290)      (12,550)       (1,340)       (1,482)       (2,821)       (2,724)         (273)         (406)      (21,596) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Equity           (1,289)             -             -             -             -             -             -       (1,289)       (1,289) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total Equity 
  and 
  liabilities    (22,579)      (12,550)       (1,340)       (1,482)       (2,821)       (2,724)         (273)       (1,695)      (22,885) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Derivative 
  cashflows                           -           (3)                         (3)           (2)             -             - 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Cumulative 
  liquidity 
  gap                           (9,557)       (7,913)       (8,882)      (10,851)       (6,258)         5,033 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 
 Audited         Carrying     Repayable         Up to    3-6 months   6-12 months     1-5 years        Over 5            No         Total 
                    value     on demand      3 months   GBP'million   GBP'million   GBP'million         years   contractual   GBP'million 
                            GBP'million   GBP'million                                             GBP'million      maturity 
                                                                                                                GBP'million 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 31 December 
  2019 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Cash and 
  balances 
  with the 
  Bank of 
  England           2,989         2,989             -             -             -             -             -             -         2,989 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Loans and 
  advances 
  to 
  customers        14,681             -           349           317           584         4,191        16,893           395        22,729 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Investment 
  securities        2,565             -           209           229            74         1,924           215            60         2,711 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other assets       1,165             -             -             -             -             -             -         1,165         1,165 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total assets      21,400         2,989           558           546           658         6,115        17,108         1,620        29,594 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Deposits 
  from 
  customers      (14,477)       (9,720)         (601)       (1,102)       (1,838)       (1,178)             -         (115)      (14,554) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Deposits 
  from 
  central 
  banks           (3,801)             -           (6)           (7)         (556)       (3,274)             -             -       (3,843) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Debt 
  securities        (591)             -             -          (23)          (23)         (766)             -             -         (812) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Repurchase 
  agreements        (250)             -          (54)             -             -         (204)             -             -         (258) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Lease 
  Liabilities       (341)             -           (7)           (7)          (14)         (119)         (329)             -         (476) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Other 
  liabilities       (357)             -             -             -             -             -             -         (357)         (357) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total 
  liabilities                   (9,720)         (668)       (1,139)       (2,431)       (5,541)         (329)         (472)      (20,300) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Equity           (1,583)             -             -             -             -             -             -       (1,583)       (1,583) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Total Equity 
  and 
  liabilities    (21,400)       (9,720)         (668)       (1,139)       (2,431)       (5,541)         (329)       (2,055)      (21,883) 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Derivative 
  cashflows                           -           (2)                         (2)           (9)             -             - 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 Cumulative 
  liquidity 
  gap                           (6,731)       (6,843)       (7,437)       (9,212)       (8,647)         8,132 
               ----------  ------------  ------------  ------------  ------------  ------------  ------------  ------------  ------------ 
 

Measurement

Our asset and liability management system is used to capture all positions across the Bank and evaluate their liquidity. We calculate our LCR and performs stress testing of our liquidity daily. Forward-looking short-range forecasts are produced at least monthly.

Early warning indicators are set out in the Recovery Plan. Colleagues monitor these on a regular basis and bump-up any triggers.

A cost of funds model is used to help colleagues account for liquidity, capital and interest rate risk in pricing.

We perform an ILAAP every year for the identification, measurement, management and monitoring of liquidity, having due regard for the PRA Rulebook section 'Internal Liquidity Adequacy Assessment'. The Treasury team seeks ILAAP input from a range of teams including Finance, Risk, and Products, before taking the ILAAP through a robust governance process.

The conclusions of the ILAAP are reviewed and approved by the Board, assisting in: identification of our material liquidity risks; deciding the management of material liquidity risks; and determining the Board's risk appetite.

For liquidity risk, we assess against internal and external requirements. The chief external requirement is the LCR, and a series of internal requirements are set and maintained through our ILAAP.

Monitoring

The Treasury function has responsibility for our compliance with liquidity policy and strategy. We have a dedicated Treasury Risk team who monitor our liquidity and funding risk including ensuring compliance with the policies we have development. The Regulatory Reporting team also monitors compliance with LCR.

The Asset & Liability Committee is responsible for liquidity and funding risk. Liquidity and funding cannot be considered in isolation, and we have regard to liquidity risk, profitability and capital optimisation when considering funding sources. Our LCR has remained strong throughout the year, ending 2020 at 187% (2019: 197%).

 
 4. Market risk 
 Definition                                        Change since 2019: 
  Market risk is the risk of loss arising from      No change 
  movements in market prices. It is the risk 
  posed to earnings, economic value or capital 
  that arises from changes in interest rates, 
  market prices or foreign exchange rates. 
                                                  ------------------- 
 
 

Appetite

We have a moderate appetite for Market Risk, and do not have a trading book. Market Risk arises naturally as a result of taking deposits from customers and lending to customers. Market Risk is closely monitored and managed to ensure the level of risk remains within appetite, with key metrics reported to senior management and the Board.

Mitigation

Interest rate risk

We benefit from natural offsetting between certain assets and liabilities, which may be based on both the contractual and behavioural characteristics of these positions. Where natural hedging is insufficient, we hedge net interest rate risk exposures appropriately, including, where necessary, with the use of interest rate derivatives. We enter into derivatives only for hedging purposes and not as part of customer transactions or for speculative purposes.

Our Treasury and Treasury Risk teams work closely together to ensure that risks are managed appropriately - and that we are well-positioned to avoid losses outside our appetite, in the event of unexpected market moves.

We have hedge accounting solutions in place to reduce the volatility in the income statement arising from these hedging activities.

Foreign exchange exposure

We have very limited exposure to foreign exchange risk. Foreign exchange assets and liabilities are matched off closely in each of the currencies we operate and less than 5% of our assets and liabilities are in currencies other than pounds sterling. We do not have any operations outside the United Kingdom. We offer currency accounts and foreign exchange facilities to facilitate basic customer requirements only.

Measurement

We measure interest rate risk exposure using methods including the following:

-- Economic value sensitivity: calculating repricing mismatches across our assets and liabilities and then evaluating the change in value arising from a change in the yield curve. Our risk appetite scenario is based on a parallel rate movement of 2% to all interest rates, but we evaluate based on a series of other parallel and non-parallel rate changes. The scenarios are designed to replicate severe but plausible economic events and to have regard to risks that would not be evident through the use of parallel

shocks alone.

-- Interest income sensitivity: the impact on 12-month future income arising from various interest rate shifts. Our risk appetite scenarios are based on parallel rate movements of 2% and of divergences of up to 1.15% between BoE base rate and LIBOR against a constant balance sheet. We also evaluate a series of other parallel, non-parallel and non-instantaneous rate changes.

-- Interest rate gaps: calculating the net difference between total assets and total liabilities across a range of time buckets.

The frequency of calculating and reporting each measure varies from daily to quarterly, appropriate to each risk type.

We use an integrated ALM system, which consolidates all our positions and enables the measurement and management of interest rate repricing profiles for the entire Bank. The model takes into account behavioural assumptions as specified in our Market Risk Policy. Material assumptions can be updated more frequently at the request of business areas, in response to changing market conditions or customer behaviours. The model also takes into account future contracted or expected growth in lending and deposits.

We measure and monitor our exposures to foreign exchange risk daily and do not maintain net exposures overnight in any currency other than pounds sterling, above 5% of our total assets and liabilities.

Monitoring

Interest rate risk

Interest rate risk measures have limits set against them through the Market Risk Policy, and these are monitored on a regular basis by the Treasury Risk team. Measures close to the limits are escalated to Treasury in order to ensure prompt action and limit excesses are escalated to the Asset & Liability Committee. A digest of interest rate risk measures and details of any excesses are presented monthly at the Asset & Liability Committee.

Internal Asset & Liability Committee Limits are set for the economic value of equity and net interest income based on the worse of a +200bps or -200bps instantaneous symmetrical parallel shock to interest rates. The economic value of equity and net interest income limits are monitored daily by risk. Performance against limits is reported monthly to the Asset & Liability Committee (with exceptions communicated by email) and more regularly to senior management, as well as being noted by the ROC and the Board.

Furthermore, limits are set for a set of asymmetrical movements between LIBOR and the BoE base rate. Our Treasury Risk function runs a series of other interest rate risk simulations on a monthly basis to ensure that the Asset & Liability Committee is kept updated of any other risks not captured by the policy measures.

We enter into hedging arrangements when the natural hedging in our book is insufficient to enable us to remain within our limits.

All derivatives are entered into macro or micro fair value hedge accounting arrangements in order to minimise volatility in the profit and loss account.

The tables on page 44 set out the interest rate risk repricing gaps of our balance sheet in the specified time buckets, indicating how much of each type of asset and liability reprices in the indicated periods, after applying expected non-contractual and out-of-course early repayments in line with the Market Risk Policy. During 2020 we have updated the tables to better reflect our behavioural assumptions on deposits and equity as well as to provide increased granularity. The comparative tables for 2019 have also been updated to reflect these changes.

Table 14: Repricing analysis

 
 31 December           Up to     3-6 months    6-12 months      1-5 years         Over 5   Non-interest          Total 
  2020              3 months    GBP'million    GBP'million    GBP'million          years        bearing    GBP'million 
                 GBP'million                                                 GBP'million    GBP'million 
 Cash and 
  balances 
  with the 
  Bank 
  of England           2,913              -              -              -              -             80          2,993 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Loans and 
  advances 
  to 
  customers1           4,665            538          1,083          5,924            175              -         12,385 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Investment 
  securities           2,343             65              -            910             95              -          3,413 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Other assets          2,568              -              -              -              -          1,220          3,788 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Total assets         12,489            603          1,083          6,834            270          1,300         22,579 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Deposits from 
  customers          (8,761)        (1,091)        (1,657)        (4,563)              -              -       (16,072) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Deposits from 
  central 
  banks 
  and 
  repurchase 
  agreements         (3,808)              -           (47)          (149)              -              -        (4,004) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Debt 
  securities               -              -              -          (600)              -              -          (600) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Other 
  liabilities2             -              -              -              -              -          (614)          (614) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Equity                (886)           (40)           (79)          (284)              -              -        (1,289) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Total equity 
  and 
  liabilities       (13,455)        (1,131)        (1,783)        (5,596)              -          (614)       (22,579) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Interest rate 
  derivatives            389          (125)              -          (264)              -              - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Interest rate 
  sensitivity 
  gap                  (577)          (653)          (700)            974            270            686              - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Cumulative 
  gap                  (577)        (1,230)        (1,930)          (956)          (686)              -              - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 
 31 December           Up to     3-6 months    6-12 months      1-5 years         Over 5   Non-interest          Total 
  2019              3 months    GBP'million    GBP'million    GBP'million          years        bearing    GBP'million 
                 GBP'million                                                 GBP'million    GBP'million 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Cash and 
  balances 
  with the 
  Bank 
  of England           2,989              -              -              -              -              -          2,989 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Loans and 
  advances 
  to customers         4,565            639          1,506          7,962              9              -         14,681 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Investment 
  securities           2,068              -              3            472             22              -          2,565 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Other assets              -              -              -              -              -          1,165          1,165 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Total assets          9,622            639          1,509          8,434             31          1,165         21,400 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Deposits from 
  customers          (6,462)        (1,212)        (2,066)        (4,737)              -              -       (14,477) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Deposits from 
  central 
  banks 
  and 
  repurchase 
  agreements         (3,855)              -              -          (196)              -              -        (4,051) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Debt 
  securities               -              -              -          (591)              -              -          (591) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Other 
  liabilities2             -              -              -              -              -          (698)          (698) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Equity                (634)           (50)          (100)          (799)              -              -        (1,583) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Total equity 
  and 
  liabilities       (10,951)        (1,262)        (2,166)        (6,323)              -          (698)       (21,400) 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Interest rate 
  derivatives            964           (90)          (245)          (628)                             - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Interest rate 
  sensitivity 
  gap                  (365)          (713)          (902)          1,483             30            467              - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 Cumulative 
  gap                  (365)        (1,078)        (1,980)          (497)          (467)              -              - 
                ------------  -------------  -------------  -------------  -------------  -------------  ------------- 
 

1. Loans and advances to customers at 31 December 2020 includes the GBP295 million of loans and advances classified as held for sale.

2. Other liabilities includes lease liabilities which are shown as non-interest bearing category. Whilst interest expense is recognised on these liabilities within the income statement this interest is not paid like other financial liabilities. The maturities of the lease liabilities shown on the balance sheet are set out below:

Lease liability maturity profile

 
 Audited                    Up to     3-6 months    6-12 months      1-5 years         Over 5          Total 
                         3 months    GBP'million    GBP'million    GBP'million          years    GBP'million 
                      GBP'million                                                 GBP'million 
 31 December 2020             (7)            (7)           (15)          (102)          (196)          (327) 
                    -------------  -------------  -------------  -------------  -------------  ------------- 
 31 December 2019             (7)            (7)           (14)          (101)          (212)          (341) 
                    -------------  -------------  -------------  -------------  -------------  ------------- 
 

A positive interest rate sensitivity gap exists when more assets than liabilities reprice during a given period. A positive gap position tends to benefit net interest income in an environment where interest rates are rising; however, the actual effect will depend on multiple factors, including actual repayment dates and interest rate sensitivities within the banding periods. The converse is true for a negative interest rate sensitivity gap.

The table below shows the sensitivity arising from the standard scenario of a +200bps and -200bps parallel interest rate shock upon projected net interest income for a one-year forecasting period.

Table 15: Interest rate sensitivity

 
 Sensitivity of projected net interest income to                   200bps          200bps 
  parallel interest rate shock for a one-year forecasting        increase        decrease 
  period                                                      GBP'million    (not floored 
                                                                                 at zero) 
                                                                              GBP'million 
 31 December 2020                                                    19.8          (20.1) 
                                                            -------------  -------------- 
 31 December 2019                                                     8.1           (8.2) 
                                                            -------------  -------------- 
 
 
 5. Financial crime risk 
 Definition                                         Change since 2019: 
  Financial crime risk is the risk of financial      Decreased 
  loss or reputational damage due to regulatory 
  fines, restriction or suspension of business, 
  or cost of mandatory corrective action as a 
  result of failing to comply with prevailing 
  legal and regulatory requirements relating 
  to financial crime. 
                                                   ------------------- 
 
 

Appetite

We have no appetite for establishing or maintaining customer relationships or executing transactions that facilitate financial crime and have no appetite for sanctions breaches. Relationships with customers where it is felt that the financial crime risks are too great to manage effectively will be ended and continual investment is made in our expertise, partnerships and systems to improve our management of risk in this area. We will not tolerate any deliberate breach of financial crime laws and regulations that apply to our business and the transactions we undertake.

Mitigation

Investment in our systems and controls

We continue to conduct horizon scanning activity to identify emerging trends and typologies as well as to identify and prepare for new legislation and regulation. This includes participating in key industry forums (or associations) such as those hosted by UK Finance. As required, we will update our control framework to ensure emerging risks are identified and mitigated. We updated all our Financial Crime policies and standards in 2020 to ensure alignment with regulatory obligations.

Our Financial Crime Improvement Programme, which was mobilised in 2019, continued to deliver enhancements to our business-wide financial crime systems and controls throughout 2020. This programme will continue to deliver a Bank-wide framework to ensure Financial Crime controls are designed in line with regulatory requirements and build new capability to manage financial crime risk into 2021.

Resourcing and training

Resourcing continues to be a significant focus for the Bank to ensure the Financial Crime Framework is implemented effectively. Headcount has increased across all lines of defence and we have recruited additional specialist resource in 2020 to support operational teams in the first line of defence and to bolster second line Financial Crime Policy, Advisory and Assurance functions. We continue to invest in our colleagues' development to improve their capabilities through industry-recognised financial crime qualifications. All colleagues receive financial crime training, which is updated to reflect new requirements, ensuring our colleagues are able to meet their personal regulatory obligations and assist us in achieving our risk appetite and financial crime obligations.

Sanctions compliance

We continue to review our sanctions compliance framework with the support of external advisers, following our notifications to regulators on the sanctions matters discovered in 2017 and 2019.

The Financial Crime Improvement Programme has delivered multiple enhancements to our sanctions compliance capabilities in 2020 and will continue to do so throughout 2021.

Anti-money laundering and combating terrorist financing prevention

We comply with all relevant UK Anti-Money Laundering and Combating Terrorist Financing legislation. The Financial Crime Improvement Programme continues to deliver enhancements to our customer due diligence capabilities, transaction monitoring, customer and payment screening capabilities. The programme ensures we continue to effectively prevent, detect and treat potential out-of-appetite financial crime activities.

Anti-bribery and corruption and anti-tax evasion compliance

We comply with the UK Bribery Act 2010 and have zero tolerance for undertaking and/or facilitating bribery and/or corruption and will always avoid giving or receiving improper financial or other benefits in our business operations. We also comply with the Criminal Finances Act 2017 and have a zero tolerance approach to any facilitation of tax evasion. We are committed to acting professionally, fairly and with integrity in all our business dealings and relationships.

Fraud prevention

We have continued to invest in fraud prevention tools and further capability in 2020. This, in addition to historic investment,

has resulted in significant savings by preventing attempted frauds against our customers and the Bank itself.

During the pandemic, we have seen fraudsters continue to target customers through authorised and unauthorised payment fraud attempts. Alongside this we have also seen an increase in the use of social engineering techniques to attempt to obtain customers' personal and security details, using reasons related to COVID-19 and scams topical to the pandemic, including pets, vaccines and personal protective equipment. We have continued to share fraud prevention trends and best practice via our various communication channels to help our customers protect against such attacks.

We have supported our customers during these difficult times by providing government-funded schemes and we have implemented fraud capabilities to limit attempted fraud against these schemes. We have worked closely with the British Business Bank, other banks, network operators and law enforcement to identify and reduce the fraud risk in relation to BBLS applications.

In 2021, we will continue to work closely with stakeholders to help prevent and protect our customers from fraud.

Measurement

The Financial Crime Risk team own our control framework with accountability for execution owned by our colleagues across the first line. The Risk team defines our risk appetite and recommends this to the Board for approval. In order to monitor the effectiveness of our control framework and the alignment with our risk appetite, KPIs are defined, reported against and escalated through to the ROC. We report monthly on our Bank-wide account opening pass rates, fraud volumes and associated operational losses through this process.

Monitoring

Our policy framework also sets out key requirements which must be complied with consistently to manage our various risks.

We have risk-based audit and assurance plans to monitor the effectiveness of our controls. Dedicated and skilled resources are in place to complete these reviews, with findings and recommendations tracked through our financial crime governance structure.

We maintain policies and compliance standards, aligned to our legal and regulatory obligations, which also articulate our risk appetite.

Each year we complete a financial crime risk assessment to ensure that our financial crime control framework is commensurate and robust to manage our inherent business risks across each financial crime area.

We participate in external industry forums, including being an active member of the Cyber Defence Alliance and liaise with government bodies such as UK Finance, the Home Office, HMRC, the Financial Conduct Authority and law enforcement to support our identification of new and evolving risks.

 
 6. Regulatory and compliance risk 
 Definition                                             Change since 2019: 
  Regulatory and compliance risk is the risk             No change 
  of failing to understand and comply with relevant 
  laws and regulatory requirements; not keeping 
  regulators informed of relevant issues; not 
  responding effectively to information requests 
  nor meeting regulatory deadlines; or obstructing 
  the regulator. 
                                                       ------------------- 
 
 

Appetite

We have no appetite for actions that result in breaches of regulation or for inaction to address systemic process and control failures leading to material non-compliance. Notwithstanding the complexity and volume of the regulatory agenda, we ensure that all mandatory requirements are prioritised with sufficient resources to implement within required timescales in a customer-focused manner.

Mitigation

The following controls and procedures help to mitigate regulatory and compliance risk:

-- A clearly defined compliance policy statement (with supporting policy standards) and Regulatory Appetite Statements signed off by the Board.

-- Ongoing development, maintenance and reporting of risk appetite measures for regulatory and compliance risk to the Executive Risk Committee and the Board.

   --           Maintenance of proactive and coordinated engagement with our key regulators. 

-- Continual assessment of evolving regulatory requirements, including regulatory business plans and thematic reviews.

-- Consideration of regulatory requirements in the context of product and proposition development and associated appropriate governance.

   --           Oversight of key regulatory implementations, including PSD2. 
   --           Oversight of regulatory and compliance risks and issues in relevant governance bodies. 

-- Ongoing review and tracking of known regulatory and compliance issues and remediation actions being taken.

-- A risk-based assurance framework, designed to monitor compliance with regulation and assess customer outcomes.

Our Board, Risk Oversight Committee and Executive Committee (via the Executive Risk Committee) continue to monitor and oversee our focus on maintaining regulatory compliance. This includes periodic reporting on regulatory themes, regulatory changes on the horizon and the regulatory environment, alongside supporting key risk measures and Board-approved policies and standards.

Measurement

Regulatory and compliance risks are measured against a defined set of Board-approved risk appetite metrics relating to regulatory breaches, and past due regulatory implementations and actions. Thresholds are set and form part of the Board-approved Risk Appetite Statement.

Monitoring

Regulatory and compliance risk is considered by all three lines of defence as part of their oversight and assurance activities. A risk assurance plan, approved by the Executive Risk Committee on an annual basis, independently assesses areas of the control framework underpinning compliance with laws and regulations.

 
 7. Conduct risk 
 Definition                                          Change since 2019: 
  Conduct risk is the risk of treating customers      Increased 
  unfairly and delivering poor outcomes that 
  lead to customer detriment, such as financial 
  loss and/or distress and inconvenience. This 
  can also result in wider adverse impacts, 
  for example, loss of customers, reputational 
  damage, regulatory investigations and/or legal 
  action. 
                                                    ------------------- 
 
 

Appetite

We have no appetite for conduct risks that knowingly deliver inappropriate customer outcomes, which may lead to customer detriment. Where inappropriate outcomes are identified, these are remediated quickly to minimise risk and reduce harm to our customers.

Mitigation

Our simple, transparent and fairly-priced products and activities continue to help ensure that conduct risk is minimised. Our colleagues are fully-trained in all relevant products and services and these are delivered with exceptional levels of service to customers through all channels, with openness and transparency, supported by robust management controls and quality assurance measures. Our products are reviewed regularly to ensure they continue to meet customer needs and perform as expected. We are committed to ensuring communications are clear, fair and not misleading. We do not use sales incentives in stores, nor is there a perception amongst colleagues that they exist in any unofficial manner.

Make every wrong right

Our service-led business model gives us an inherent advantage over peers. We are committed to doing the right thing for our customers and to making any wrongs right. Where conduct risks are identified, resources and expertise are dedicated to swift remediation action to appropriately mitigate any issues, avoid recurrence and, if detriment has occurred, the scale of the harm is quantified to address this with impacted customers. This is possible because of our clear risk framework which includes defined first line ownership, review stages and challenge by the second line, and assurance from the third line.

In 2019, we made a provision of GBP12 million for customer remediation, which predominately related to non-compliance with certain requirements to provide SMS warning alerts to customers regarding overdraft charges. The error was subsequently corrected and the Competition and Markets Authority was informed. We pride ourselves on providing exceptional levels of service and we regret the impact on customers. All customers have now been contacted and the remediation project has been completed.

Measurement

We measure conduct risk through Risk Appetite Metrics which are centred around product governance, compliance monitoring, analysis of expressions of dissatisfaction, root cause analysis, 'Voice of the Customer' surveys and reporting through customer treatment forums. Key Risk Indicators are also defined, reported against and escalated to the Risk Oversight Committee. We view the effective management of conduct risk as being evidenced by low levels of poor customer outcomes and evidence of robust controls, meaning that the right internal processes are being followed to deliver these outcomes.

Monitoring

As well as monitoring the trends in the metrics outlined above, we analyse the root cause of complaints and any underlying trends, to identify opportunities to improve service provision while delivering consistently fair outcomes for customers.

 
 8. Model risk 
 Definition                                            Change since 2019: 
  Model risk can be defined as the potential            Increased 
  loss that we may incur, as a consequence of 
  decisions that could be principally based on 
  the output of models, due to errors in the 
  development, implementation or use of such 
  models. Model risk can lead to financial loss, 
  poor business and strategic decisions, and 
  reputational damage. Model risk covers all 
  models and is not limited to credit risk models. 
                                                      ------------------- 
 
 

Appetite

We have only a moderate appetite for risk due to errors in the development, implementation or use of models, which we mitigate via effective governance over the specification and design, implementation and running of our models and over model input data.

Mitigation

Governance

The main mitigant to model risk is the robust governance process we have established. This includes two dedicated

model committees:

-- Model Oversight Committee - which is the designated committee for the management of model risk.

-- Model Governance Committee - which is the technical committee overseeing the model risk life cycle.

Material models are presented to the Model Oversight Committee for approval via the Model Governance Committee, ahead of implementation or model changes.

The Model Oversight Committee defines and approves standards relevant to model risk and recommends policies and model risk appetite to the Risk Oversight Committee for approval on an annual basis. The Model Governance Committee owns the minimum standards and target operating models to mitigate model risk. It also defines roles and responsibilities, with clear ownership

and accountability.

The Model Governance function maintains a model inventory, which records key features of models including ownership and review schedules. The Model Governance function also tracks model risk and actions from both the Model Oversight Committee and Model Governance Committee.

Independent review

We have established an independent Model Validation team, which is part of our Prudential Risk function. This is managed by

a team of experts, independent from model development. This team is responsible for reviewing model development submissions and maintains a model validation action log to track model risk remediation plans. Models are also subject to internal and external audit as well as regulatory reviews.

Measurement

We measure model risk using a set of model performance indicators which form part of our Key Risk Indicators are regularly reported and discussed at the Model Governance Committee, Model Oversight Committee, Risk Oversight Committee and Board. On a monthly basis, the Model Governance Committee reviews any material validation actions and tracks their closure.

Monitoring

A dedicated Model Monitoring team is responsible for assessing the ongoing performance of credit risk models against pre-specified tolerances approved by the Model Governance Committee as part of model monitoring standards.

Model performance is regularly monitored, and results are discussed both at the Model Governance Committee and Model Oversight Committee, where actions are agreed and tracked to completion. Non-credit risk models are also subject to monitoring according to metrics and a schedule agreed at Model Governance Committee, however, this monitoring is undertaken by the appropriate user areas rather than by the Model Monitoring team.

 
 9. Capital risk 
 Definition                                               Change since 2019: 
  Capital Risk is the risk that we fail to meet            No change 
  minimum regulatory capital (and MREL) requirements. 
  Management of capital is essential to the 
  prudent management of our balance sheet, ensuring 
  our resilience under stress and the maintenance 
  of the confidence of our current and potential 
  creditors (including bondholders, the bond 
  market, and customers) and key stakeholders 
  in the pursuit of our business strategy. 
                                                         ------------------- 
 
 

Appetite

We have a low appetite for Capital Risk and our aim is to maintain a surplus of capital resources above regulatory requirements.

Mitigation

We manage our capital risk via our Capital Adequacy Framework which includes policies, strategy, limit setting, continuous monitoring and stress testing. Our ICAAP is a key component of this framework and is used to analyse material risks and assess our strategy and objectives under various stress scenarios. Capital ratios continued to be maintained within Board risk appetite and regulatory requirements throughout 2020.

Sustainable profit growth

The main mitigation to capital risk is the sustainable generation of additional capital through the accumulation of profits. The Board and Executive Committee are focused on ensuring the successful delivery of the strategic plan to ensure the return to sustainable profitability.

Balance sheet optimisation

Another key mitigation that we can use to manage capital risk is the efficient deployment of our existing capital resources. One of our strategic priorities is improving our balance sheet optimisation to ensure we maximise our risk-adjusted returns whilst remaining above regulatory requirements. As part of this approach we executed a sale of a portfolio of residential mortgages in December 2020 which increased our MREL resources, through a combination of reducing our RWAs and the recognition of a gain on sale.

Raising of additional capital

As we grow we need to raise additional regulatory capital to support lending growth. The ability to raise additional capital, as well as the associated cost, is dependent upon market conditions and perceptions. The sale of the mortgage portfolio removed the need for us to raise additional capital in the near term.

Measurement

We measure our capital resources in line with regulatory requirements. In order to appropriately manage our capital resources, we produce regular reports on the current and forecasted level of capital for the Board and the Executive Leadership Team. This includes the undertaking of routine stress testing on an ongoing basis.

The key assumptions and risk drivers used to create the stress tests are regularly monitored and reported, and are used in determining how we will evolve our capital resources and ensure they are appropriate for growth.

The ICAAP is used to assess the adequacy and efficiency of our capital resources required to support our business model.

Monitoring

We consider both short-term forecasts and medium-term plans, and our overall agreed risk appetite.

We also develop appropriate strategies under market stress conditions to manage those risks to capital and consider both past events and customer behaviour to inform our analysis, and to validate our robustness. This process is used to ensure that we apply appropriate management buffers to regulatory capital requirements in line with risk appetite.

We manage and monitor capital in accordance with prudential rules issued by the PRA and FCA, in line with the EU Capital Requirements Directive, in addition to our own internal reporting measures. We are committed to maintaining a strong capital base under both existing and future regulatory requirements.

We are working to ensure we are compliant with the incoming CRD V / CRR 2 requirements, which were published in June 2019; and the recent PRA consultation CP17/20 (CRD V: Further Implementation) detailing the transitional changes in the UK regulatory framework required as a result of the exit from the European Union.

Table 16: Capital resources

 
 Audited                          31 December    31 December 
                                         2020           2019 
                                  GBP'million    GBP'million 
 Ordinary share capital                     -              - 
                                -------------  ------------- 
 Share premium                          1,964          1,964 
                                -------------  ------------- 
 Retained earnings                      (694)          (392) 
                                -------------  ------------- 
 Other reserves                            19             11 
                                -------------  ------------- 
 Intangible assets                      (254)          (168) 
                                -------------  ------------- 
 Other regulatory adjustments             157             12 
                                -------------  ------------- 
 Total Tier 1 capital (CET1)            1,192          1,427 
                                -------------  ------------- 
 Debt securities (Tier 2)                 249            249 
                                -------------  ------------- 
 Total Tier 2 capital                     249            249 
                                -------------  ------------- 
 Total regulatory capital               1,441          1,676 
                                -------------  ------------- 
 

Emerging risks

In addition to our principals, we monitor other potentially significant emerging risks.

We consider emerging risks to be evolving threats which cannot yet be quantified, with the potential to significantly impact the Bank's strategy, financial performance, operational resilience and/or reputation. The emerging risks are continually assessed and reviewed through a horizon scanning process, with escalation and reporting to the Board as necessary. The horizon scanning process fully considers all relevant internal and external factors and is designed to capture those risks which are present but have not yet fully crystallised, as well as those which are expected to crystallise in the future.

Macroeconomic environment

The full extent of the economic impacts from COVID-19 are yet to be seen. The duration and depth of the downturn is uncertain and risks to credit and margin performance are expected, with significant disruption to both supply and demand already occurring. Increasing levels of unemployment could impact customers' ability to repay their lending. The efficacy of monetary and fiscal policy, and the speed and ability with which the UK can return to 'normal' operating conditions, will determine the overall economic impact for the UK.

Mitigating actions

We continue to monitor economic and political developments in light of the ongoing uncertainty, considering potential consequences for our customers, products and operating model. We actively monitor our credit portfolios and undertake robust internal stress testing to identify sectors that may come under stress as a result of an economic slowdown in the UK.

Climate risk

There is significant uncertainty around the time horizon over which climate risks will materialise, as well as the exact way in which they will occur. Climate risk is classified as a cross-cutting risk type that manifests through other principal risks - primarily strategic risk, credit risk and operational risk. We are exposed to physical, transition and reputation risks arising from climate change.

Our mortgage portfolio represents a significant proportion of our customer lending. Increases in extreme variability in weather patterns may lead to increased incidence and severity of physical risks which, in addition to the disruption felt by customers, can lead to a decrease in the valuations of property taken as collateral to mitigate credit risk. In addition, tightening minimum energy efficiency standards for domestic buildings could impact the value of mortgaged properties or the ability of borrowers to service debt. We have low levels of lending to carbon-related assets, however, we may be exposed to future transition risks through the business portfolio.

Mitigating actions

The Chief Risk Officer has Senior Manager Responsibility for our approach to managing financial risks from climate change. We continue to consider climate change in our Risk Management Framework, in line with our plan to align to regulatory expectations. The Executive Risk Committee has responsibility for overseeing our exposures and approach to managing the financial risks from climate change. The Committee will receive regular updates on progress against the plan through the Bank Risk Report and special papers.

Analysis of current river and sea flood risk to properties within the mortgage portfolio has been undertaken as an initial step in assessing the physical risk to our lending. Scenario analysis work will be undertaken to consider the longer-term impacts, as well as the high degree of uncertainty. Transition risk within the mortgage portfolio will also be considered with an assessment of the energy efficiency of properties and we intend to use this information to support our customers to 'green' their homes. An assessment of sectors (and sub -- sectors) that may have a higher likelihood of being impacted by transition risks from moving to a lower carbon environment has been performed, to increase understanding of the possible risks facing our customers, and support prioritisation of areas where further analysis is required. Building scenario analysis capability is a key component of work planned for 2021.

Regulatory change

The suite of government support measures introduced in reaction to the economic pressures created by COVID-19 are complex and nuanced. Any sudden

or unexpected change to the rules and regulations governing the measures

could create material market disruption, requiring large-scale prioritisation decisions in a fast-paced environment. Beyond COVID-19, there is continued evolution of the regulatory landscape and the requirement to respond to ongoing prudential and conduct driven initiatives.

Mitigating actions

We continue to monitor emerging regulatory initiatives to identify potential impacts on our business model and ensure we are well placed to respond with effective regulatory change management. We continue to work with regulators to ensure we meet all regulatory obligations, with identified implications of upcoming regulatory activity incorporated into the strategic planning cycle.

Digitisation

COVID-19 has accelerated the digitisation of the banking industry in the space of a few months and is likely to lead to rapid change over the coming years as the industry rapidly adapts to customers' evolving behaviours. This is spurring an acceleration of investment and delivery by both incumbent banks and neo-banks to provide enhanced digital propositions to customers in both the consumer and business markets.

Mitigating actions

The Bank's strategy had always been predicated on new and exciting digital propositions, with the implications of the pandemic both supporting that ambition, but also accelerating the timeframe for delivery. Our rapid response to the pandemic has demonstrated our ability to implement change and digital solutions swiftly. We are therefore continuously evaluating the timetable and investment profile of our strategy. We are continuing with our investment and digital development in the near term to position us for the future.

SIGNIFICANT EVENTS

In September 2020, as part of our strategy to enhance returns and ambition to grow unsecured lending, we acquired Retail Money Market Ltd (RateSetter). RateSetter's originating and underwriting capability will enable us to rapidly accelerate this ambition via an existing, scalable platform.

In December 2020 we announced the sale of a portfolio of owner occupied residential mortgages, the transaction completed in February 2021. The portfolio had a gross book value of GBP3,044 million resulting in a total cash consideration of GBP3,127 million.

RELATED PARTIES

Key management personnel

Our key management personnel, and persons connected with them, are considered to be related parties. Key management personnel are defined as those persons having authority and responsibility for planning, directing and controlling the activities of the Group. The Directors and members of the Executive Leadership Team are considered to be the key management personnel for disclosure purposes.

Key management compensation

Total compensation cost for key management personnel for the year by category of benefit was as follows:

 
 Group                                              2020           2019 
                                                     GBP'million    GBP'million 
 Short-term benefits                                5.3            5.8 
 Post-employment benefits                           0.1            - 
 Share-based payment costs                          0.7            1.7 
                                                   -------------  ------------- 
 Total compensation for key management personnel    6.1            7.5 
                                                   -------------  ------------- 
 

Short-term employee benefits include salary, medical insurance, bonuses and cash allowances paid to key management personnel. The share-based payment cost represents the IFRS 2 charge for the year which includes awards granted in prior years that have not yet vested.

Banking transactions with key management personnel

We provide banking services to Directors and other key management personnel and persons connected to them. Loan transactions during the year and the balances outstanding at 31 December were as follows:

 
 Group                                       2020           2019 
                                              GBP'million    GBP'million 
 Loans outstanding at 1 January              0.7            3.8 
 Loans relating to persons and companies     1.8            - 
  newly considered related parties 
 Loans relating to persons and companies 
  no longer considered related parties       (0.6)          (3.1) 
 Loans issued during the year                -              0.2 
 Loan repayments during the year             -              0.2 
                                            -------------  ------------- 
 Loans outstanding as at 31 December         1.9            0.7 
                                            -------------  ------------- 
 Interest expense on loans payable to the 
  Group (GBP'000)                            34             90 
                                            -------------  ------------- 
 

There were three (31 December 2019: five) loans outstanding at 31 December 2020 totalling GBP1.9 million (31 December 2019:GBP0.7 million). Of these, two are residential mortgages secured on property and one is an asset finance loan; all loans were provided on our standard commercial terms.

In addition to the loans detailed above, we have issued credit cards and granted overdraft facilities on current accounts to Directors and key management personnel.

Credit card balances outstanding at 31 December were as follows:

 
 Group                                         2020       2019 
                                                GBP'000    GBP'000 
 Credit cards outstanding as at 31 December    22         16 
                                              ---------  --------- 
 

Deposit balances outstanding at 31 December were as follows:

 
 Group                                         2020           2019 
                                                GBP'million    GBP'million 
 Deposits held at 1 January                    3.3            4.5 
 Deposits relating to persons and companies 
  newly considered related parties             0.2            2.1 
 Deposits relating to persons and companies 
  no longer considered related parties         (0.3)          (1.8) 
 Net amounts withdrawn                         (1.1)          (1.5) 
                                              -------------  ------------- 
 Deposits outstanding as at 31 December        2.1            3.3 
                                              -------------  ------------- 
 

Transactions with Group companies

Details of transactions with Group companies can be found within note 39.

Other transactions with related parties

During the year, architecture, design and branding services were provided to us by InterArch, Inc., ('InterArch') a firm which is owned by Shirley Hill, the wife of Vernon W. Hill II. Vernon W. Hill II was Chairman until 23 October 2019 and a Board member until 17 December 2019 when he stepped down.

He retains an honorary role as Chairman Emeritus. By virtue of his previous position in the Bank, as well as status of founder, InterArch continues to be considered a related party. The creative and brand services contract and architectural design service contract ended on 27 February 2020. In order to ensure the smooth transition to new providers, we entered into a short agreement with InterArch to support the transition until the end of June 2020. This process has now fully completed.

The following transactions were carried out with InterArch during the year:

 
 Group                                         2020       2019 
                                                GBP'000    GBP'000 
 Architectural design services                 388        4,885 
 Creative and brand services                   333        428 
                                              ---------  --------- 
 Total purchase of services with entities 
  connected to key management personnel        721        5,313 
                                              ---------  --------- 
 Amounts outstanding as at 31 December owed 
  by Metro Bank                                -          82 
                                              ---------  --------- 
 

STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS

Our directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the group financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) no 1606/2002 as it applies in the European Union and parent company financial statements in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006.

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and parent company and of the profit or loss of the Group for that period. In preparing the financial statements, the directors are required to:

   --           select suitable accounting policies and then apply them consistently; 

-- state whether applicable international accounting standards in conformity with the requirements of the Companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) no 1606/2002 as it applies in the European Union have been followed for the group financial statements and international accounting standards in conformity with the requirements of the Companies Act 2006 have been followed for the parent company financial statements, subject to any material departures disclosed and explained in the financial statements;

   --           make judgements and accounting estimates that are reasonable and prudent; and 

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group and parent company will continue in business.

The directors are also responsible for safeguarding the assets of the Group and parent company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group's and parent company's transactions and disclose with reasonable accuracy at any time the financial position of the Group and parent company and enable them to ensure that the financial statements and the directors' Remuneration Report comply with the companies Act 2006.

The directors are responsible for the maintenance and integrity of the information included on our website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

The directors consider that the annual report and accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's and parent company's position and performance, business model and strategy.

Each of the directors, whose names and functions are listed in pages 78 and 79 confirm that, to the best of their knowledge:

-- the Group financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the companies Act 2006 and international financial reporting standards adopted pursuant to Regulation (EC) no 1606/2002 as it applies in the European Union, give a true and fair view of the assets, liabilities, financial position and loss of the Group;

-- the parent company financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and loss of the parent company; and

-- the strategic Report includes a fair review of the development and performance of the business and the position of the Group and parent company, together with a description of the principal risks and uncertainties that it faces.

Statement of disclosure of information to auditors

Each director in office at the date of this report, and whose name is listed on pages 78 and 79, confirms that to the best of their knowledge:

-- there is no relevant audit information of which the Group and parent company's auditors are unaware; and

-- all reasonable steps that they ought to have taken as a director to make themselves aware of any relevant audit information, and to establish that the Group and parent company's auditors are aware of the information, have been taken.

The confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.

About Metro Bank

Metro Bank serves more than two million customer accounts and is celebrated for its exceptional customer experience. It is the highest rated high street bank for overall service quality for personal and business customers and the number one bank for service in stores in the Competition and Market Authority's Service Quality Survey in February 2021. It was recognised as 'Bank of the Year' at the 2020 MoneyAge Awards and 'Banking Brand of The Year' at the Moneynet Personal Finance Awards 2021.

The community bank offers retail, business, commercial and private banking services, and prides itself on giving customers the choice to bank however, whenever and wherever they choose, and supporting the customers and communities it serves. Whether that's through its network of 77 stores open seven days a week, early until late, 362 days a year; on the phone through its UK-based 24/7 contact centres; or online through its internet banking or award-winning mobile app: the bank offers customers real choice.

Metro Bank PLC. Registered in England and Wales. Company number: 6419578. Registered office: One Southampton Row, London, WC1B 5HA. 'Metrobank' is the registered trademark of Metro Bank PLC.

It is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority. Most relevant deposits are protected by the Financial Services Compensation Scheme. For further information about the Scheme refer to the FSCS website www.fscs.org.uk .

All Metro Bank products are subject to status and approval.

Metro Bank PLC is an independent UK bank - it is not affiliated with any other bank or organisation (including the METRO newspaper or its publishers) anywhere in the world. Please refer to Metro Bank using the full name.

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