New blow for troubled Metro Bank

Author: Anna Bowes
26th September 2019

New blow for troubled Metro Bank – what should you do if you hold savings with the bank?

Customers who have taken advantage of some the competitive rates offered by Metro Bank during the last year, may be worried if they have seen the recent press reports about the state of the Bank.

Earlier in the year, Metro’s share price plummeted following an accounting error in January which wiped £1.5bn off its market value – leaving it without the capital needed to grow.

Metro Bank logo

However, in May 2019, the bank was able to raise £375m from existing and new shareholders to bolster its finances. The decision to raise capital was endorsed by the Prudential Regulation Authority (a division of the Bank of England which checks that financial firms act safely and reduce their chances of getting into financial difficulty) who said;

The Prudential Regulation Authority welcomes the steps taken today by Metro Bank. Metro Bank is profitable and continues to have adequate capital and liquidity to serve its current customer base. It has raised additional capital in order to fund future growth.

This week’s news that Metro Bank has scrapped a crucial £250m corporate bond issue due to lack of investor interest will be a fresh blow to shareholders and customers alike. The failure to generate interest in the recent issue signals a lack of confidence in the business at the current time but does not necessarily mean that the business will fail.

What does this mean for shareholders and savers?

If Metro Bank should fail then shareholders who have already seen the value of their shares plummet would be most badly affected as they would lose their money.

For savers, the outlook is not as bad, as any funds deposited in cash savings accounts with the bank, up to a limit of £85,000 per person (£170,000 savings held jointly), are protected under the Financial Services Compensation Scheme. However, if the bank was to fail, funds of over £85,000 are not protected, so could be lost.

While we don’t know what the future holds for Metro Bank, savers who are worried might want to reduce any cash deposits that they have with the provider to within £85,000 if possible. That said, those holding fixed rate bonds will be unable to withdraw funds before maturity.

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