Ex Northern Rock Boss Fined for Mortgage Reporting

by Mark Johnston

The former financial chief of Northern Rock, the bailed out bank that was the first British bank in 150 year to suffer a bank run has been fined £320,000 by the financial services regulator the FSA.The fine is a result of the an inquiry led by the FSA into how some leading Northern Rock staff manipulated data relating to mortgage arrears. The finance chief, David Jones was found to have played a key role in the misreporting of mortgage figures leading up to Northern Rocks collapse in 2008.

The city regulator has previous imposed large fines on other senior staff including David Baker the previous chief executive who was fined over half a million back in April this year. Richard Barclay the previous credit director was also fined £104,000 his role in the misreporting fiasco that helped to bring the bank to its knees.

Margaret Cole, of the FSA, said today’s fine sent “a message” to the industry. The FSA revealed that false mortgage data which included arrears and possession figures had been reported which mislead shareholders and investors.

No evidence was found against the former CEO Adam Applegarth that he had any involvement and knew about the misreporting.

The former chief financial officer agreed to include false data into the 2006 annual accounts. The FSA’s findings showed that the misreporting did not have a direct impact on the Newcastle based banks collapse but they did hide considerable losses relating to nearly 2,000 mortgage arrears.

The FSA investigation reported that  staff felt “to produce attractive arrears figures”. Whilst Mr Jones was not himself responsible for manipulating the figures, he did fail to correct the ‘mistakes’ and knew it would be used for internal and external communications. The misleading figures showed that its rate of mortgage loan arrears was under 5 percent which was under half the industry average. If the correct figures were used this would have increased b y 50% to 0.68%. Possession figures would have increased by around 300%.

Following the financial crisis, Northern Rock was nationalised after it had to ask for emergency funding from the Bank of England. It was the first bank to suffer a bank run in 150 years.

Following the announcement Ms Cole from the FSA was quoted in saying “This is a message to all FSA-approved persons, that they must take their individual responsibilities seriously at all times, or suffer the consequences.”

Northern Rock said: “The investigation related to a period before the company entered public ownership. The company is not subject to any sanction from the FSA as a result of this investigation.”



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