UPDATE 1-Ex-Bradford & Bingley CFO fined over 2008 cash call risks

Thu Dec 12, 2013 8:36am EST

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LONDON Dec 12 (Reuters) - The former finance director of Bradford & Bingley (B&B), a UK lender, has been fined 30,000 pounds ($49,000) for failings related to a 2008 cash call, as the regulator forces board members to take responsibility for their actions.

The Financial Conduct Authority (FCA) said on Thursday Christopher Willford had failed to alert the board to potential risks such as details about profits, mortgage arrears and re-possessions, at the height of the credit crisis five years ago.

The fine, described as "relatively uncommon" by lawyers now bracing for further such penalties, is an attempt by the FCA to bring individuals to book after the financial crisis left taxpayers nursing big bills to prop up the financial industry.

"Willford failed to identify and investigate potentially material risks, or alert the board, at a crucial time for the firm," said Tracey McDermott, head of the FCA's financial crime and enforcement division.

"His conduct fell short of the FCA's standards - senior managers should expect the FCA to take action if they fail to show due skill, care and diligence."

Bradford & Bingley, which specialised in buy-to-let mortgages, tried to raise 400 million pounds from a rights issue in 2008 but investors baulked and the underwriters were left with much of the stock. The bank was subsequently nationalised.

The FCA said Willford had received information on May 16, 2008, that suggested B&B's financial outlook might be weaker than expected.

He failed to immediately raise this with the board so that it could investigate and ensure financial information provided to shareholders about the rights issue on May 19 was correct.

PRESSURE

The information Willford received showed that bad mortgage debts, arrears and repossessions had all risen, while the difference between the interest rates B&B charged to, and received from, its customers had fallen. This could have led to a shortfall in B&B profits for the year, the FCA said.

However, the FCA acknowledged that the bank and Willford had been under great pressure at the time, exacerbated by a serious illness of the bank's chief executive - and it noted that Willford's failures did not cause or contribute to the failure of the rights issue or subsequent nationalisation.

Financial lawyers said the FCA was positioning itself ahead of a new UK banking law, that will introduce a so-called senior persons regime to reinforce individual accountability.

"This is a sign of what we can expect to see going forward," a financial laywer said.

"We know it's a major priority. In every case now there is a hard-wired requirement to consider the culpability of senior executives after we saw a cataclysmic financial crisis with few individuals being fingered," a second lawyer said.

Bradford & Bingley was split in two. Its deposits and branches were sold to Santander, while its loans remained with the government, which is running them down.

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