Legal experts say the UK financial regulator has “sent a message” to the banking industry after issuing a fine to the former chief executive of the now-defunct Wyelands Bank for inadequate capital and risk controls.

Earlier this month, the UK’s Prudential Regulatory Authority (PRA) fined Iain Mark Hunter £118,808 for infringing three of its conduct rules while at the helm of Wyelands Bank between 2016 and 2020.

The PRA found Hunter failed to act with “due skill, care and diligence” in his running of the lender, and did not take “reasonable steps to ensure that Wyelands had adequate systems and controls in relation to the large exposures regime and PRA record keeping requirements”.

Additionally, it says he failed to comply with Wyelands internal policies created to mitigate potential conflicts of interest, arising from its membership of the GFG Alliance – a network of businesses linked to steel magnate Sanjeev Gupta. Hunter did not take appropriate steps to “verify the accuracy” of statements he made in two letters he wrote to the PRA, the authority says.

Gupta-owned Wyelands was plunged into chaos after the PRA restricted it from entering into new transactions in late 2019, amid concerns over its exposure to GFG Alliance companies.

The bank later admitted that 80% of its clients were members or customers of GFG Alliance firms, and in April 2023, following a multi-year investigation, was censured by the PRA for “wide-ranging and serious failings”.

While the PRA has opted not to impose a fine on Wyelands on the basis it is already being wound down, it heavily criticised the lender, especially in relation to its GFG Alliance receivables programme.

The regulator’s action against Hunter, who joined Wyelands in 2015, is based on alleged breaches of its Senior Manager Conduct Rules and its Individual Conduct Rules.

“The PRA has taken significant action against Mr Hunter because his management created prudential risks for the firm, threatened its safety and soundness and contributed to the firm’s breaches of a number of PRA rules and regulations,” says Sam Woods, the deputy governor for prudential regulation and PRA’s chief executive.

“If senior individuals fail to meet the conduct rules, as Mr Hunter did, it undermines the trust in financial institutions and the wider financial system,” they add.

Hunter also served as chief risk officer and chief financial officer during his time at the bank.

In a settlement with the PRA, Hunter has agreed not to work in a regulated UK financial sector role in future. In deliberating the size of the fine, the PRA considered “exceptional factors” as being relevant, including Hunter’s residence outside the UK and his acceptance of his failings at Wyelands.


Banks put on alert

Legal experts say the enforcement action – only the second time the PRA has imposed a fine under its Senior Manager and Certification Regime – highlights a growing resolve to target executives at errant financial institutions.

“Over the next 12 to 24 months, we will inevitably start to see more action being taken in relation to senior managers and holding them accountable on a personal level,” says Michael Ruck, a partner at law firm K&L Gates who previously worked in the Financial Conduct Authority’s (FCA) enforcement division.

In part, this is because multi-year PRA and FCA investigations are now drawing to a close and outcomes are being made public.

Following a freedom of information request in 2022, the FCA revealed that as of April that year, it had 47 open investigations into individuals holding a senior manager function and 16 into employees under the senior manager regime.

But Ruck tells GTR that this trend will likely continue and banks should take note – if they had not done so already – of the PRA’s enforcement push.

“This ruling sends a wider message to banks, as well as the wider financial services industry,” he says. “It is going to become increasingly likely that if there’s an issue identified at a firm, that one or more senior managers will be part of that investigation and may well face action personally, in relation to the failings.”

Laura Bridgewater, a senior associate at Macfarlanes, says the notice will be of “particular interest to banks, insurers and all other firms regulated by the PRA”.

She tells GTR that the ruling demonstrates the PRA’s “willingness to bring enforcement action in respect of conduct breaches by individuals, even where the relevant firm has already been sanctioned – as was the case with Wyelands Bank, which received a public censure in respect of the same underlying failings”.

Following the global financial crisis in 2008, the UK’s Parliamentary Committee on Banking Standards recommended the creation of a mechanism to hold senior managers at banks more personally accountable.