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Metro Bank to end 'inappropriate' relationship with firm run by chairman's wife

Metro Bank PLC will sever ties with the design company owned by Chairman Vernon Hill's wife, Shirley Hill, that has been paid tens of millions of pounds by the bank.

The development was laid out in the bank's prospectus issued ahead of its £375 million rights issue and shortly before its annual general meeting on May 21.

Shirley Hill's InterArch is the design firm behind the bank's distinctive blue and red livery and Metro has paid it about £26 million since the bank launched in 2010, according to accounts filed by the bank. Metro paid InterArch about £4.6 million in 2018. At the bank's AGM in 2018, Royal London Asset Management and shareholder advisory firm Glass Lewis both called the relationship with InterArch "inappropriate."

The bank said in its 2018 annual report that it would look for an alternative supplier of architectural services but in its prospectus, it said it would also seek alternative suppliers of creative and branding services, also currently provided by InterArch.

"InterArch will work with Metro Bank to ensure a smooth operational transition by the end of 2020," the bank said in its prospectus.

Vernon Hill stepped down from the U.S. bank he founded, Commerce Bancorp, in 2007 after U.S. regulators stopped the bank doing business with firms under its control.

Meanwhile, ahead of Metro's AGM, Royal London Asset Management joined Legal & General Investment Management in announcing that it would vote against the re-election of Hill and other directors.

The bank has come under fire since it announced in January that it had miscalculated the riskiness of large numbers of its commercial and professional buy-to-let operator loans and had to add £900 million to its risk-weighted assets. As a result, the bank had to boost its capital buffers which led it to raise £375 million in equity last week. It is being investigated by the Bank of England's Prudential Regulation Authority and the Financial Conduct Authority as a result of its mistakes.

Royal London said it will vote against the re-election of eight directors, including CEO Craig Donaldson.

"We continue to have significant governance concerns, and believe that weak oversight by the board may be a contributing factor to ongoing issues at the company, including the adjustment to risk-weighted assets, FCA and PRA investigations, recent capital raise and significant fall in the share price. In our view only five out of the 11 directors are independent, and we do not consider the chairman to be independent either," said Ashley Hamilton Claxton, head of responsible investment at Royal London.

Royal London said it welcomed the continued involvement of Vernon Hill with the bank but it wanted the bank to appoint "a truly independent chairman."

Metro, which has 66 branches and opens seven days a week, has seen its shares fall more than 80% on the year, despite rising sharply last week when it announced details of capital raise. Its shares closed 3.10% down May 20 at 656 pence.