Northern Rock Asset Management Says CFO David Jones to Leave Immediately
Northern Rock Asset Management Plc’s Chief Financial Officer David Jones left the company in the face of a regulatory probe into disclosures about mortgages sold before the bank was nationalized by the U.K. government.
Jones, 51, will focus on an ongoing Financial Services Authority investigation, Northern Rock said today in a statement.
Two former Northern Rock executives were banned by the FSA on April 13 for hiding the number of impaired mortgages from the bank’s board and the wider market. Northern Rock was the first British casualty of the mortgage market’s collapse and was taken over by the government in February 2008.
The investigation is into “matters relating to a period before the company entered public ownership,” Northern Rock said in the statement. The company is “not subject to any sanction from the FSA as a result of this investigation.”
Jones didn’t immediately respond to a call seeking comment at his office today. Northern Rock spokesman Simon Hall declined to comment further.
He had worked at Northern Rock for 14 years in finance positions and became finance director in February 2007 until the bank’s nationalization. He was most recently CFO of Northern Rock Asset Management as the bank was restructured and split in two.
“We’re aware of the statement and can confirm that he’s under investigation,” FSA spokeswoman Heidi Ashley said.
Unnamed Senior Colleague
The FSA report this month on the former Northern Rock executives said an unnamed senior colleague signed off on decisions about how to account for bad loans, and said there was no need to amend the bank’s 2006 results.
Northern Rock’s former deputy chief executive officer David Baker and former managing credit director Richard Barclay were banned and fined by the FSA last week. They were penalized a total of 644,000 pounds ($992,00) for the misreporting, which took place from 2004 until 2008.
“Mr. Baker sought and obtained confirmation from a senior and suitably qualified colleague that the pending possessions cases had been appropriately accounted for in the bad debt provisions,” the FSA said in its investigative report earlier this month. “That colleague also expressed the view that there was no obligation to amend statements in the annual 2006 accounts which were about to be published.”
Debt Management Office
The investigation centered on the bank’s debt management office, led by Barclay, which was under pressure to keep its impaired loans to half the average cited by the U.K. Council of Mortgage Lenders, according to the FSA’s investigation report.
The FSA defines loans as being impaired when they are either more than three months in arrears, or when properties have been repossessed.
Northern Rock was the fifth-largest U.K. lender by the end of 2006. On Sept. 14, 2007, the U.K. government agreed to bail out the bank. Its stock market value had fallen 83 percent in three months and it then suffered the first run on a U.K. bank since 1866.
Jones received total compensation of 440,000 pounds in 2007, according to the last public disclosure of his pay as a director in the 2008 annual report. The company declined to disclose his current compensation agreement.
Hugh Graham, head of Northern Rock’s treasury operation, was appointed interim finance chief, the company said.
To contact the reporter on this story: Lindsay Fortado in London at email@example.com.