Treasury officials were in talks with the Bank of England on Thursday night after Metro Bank’s shares plunged by more than a quarter amid a race to shore up its finances.
A Treasury source said officials were “monitoring the situation” and were in contact with Threadneedle Street as the beleaguered lender scrambles to raise up to £600m to boost its balance sheet.
The Telegraph understands that there has not been any engagement between Treasury officials and Metro’s board or executives.
It came as Robert Sharpe, Metro’s chairman, met with top City regulators on Thursday morning as shares in the London-listed challenger bank fell by as much as 31pc to 35p, valuing the company at around £63m.
A Metro spokesman said the meeting was a “longstanding, standard catch-up with the [Prudential Regulation Authority (PRA)]”.
However, Gary Greenwood, a banking analyst at Shore Capital, said the meeting suggested that the regulator has “serious concerns about the ongoing viability of the business”.
Metro hired Wall Street giant Morgan Stanley to oversee capital raising plans, it emerged on Wednesday, with hopes to raise around £250m in equity funding and £350m in debt.
Speculation around its finances sparked an unplanned market announcement from Metro, which said it was “evaluating the merits of a range of options” to raise cash, including a possible equity raise or an increase in debt.
However, Metro said no decision has been made on whether to proceed with any of these options.
The company’s statement said the bank has been profitable on an underlying basis for three consecutive quarters and is meeting minimum regulatory capital requirements.
As part of the fundraising efforts, Metro was sounding out potential buyers for a £3bn chunk of its mortgage book, including NatWest and Lloyds Banking Group, Sky News reported.
Around 40pc of Metro’s residential mortgages are interest only, according to the bank’s latest half-year results. Selling mortgage assets would reduce the amount of capital the bank is forced to hold.
Metro, which has 2.7m customers and 76 UK branches, suffered a setback last month when regulators failed to approve a plan that would have reduced the amount of capital it is required to hold for residential mortgages.
It means its capital requirements will not be lowered until 2024 at the earliest, although there is no guarantee the application will be approved.
