Former Northern Rock executives fined

The UK Financial Services Authority has fined two former Northern Rock executives for misreporting mortgage arrears and misleading investors, the first sanction for the lender's bosses since it was nationalised in 2008.

Northern Rock, the fifth largest UK mortgage lender at its height, was the first big British casualty of the crunch and its near collapse after wholesale funding markets dried up prompted the first run on a major UK bank in over a century.

Its bosses, led by then chief executive officer Adam Applegarth, were hauled over the coals by regulators over reckless lending and the bank's business model, but were never fined.

The FSA said yesterday that former deputy chief executive officer David Baker was fined £504,000 over the bank's failure to admit its bad mortgages were actually 50 per cent higher than official numbers showed. Richard Barclay, former managing credit director of the debt management unit, was fined £140,000.

Both have also been banned. Regulatory bans are typically permanent, unless individuals reapply for authorisation.

The FSA, which has been tightening its grip on financial misdemeanours, said Mr Baker became aware in December 2006 that 1,917 loans were missing from Northern Rock's mortgage arrears figures, a change which would have increased arrears in 2006 to 0.68 per cent from 0.42 per cent, but failed to report the issue.

Asset quality was critical for the former mutual, whose fast growth gave it just over eight per cent of the UK residential mortgage market at end 2006, and the FSA said the lender's debt management unit "took action" to reduce the number of reported impaired loans and keep it below half the market average.