The PRA has banned two former EBCU directors from the financial services industry for their part in the failure of the company, which held £7m in savings for its 1,900 members. EBCU entered into administration in 2015 for failing to meet the necessary capital requirement. The PRA has banned Mr Michael Grimsdale and Mr Richard Nichols on grounds of lack of integrity (and dishonesty on the part of Mr Grimsdale). The PRA has also issued public censures to Mr Nichols and two other former directors, Ms Gillian Birkett and Mr Phil Neale. This enforcement action represents the PRA’s first against individuals involved in a credit union.
Before its liquidation, the individuals’ misconduct contributed to EBCU breaching a PRA requirement not to accept deposits, issue new loans or vary the terms of existing loans, a requirement which was imposed to stabilise EBCU’s deteriorating capital position. In breach of this requirement, Mr Grimsdale paid out c.£650,000 of loans and concealed his actions from EBCU. He also improperly paid fees to EBCU’s outsourced third-party service provider on materially higher terms than those agreed by the EBCU Board.
The PRA has also issued public censures to Mr Nichols, Ms Birkett and Mr Neale for their failure to act with due skill, care and diligence in performing their roles as directors at the company. Mr Nichols has also been banned for acting recklessly in relation to the accuracy of information he provided to the company’s auditors and the PRA concerning EBCU’s financial position. Mr Nichols failed to oversee and monitor the activities of the outsourced service provider and, were it not for his financial circumstances, the PRA noted it would have also imposed a £20,000 fine.
As a result of EBCU’s failure, the FSCS has paid out over £7m to EBCU’s members, of which it has recovered just under £3m to date.