LONDON (Reuters) - Shares in Britain's Metro Bank <MTRO.L> fell as much as 6.5% on Wednesday after it said there could be "significant expense" to resolve investigations into a 900 million pound accounting error.
Metro Bank has struggled to rebuild investor confidence after disclosing in January it had under-reported the risk of its loan book.
The error forced the bank to raise 375 million pounds from shareholders in May and by July it said customers had pulled 2 billion pounds out of the bank.
In a bond prospectus published on Tuesday, Metro said the Financial Conduct Authority and Prudential Regulation Authority investigations had been broadened to include senior members of management and could lead to "criminal and/or civil liability for the bank" or suspension of its regulatory permissions.
"Making redress, and the cost of any regulatory sanctions may involve significant expense," the bank said.
It also warned that any negative publicity relating to regulatory investigations could undermine customer confidence and reduce demand for its products and services, which could have "a material adverse effect on its business".
Metro's shares, which have fallen 84% this year, were down 4.2% lower at 271.2 pence on Wednesday, the second biggest losers on London's midcap index <.FTMC>.
Metro also said that it had received notice in August that the FCA was extending the scope of its investigation to cover the period from June 1, 2017 to Metro's fourth quarter trading update issued on February 26 this year.
The warnings over the possible impact of the PRA and FCA investigations has raised questions over whether Metro will meet targets to issue debt this year in line with its regulatory requirements.
The Bank of England has set out guidelines on what banks will need to hold for so-called minimum requirement for own funds and eligible liabilities (MREL), as part of plans to better protect savers and taxpayers.
The lender, which muscled on to Britain's high streets in 2010, also said it would raise equity capital in the medium-term to support its controlled growth plans.
(Reporting by Noor Zainab Hussain in Bengaluru and Sinead Cruise in London; editing by Jason Neely)