Baker has also been prohibited from performing any function in relation to any regulated activity and Barclay has been prohibited from performing any significant influence function at an FSA-regulated firm.
As deputy chief executive, between January 2004 and March 2008, Baker was responsible for internal and external reporting.
Despite becoming aware in January 2007 that there were 1,917 loans omitted from the mortgage arrears figures, Baker failed to escalate the information internally and agreed a course of action which resulted in the loans not being reported, the FSA says.
Baker also made misleading statements regarding these impaired loans to external stakeholders, including market analysts, quoting inaccurate figures.
If the 1,917 loans had been reported as being in arrears, the figures would have increased by approximately 50 per cent while if the loans had been reported as in possession, the number would have increased from 662 to 2,579 cases.
As managing credit director, Barclay was directly responsible for the provision of accurate management information concerning loan arrears and property possessions.
The FSA says he knew the firm’s arrears position enabled senior management within Northern Rock, analysts and the FSA to form a view of the bank’s asset quality but failed to ensure that the management information reported was accurate despite warning signs at an early stage.
The FSA says that although it is not possible to calculate the exact extent of this misreporting, if the correct figure had been reported, the arrears figures would have been significantly worse and closer to the Council of Mortgage Lenders average over an extended period of time.
FSA director of enforcement and financial crime Margaret Cole (pictured) says: “Baker and Barclay both failed to meet the standards we require of senior individuals within FSA-regulated firms. They both held senior positions of trust within the firm but they provided inaccurate information to the Northern Rock board and to the market.
“The fines we have imposed on them leave no doubt that we will take action against individuals who either fail to act with integrity or who fail to perform their roles to a high standard – this is a loud and clear message that we are serious about taking action against senior directors where they step over the line.”
Both Baker and Barclay admitted their misconduct at an early stage and co-operated fully with the FSA. As such, the pair received a 30 per cent discount. Without this discount, Baker would have been fined £720,000. Barclay’s fine was reduced on the grounds of hardship. His original fine would have been £300,000.
Baker says his decision was taken to resolve and not hide the reporting error.
He says: “I decided to give the Debt Management Unit six months to rectify the misreporting. My decision, and its timeframe, was made with the best of intentions. I now recognise that this decision, taken to resolve and not hide, the reporting error, did not make these loans immediately transparent. I made an error of judgment and I regret it.
“I accept full responsibility for my own actions. Where the FSA has decided my conduct fell below the expected standard, it is only right that I accept the personal and financial consequences imposed.”