The City watchdog said that it had fined the former Northern Rock deputy chief executive for "misreporting" mortgage arrears figures.
David Baker, who held the senior position at the now state-owned lender between January 2004 and March 2008, was fined £504,000 by the Financial Services Authority (FSA) and banned from "performing any function in relation to any regulated activity".
The regulator said that, despite becoming aware at the beginning of 2007 that there were 1,917 loans omitted from the mortgage arrears figures, Mr Baker did not pass on the information internally and "agreed a course of action which resulted in the loans not being reported".
Northern Rock's former managing credit director, Richard Barclay, was also fined £140,000 and banned from performing "any significant influence function" at an FSA-regulated firm.
Both men admitted the misconduct and were given a 30% discount for early settlement.
The FSA said Northern Rock's mortgage arrears figures would have increased 50% had they been amended to include the extra loans.
It said that, if they had been added to the properties in possession, those figures would have increased from 662 to 2,579 cases.
The FSA said Mr Baker's role included accurate internal and external reporting at Northern Rock.
"He also made misleading statements regarding these impaired loans to external stakeholders, including market analysts, quoting inaccurate figures," the FSA said.
It added that, for much of his time at the company, Mr Baker also had overall responsibility for its debt management unit (DMU), which managed the secured loan book.
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