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UPDATE 2-UK's Metro Bank launches cut-price share placing to patch up finances

Iain Withers and Pamela Barbaglia

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* Accelerated bookbuild priced at 500 pence

* Fundraise expected to close by 1500 GMT Friday

* Bank has plans for new branches after fundraising

* Existing investors expected to subscribe - source

LONDON, May 16 (Reuters) - Britain's Metro Bank launched a discounted funding round on Thursday to raise 350 million pounds ($450 million) to repair a stretched balance sheet and try and restore investor and customer confidence.

The accelerated share placing will be priced at 500 pence per share, 14% below the stock's closing price on Wednesday.

The capital injection is needed to shore up the finances of the nine-year-old challenger bank, five months after it admitted it had under-reported the risk of its loan book by nearly 1 billion pounds.

Investor and customer confidence has been shaken by corporate governance concerns and a tumbling stock price which has slashed more than 1.5 billion pounds off the bank's market value.

Fidelity Management & Research, once Metro Bank's second biggest investor, has cut its stake by nearly a third, a regulatory filing showed earlier this month.

The fundraising is expected to close no later than 1500 GMT on Friday, Metro Bank said in a statement.

"Existing investors are supportive of the deal and there have been strong indications that they will buy into the placement," a source close to the deal said.

"Metro Bank had the confidence to launch the book-build because investors agreed to take part," the source added.

Metro Bank's top managers are backing the lender with American chairman and founder Vernon Hill subscribing up to 5 million pounds, while CEO Craig Donaldson will invest up to 350,000 pounds and CFO David Arden up to 75,000 pounds.

RBC, Jefferies and KBW are advising on the fundraising.

Some nervous business accountholders and savers have headed for the exit since the accounting blunder, citing concerns about the bank's stability after the board refused to accept the resignation of Chief Executive Craig Donaldson.

Metro Bank said today that further Metro Bank customers pulled deposits between May 10 and May 13 after press speculation about its financial health, but said this position was "stabilizing."

Regulators at the Financial Conduct Authority and Prudential Regulation Authority have given no details on their investigations into the error or the possible penalties or sanctions which could arise.

Metro has made no financial provisions for a possible fine or potential litigation by investors seeking to recoup some of the losses sustained in this year's share price rout.

The bank said it hoped the fundraising would enable management to proceed with plans to grow its branch network and increase its share of Britain's retail banking market.

($1 = 0.7814 pounds) (Reporting By Iain Withers, Pamela Barbaglia and Sinead Cruise, editing by Kirstin Ridley and Elaine Hardcastle)