Bank handed fine over risk failures
Published 19/11/2012 | 13:03
Ulster Bank has been fined just under two million euro over liquidity risk management failures.
The Central Bank said the penalty reflects the importance it places on compliance with prudential requirements for credit institutions.
Peter Oakes, director of enforcement at the Central Bank, said failure to meet requirements is an unacceptable risk. "This enforcement action and the penalties imposed reflect the importance the Central Bank places on compliance with all aspects of key prudential requirements," he said.
He went on: "Regulated firms must fully comply with their liquidity and capital requirements including, establishing and maintaining effective internal controls for the management of liquidity risk and having in place sound and effective strategies and processes to address internal control requirements.
"Failing to meet these basic requirements represents an unacceptable risk to a regulated financial service provider's business and to the Central Bank achieving its statutory objectives."
Ulster Bank was found to have had a shortfall of 313m euro in its safeguards against risk in a regulatory return filed on March 31 earlier this year. Parent company Royal Bank of Scotland immediately made a cash injection when the mistake was revealed.
It is the first settlement by the Central Bank with a firm for contraventions of capital requirements and the third for contraventions of liquidity requirements.
The Central Bank said the primary cause of the failures was due to inaccurate capital forecasting and other capital management control issues. Ulster Bank was found to have contravened regulations in five areas - three on liquidity and two on capital requirements.
Ulster Bank said it had spotted the failures and notified the Central Bank. It said no customers were affected. Chief executive Jim Brown said: "This settlement is significant and we acknowledge that these contraventions, which occurred in 2011, were unacceptable."
The bank was thrown into chaos earlier this year after a systems failure left many of its 1.9 million customers unable to see or use cash paid into their accounts. It was initially estimated that the IT meltdown would cost the bank 35 million euro but that forecast was later upgraded to twice that.
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