KBC is fined €1.4m for breaching lending rules brought in after Crash
Published 11/10/2016 | 02:30
KBC Ireland has been fined €1.4m and reprimanded for breaching rules on lending to people or other entities connected to the bank.
It's the largest fine ever levied by the regulator under the rules, reflecting the fact that multiple breaches of the code occurred from September 2012 to February this year.
The Central Bank made a number of interventions, including requesting an internal audit by KBC of its lending, during that period.
The Central Bank said KBC Ireland had failed to comply with the relevant lending rules on 18 separate occasions - ranging from the granting of a new loan, extending maturities on loans and in respect of management of existing loans.
The loans involved ranged from a €2000 credit card debt to €6.6m.
The breaches mainly reflected failure to follow procedures in relation to loans to companies linked to the bank.
The breaches have been admitted by KBC, the Central bank said.
The agreed settlement between the bank and the regulator effectively rules out any likelihood of an appeal.
In a statement issued yesterday the Central Bank of Ireland said it had fined and reprimanded KBC Bank Ireland Plc for breaches of the Code of Practice on Lending to Related Parties 2010, and the Code of Practice on Lending to Related Parties 2013.
It's the first time a bank has been fined under the code, which was introduced after the Crash to protect against abuses in lending by banks to people or companies with a connection to a lender. All of the breaches brought to light at KBC Ireland happened after the Crash. The maximum fine that can be imposed is €10m or 10pc of a company turnover, under the new rules.
Under the code a bank must obtain prior approval from its board or a board subcommittee before making or modifying a loan to a related party - such as a director, a senior manager, significant shareholders or the spouse or partner of any of those categories. The code also covers loans to related entities, such as inter-company loans.
"Related party lending is an issue of significant prudential concern for the Central Bank, particularly in the context of identified failings at the time of the financial crisis when loans were issued to related parties without adherence to internal controls and procedures," the Central Bank's director of enforcement, Derville Rowland, said.
"The Central Bank requires all firms to ensure full compliance with the code," Mr Rowland said.
"Where firms fall short of the required standards, the Central Bank will continue to take the necessary enforcement action," she said.
The regulator is committed to "robust, appropriate and proportionate enforcement action," to ensure there is a "credible deterrent," Ms Rowland added.