Business Irish

Wednesday 17 September 2014

Rulebreaker Ulster Bank fined €1.96m over Central Bank breach

Published 20/11/2012 | 05:00

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Third largest penalty in history imposed over capital shortfall

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Ulster Bank has been hit with the third biggest fine ever imposed on an Irish bank.

The bank was ordered to pay €1.96m for breaches of Central Bank rules, including a €313m shortfall in its capital in 2011.

The fine was imposed for breaching Central Bank rules but also for failing to spot and report the violations, the Central Bank said.

"Ulster Bank was absolutely solvent at all times. Customers' money was never at risk as a result of the regulatory breaches," a spokesman for the bank said last night.

While the fine is large by historic standards, it will not materially affect the bank, which suffers losses of around €100m per month on soured Irish property loans and mortgages.

"The firm (Ulster Bank) had access at all times to sufficient liquidity and capital during the period as part of RBS," the Central Bank said in a statement.

The fine is the third biggest ever levied on a bank here.

Injection

AIB was fined €2m in 2010 for breaching banking rules, and the Irish unit of US banking giant Merrill Lynch was forced to pay €2.75m in fines in 2009.

The Central Bank said that Ulster Bank suffered a €313m shortfall in capital in March last year that needed to be plugged with an injection of capital from RBS.

"Ulster Bank lacked sound strategies and processes to assess its capital levels during the period of the violations, between January 26 and September 13, 2011," the Central Bank said in a statement.

It said the bank failed to correctly discount, or haircut, the cash flows related to four categories of retail and corporate deposits.

It also failed to maintain "effective internal controls" to manage liquidity risks, the statement said.

The financial and reputational fallout from the fine are likely to be limited, analysts said yesterday.

That's because the bank is already in poor shape on both counts.

Failure

In addition to loan losses, Ulster Bank's reputation with customers has been battered as a result of the high-profile failures of its technology systems over the summer, that meant customers were unable to access bank account details and track transactions.

The bank's parent RBS is under investigation by authorities in the US and UK in relation to the scandal surrounding the setting of interbank lending rates known as Libor.

Ulster Bank said in a statement that the liquidity and capital violations last year had not affected customers.

The bank had implemented "a number of robust measures to ensure similar contraventions are not repeated", it said.

The Central Bank said it now considered the issue closed.

Irish Independent

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