Business Irish

Thursday 26 April 2018

ECB fines PTSB €2.5m for liquidity breach error

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Gretchen Friemann

Permanent TSB was forced to swallow a €2.5m fine yesterday and issue a mea culpa for "misinterpreting" key European banking regulations that left it in breach of liquidity requirements over a seven-month period.

The penalty is the first to be issued by the ECB and comes as the State-backed lender prepares to tackle its bulging book of non-performing loans amid investor discontent at the lack of progress on this front.

The fine was triggered by PTSB's faulty calculation of its liquidity coverage ratio, which reflects the volume of highly liquid assets that can be cashed in during a crisis.

Yet while the bank was technically out of the required range, its actual reserves remained within the proper bounds.

In a statement the bank stressed it had "self-identified and reported the issue to the ECB and co-operated fully with the ECB on the matter".

A spokesperson for the lender said the bank had a liquidity buffer of about €4bn during the time of the breach - October 2015 to April 2016 - while the current reserves stand at €6.5bn.

A statement from the ECB also noted that "this breach did not change the liquidity position of [PTSB] and said the group had "fully remediated the issue".

Eamonn Hughes of Goodbody stockbrokers characterised the slip-up as "a bit embarrassing" but said the fine would not affect the bank's earnings guidance.

He added the bank could "move on" as the incident had been "contained". It is understood PTSB's error revolved around whether or not it included the repayment of ECB funding facilities in calculating its LCR.

Sources said the responsibility for these sums rests with the chief financial officer.

PTSB, which remains 75pc owned by the State, has seen a number of changes in that role over the past few years with Glen Lucken stepping down from the position in October 2015. Patricia Carroll of KPMG acted as CFO on an interim basis until the current incumbent, Eamonn Crowley, took up the reins.

When the mistake first arose, PTSB's reliance on ECB funding was far higher at €4.65bn.

Changes to the LCR rules - ushered in after the collapse of Lehman Brothers - rendered the calculations more complex as in certain circumstances the repayment of ECB funding facilities were included whilst in others they were excluded.

At its latest results, PTSB said support from the ECB accounted for less than 1pc of total funding after falling by €1.2bn in the first half to €230m.

While PTSB has become the first bank to receive a penalty for a liquidity breach from the ECB, the incident marks the latest censure for the sector. In April the Central Bank of Ireland levied AIB with a fine for failing to comply with money-laundering rules and the regulator is in the midst of an enforcement investigation in to Ulster Bank's treatment of tracker mortgage customers.

Irish Independent

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