Business World

Tuesday 23 January 2018

Bad bankers facing €5m fines under new proposal

European Commission plans dwarf €500,000 penalty from Central Bank of Ireland

Thomas Molloy

THE European Commission plans to introduce new fines for bad bankers which will completely dwarf the fines that can be imposed by Irish regulators, Reuters reported yesterday, citing secret documents.

The Central Bank of Ireland can only slap bankers with fines of €500,000 -- a puny amount compared with the fines available elsewhere.

Under the new rules, bankers could face fines more than €5m for rule-breaking or 10pc of their pay and bonus -- whichever is higher.

The new proposals would bring most countries into line with Britain's tougher regime on regulating banks.

The draft law promises a stricter code of penalties not just for banks, but also for individual bankers, if they hide information from regulators or break rules capping the amount of cash paid in a bonus.

Reuters reported that the new rules would set the bar higher for fines in Europe and add to momentum for increased penalties in countries that were lax in regulating banks before the financial crisis, such as Ireland, as well the region's biggest economic power, Germany.

In one of the most far-reaching reforms since bonus curbs were imposed on European bankers, officials working for the EU's top regulatory official, Michel Barnier, have outlined plans for standardising such fines, in a document seen by Reuters.

The document also proposes powers for national authorities to penalise banks by up to 10pc of turnover.

The rules, if made law, would far outstrip the powers of regulators in Ireland, who cannot impose a fine of more than €500,000 on individuals, Reuters noted.

Britain's Financial Services Authority is already able to impose unlimited penalties on banks or their employees and last year fined JP Morgan £33m (€33.7m) for failing to separate clients' money from its own.


It has also fined two managers at Northern Rock for playing down the extent of the lender's problems, although the £504,000 penalty given to former deputy chief executive David Baker is only a fraction of what is proposed in rules from the EU Commission.

Officials hope EU sanctions would give extra bite to reforms to control finance as well as discourage banks from relocating to countries with softer rules, as Germany's Depfa did with a move to Dublin before later needing a state bailout to avoid collapse.

The draft law will now go to EU member states and the European Parliament for approval before it could become law across the bloc's 27 member states.

"A manager of a bank could be sanctioned when he is responsible for a violation, for instance, in case he deliberately decided not to report disadvantageous financial information to supervisors," said one official with knowledge of the proposal.

"In most cases sanctions will be imposed also on the bank."

Irish Independent

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