Compliance

PRA Fines Standard Chartered £46 Million Over Regulatory Lapses

Shirin Aguiar, Reporter, London, 21 December 2021

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The penalty was imposed by the Bank of England on Standard Chartered for reporting errors between March 2018 and May 2019. This is the third UK bank to be handed heavy fines by regulators in two weeks, following the FCA penalising NatWest and HSBC for AML failures.

The UK’s top banking supervisor has fined Standard Chartered £46.55 million ($61.40 million) for failures in regulatory reporting governance and controls.

The Prudential Regulation Authority, the Bank of England’s watchdog, said that Standard Chartered was not open and cooperative with the PRA and made five reporting errors between March 2018 and May 2019. The fine is the PRA’s highest ever in a PRA-only enforcement case and reflects the bank only notifying it of a miscalculation after four months. The fine was reduced by 30 per cent from the original £66.5 million as Standard Chartered agreed to resolve the matter.

“We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case,” Sam Woods, chief executive officer of the PRA, said. “Standard Chartered’s systems, controls and oversight fell significantly below the standards we expect of a systemically important bank, and this is reflected in the size of the fine in this case.”

The bank accepted the findings related to US dollar Gap 2 liquidity reporting errors that Standard Chartered self-identified and self-corrected in 2018 and 2019. “These errors did not affect Standard Chartered’s overall liquidity position, which remained in surplus throughout the period,” it said in a statement.

The bank also accepted the PRA’s findings regarding a delay in notifying the PRA of one of the errors while an internal review was underway. “Standard Chartered has cooperated proactively and fully with the PRA’s investigation and has made significant improvements to and substantial investment in its liquidity and regulatory reporting processes and controls, and remains committed to accurate regulatory reporting,” it added.

In October 2017, the PRA imposed a temporary additional liquidity expectation on SCB in response to concerns about heightened risk of the bank’s US dollar liquidity outflows (‘the liquidity metric’). This temporary expectation has now been removed, the regulator said. While SCB’s overall liquidity position remained in surplus to its core liquidity requirements, between March 2018 and May 2019, SCB made five errors reporting the liquidity metric which meant that the PRA did not have a reliable overview of its US dollar liquidity position.

With one of the misreporting errors, the bank only notified the PRA of the error after a four-month internal investigation into the issue, resulting in the bank breaching the regulator’s fundamental rule 7.

The investigation identified that SCB’s internal controls and governance arrangements underpinning its regulatory reporting in relation to the liquidity metric were not implemented or operating effectively. 

The bank also failed to ensure that its escalation framework for liquidity miscalculations and misreporting was properly embedded within the relevant business area, and did not implement a documented policy setting out when liquidity errors or potential liquidity errors should be notified to the PRA, the regulator said.

Standard Chartered did not maintain and operate adequate controls testing and checks for reporting the liquidity metric, or ensure that it had appropriate human resources to investigate potential misreporting of the liquidity metric, it added.

As a result, the bank breached the PRA’s rulebook, in particular fundamental rule 6, which requires that a firm organise and control its affairs responsibly and effectively, and fundamental rule 7, requiring openness and cooperation with the regulator.

Last week two UK banks NatWest and HSBC were heavily fined for breaking AML rules.

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