UK fine for bank over liquidity reporting

Out-Law News | 23 Dec 2021 | 10:59 am | 2 min. read

A bank has been fined for errors it made in its liquidity reporting and for not notifying UK regulators quickly enough after one of those errors was identified.

The Prudential Regulation Authority (PRA) fined Standard Chartered Bank £46.55 million after it considered the institution had breached Fundamental Rule 6 and Fundamental Rule 7 of the PRA Rulebook.

Fundamental Rule 6 requires that a firm organise and control its affairs responsibly and effectively. Fundamental Rule 7 requires that a firm be open and cooperative with the regulator.

The reporting failings concerned additional liquidity expectations that the PRA imposed on Standard Chartered in late 2017. The regulator had raised concerns about a “heightened risk” of US dollar liquidity outflows and instructed the bank to achieve and maintain certain metrics in respect of its US dollar liquidity in response. The bank was obliged to report daily to the PRA in relation to its position relative to the metrics.

However, the PRA said (40-page / 665KB PDF) that, over a 15-month period, Standard Chartered made five errors that led to the bank misreporting its liquidity position relative to the regulator’s expectations. While the errors did not affect Standard Chartered’s overall liquidity position, the regulator said the failings in oversight and governance it had identified “fell below the standards expected of a systemically important institution”.

Standard Chartered said it self-identified and self-corrected the reporting errors that were identified and accepts the PRA’s findings – that it was not notified promptly enough – in respect 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,” the bank said in a statement.

The fine imposed on Standard Chartered of £46.55m represented a 30% discount on the penalty the PRA said it would otherwise have imposed in the case. The bank was eligible for the discount after reaching a settlement agreement with the PRA during an early stage of the regulator’s investigation.

The PRA said: “The provision of complete, timely and accurate prudential data is a key component in the PRA’s supervisory approach. The PRA relies on firms submitting sufficient data, of appropriate quality, to inform its judgements about key risks, to measure individual firms’ compliance and performance. Accurate and timely prudential data supports going-concern supervision and is crucial in identifying, monitoring and managing periods of when firms are at risk of going into stress.”

“Where the PRA has set a specific expectation on a firm, (for example by setting an expectation that a firm will hold increased liquidity in response to a specific potential risk, or that a firm will report to the PRA on a more frequent basis than normal to enable the PRA to monitor a risk more closely), the firm is expected to ensure that it has adequate systems and controls in place to be able to meet the expectation, and to have open communication with the PRA about any data integrity or other risk issues affecting compliance,” it said.