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StanChart fined $61.5 million for misreporting liquidity position

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By Reuters
Bank of England fines Standard Chartered $61.5 million for regulatory lapses
Bank of England fines Standard Chartered $61.5 million for regulatory lapses   -   Copyright  Thomson Reuters 2021   -  

<div> <p>By Abhinav Ramnarayan</p> <p><span class="caps">LONDON</span> -The Bank of England said on Monday it was fining Standard Chartered 46.55 million pounds ($61.51 million) for misreporting its liquidity position to the regulator and for failings in its controls. </p> <p>The Prudential Regulation Authority (<span class="caps">PRA</span>) said the fine related to when the regulator was concerned from late 2017 about a “heightened risk” of U.S. dollar outflows from Standard Chartered and had placed additional liquidity requirements on the bank. </p> <p>The fine is the highest ever imposed by the <span class="caps">PRA</span> in a case where it was the sole enforcer, it said in a statement. </p> <p>The <span class="caps">PRA</span> said Standard Chartered made five errors reporting its liquidity metric between March 2018 and May 2019, meaning the regulator did not have a reliable overview of the bank’s liquidity position.</p> <p>Regulators monitor banks’ liquidity positions to ensure they have enough cash or cash-like assets if they suddenly face a large number of withdrawal requests. </p> <p>“We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case,” <span class="caps">PRA</span> chief executive Sam Woods said. </p> <p>“Standard Chartered’s systems, controls and oversight fell significantly below the standards we expect of a systemically important bank,” he said. </p> <p>The fine will be a blow to Chief Executive Bill Winters, who at the time the errors happened was trying to overhaul the lender’s risk and compliance culture. </p> <p>Standard Chartered said it accepted the <span class="caps">PRA</span>’s findings. </p> <p>“These errors did not affect Standard Chartered’s overall liquidity position, which remained in surplus throughout the period,” it said in a statement. </p> <p>“Standard Chartered … has made significant improvements to and substantial investment in its liquidity and regulatory reporting processes and controls and remains committed to accurate regulatory reporting”. </p> <p>The <span class="caps">PRA</span> said that one of Standard Chartered’s errors resulted in an overreporting of the lender’s “US dollar Gap 2 Metric” by $7.9 billion. It said correcting for the errors would have meant there were around 40 days when Standard Chartered fell short of the <span class="caps">PRA</span>’s liquitidy expectations. </p> <p>In a rare insight into the <span class="caps">PRA</span>’s dealings with banks, the regulator said one error arose because a cell in a spreadsheet used for liquidity reporting had a positive value when a zero or negative value was expected</p> <p>Standard Chartered notified the <span class="caps">PRA</span> of this error on 1 April 2019, over four months after it was identified.</p> <p>Another mistake saw the bank report its holdings of U.S. asset-backed mortgage securities securities based on their notional value rather than their carrying value, resulting in an overreporting of approximately $2.5 billion. </p> <p>The <span class="caps">PRA</span> said Standard Chartered’s co-operation in its probe meant the fine was reduced by 30% from 66.5 million pounds. </p> <p>It also said Standard Chartered’s overall liquidity position was above its core liquidity requirement throughout the period. </p> <p>($1 = 0.7568 pounds)</p> </div>