The Bank of England said that it was fining Standard Chartered 46.55 million pounds ($61.51 million). This is for misreporting its liquidity position to the regulator and for failings in its controls. The Prudential Regulation Authority (PRA) said that the fine related to when the regulator was concerned from late 2017 about a “heightened risk” of U.S. dollar outflows from Standard Chartered. Also, they had placed additional liquidity requirements on the bank.
The fine is the highest ever imposed by the PRA in a case. And there it was the sole enforcer. The PRA said that the Standard Chartered made five errors reporting its liquidity metric between March 2018 and May 2019. This means that the regulator did not have a reliable overview of the bank‘s liquidity position. Regulators monitor banks’ liquidity positions. And this is to ensure that they have enough cash or cash-like assets, if they suddenly face a large number of withdrawal requests.
PRA chief executive Sam Woods said that they expect firms to notify them promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case. Standard Chartered’s systems, controls and oversight fell significantly below the standards they expect of a systemically important bank. The fine will be a blow to Chief Executive Bill Winters. Standard Chartered said that it accepted the PRA’s findings. These errors did not affect Standard Chartered’s overall liquidity position. It remained in surplus throughout the period.
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. The PRA 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 also said that correcting for the errors would have meant there were around 40 days when Standard Chartered fell short of the PRA’s liquitidy expectations. Mistake saw the bank report its holdings of U.S. asset-backed mortgage securities based on their notional value rather than their carrying value. And that resulted in an overreporting of approximately $2.5 billion. The PRA said Standard Chartered’s co-operation in its probe meant the fine was reduced by 30% from 66.5 million pounds. It also said that the Standard Chartered’s overall liquidity position was above its core liquidity requirement throughout the period.
