The Central Bank acknowledged that the breach was unintentional and related to Bank ofIreland Mortgage Bank holding credit transaction assets in excess of the 10% cap on the holding of such assets in the period between April and December last year.
“During the period, the firm failed to have in place adequate internal controls to enable the firm to identify or ensure compliance with the limit on credit transaction assets,” the Central Bank said.
The case involves a complex set of transactions. Bank of Ireland Mortgage Bank issued a series of covered bonds in 2011.
These type of bonds are backed by assets held by Bank of Ireland.
But because Bank of Ireland was downgraded in Apr 2011 and some of its deposits reclassified, this meant that the level of covered bonds issued exceeded the 10% cap stipulated by the Asset Covered Securities Act 2001.
In a statement issued yesterday, the Central Bank said there were no investors affected.
Moreover, Bank of Ireland took appropriate action to rectify the breaches as soon as it was made aware of them. And, the firm has introduced enhanced features and controls to prevent future incidences of this nature.
Central Bank director of enforcement, Peter Oakes, said, “This is the second settlement by the Central Bank with a firm for breaches of the Asset Covered Securities legislation in the last three years.”