Ulster Bank fined €2m for breaches

Ulster Bank has been fined €1.96m by the Central Bank following a number of breaches of liquidity and capital requirements.

Ulster Bank fined €2m for breaches

The fine relates to the failure by Ulster to set aside adequate levels of capital in compliance with Central Bank guidelines.

Between Jan 26 and Sept 13, 2011, the bank did not apply haircuts to certain retail and corporate deposits.

Ulster is supposed to set aside capital relative to the size of the deposits it takes in to ensure that it could meet future calls in a timely manner. Moreover, it had excluded certain cashflows from the calculation of its overall liquidity position.

The Central Bank imposed the fine in part for these breaches and also for failing to report them to the relevant authorities during the period when they took place.

In 2009, the Central Bank ordered all Irish banks to hold additional Pillar II capital to cushion against increased risks. Under this directive Ulster Bank should have been holding €339m, but in a regulatory filing to the Central Bank at Mar 31, 2011, the firm had a shortfall of €313m in relation to its requirement.

Ulster is a wholly owned subsidiary of Royal Bank of Scotland. In a statement, it said no customers were ever at risk through these errors.

Jim Brown, Ulster Bank CEO, said: “This settlement is significant and we acknowledge that these contraventions, which occurred in 2011, were unacceptable.

“We identified the contraventions ourselves and we have since implemented a number of robust measures to ensure similar contraventions are not repeated.

“I would like to highlight that, at no point during the period in question, were our customers affected in any way. We remain committed to serving the needs of our 1.9m customers across the island of Ireland.”

RBS has had to pump in over £15bn (€18.6bn) to cover losses at the bank since 2008. Moreover, it was plagued by technology problems over the summer which has cost it €100m between compensation claims and additional operating costs.

Peter Oakes, director of enforcement at the Central Bank, said: “This is the first settlement by the Central Bank with a firm for contraventions of capital requirements and the third for contraventions of liquidity requirements.

“This enforcement action and the penalties imposed reflect the importance the Central Bank places on compliance with all aspects of key prudential requirements regardless of whether or not contraventions of core Pillar I minimum capital requirements or liquidity ratios arise.

“Regulated firms must fully comply with their liquidity and capital requirements including, establishing and maintaining effective internal controls for the management of liquidity risk and having in place sound and effective strategies and processes to address internal control requirements,” Mr Oakes said.

“Failing to meet these basic requirements represents an unacceptable risk to a regulated financial service provider’s business and to the Central Bank achieving its statutory objectives.

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