Central Bank fines AIB €490k for liquidity reporting lapses

The Central Bank has fined AIB €490,000 for breaking rules on reporting liquidity requirements on four occasions over a six-year period.

The breaches took place between Sept 2007 and May 2013 and relate to four separate cases over that period. All of them highlight a failure of internal controls to ensure that the proper regulatory reporting was made to the Central Bank.

All banks are required to analyse incoming and outgoing cash flows over a set period for regulatory purposes. The bank is required to meet minimum liquidity levels relative in scale to these cash flow movements.

“Details of these cash flows are required to be submitted to the Central Bank in regulatory liquidity returns and credit institutions are required to make assumptions on the behaviour of cash flows when preparing returns. The Requirements also set out rules regarding what a credit institution’s liquidity policy should include. The contraventions in this case relate to inaccuracies in the regulatory liquidity returns and the failure to have in place adequate internal controls to ensure the accuracy of these returns,” said the Central Bank in a statement.

The Central Bank said it took several factors into account when deciding the fine imposed on AIB. These included the seriousness of the breaches; the extended period of time over which the breaches occurred; and the seriousness the Central Bank places upon the timely and accurate reporting of liquidity requirements.

There were mitigating circumstances, however. AIB identified these errors and brought them to the attention of the Central Bank and the fact that the bank has access at all times to sufficient liquidity. Moreover, AIB has now taken remedial steps to prevent lapses.

“This is the fifth settlement by the Central Bank in the last four years for breaches of the liquidity requirements.

“The failure by a credit institution to accurately report its liquidity position to the Central Bank undermines the ability of the Central Bank to supervise such an institution and is viewed as a serious matter,” said the Central Bank’s director of enforcement, Derville Rowland.

“The pursuit of enforcement actions in respect of the accuracy of information submitted to the Central Bank, and systems and controls failings, are two of the Central Bank’s Enforcement Priorities for 2013 and, for that reason, where breaches occur in these areas, regulated entities and their management should expect vigorous investigation and follow up by the Central Bank.”