KBC fined €1.4m over loan breaches

The Central Bank has fined KBC Ireland €1.4m for an “unacceptable” breach of rules around approving loans to directors and managers and their families, the first sanction since the code was introduced in 2011 to clean up the abuses of the boom years.

The Central Bank detailed the breaches involved 18 instances and occurred over a long period — from 2012 and up to February this year — when KBC Ireland failed to properly approve the related party loans through its board or a committee.

KBC Ireland admitted to the breaches, the Central Bank said.

Derville Rowland, director of enforcement at the Central Bank, said the breaches raised serious concerns.

“Related party lending is an issue of significant prudential concern for the Central Bank, particularly in the context of identified failings at the time of the financial crisis when loans were issued to related parties without adherence to internal controls and procedures,” Ms Rowland said.

“The Central Bank will continue to take the necessary enforcement action.”

The bank breached the code by failing to “have adequate policies and processes in place, which are adhered to, to identify loans to related parties” and “obtain the prior approval of its related party lending committee prior to granting a loan to a related party and extending the maturity dates on 12 separate occasions in respect of five existing loans”.

It also failed to “obtain prior approval of the related party lending committee on five separate occasions in respect of the management of four loans to two related parties”, the Central Bank said.