Regulator slaps Merrill Lynch with €2.75m fine

The Financial Regulator has entered into a settlement agreement with effect from October 22 with Merrill Lynch International Bank Ltd (MLIB) in relation to two separate incidents in which traders failed to appropriately value their positions.

Both incidents occurred in the London branch of MLIB.

The first incident occurred between December 2008 and February 2009, resulting in losses to MLIB of $456m (€303m). The second occurred between May and August 2009, resulting in losses of $5.3mm (€3.5m).

Full details of the second incident were notified to the FR during the course of the examination into the first incident. For this reason, both cases are being dealt with together.

Breaches of regulatory requirements common to both incidents were a failure to have in place a well defined and transparent line of supervisory responsibility; a failure to supervise the traders' activity and an inadequate month-end independent price verification process.

Additionally, in the first incident it was also found that there was a failure to manage effectively market risk limits in respect of the trader's activities.

The Financial Regulator reprimanded MLIB and required it to pay a €2.75m penalty.

MLIB notified the Financial Regulator in respect of each separate incident, commissioned investigations and subsequently submitted reports of each investigation to the Financial Regulator.

"MLIB has fully cooperated with the Financial Regulator and has been open and transparent throughout the examination. MLIB confirms that it has taken complete remedial action to fully rectify the breaches," a spokesman for the bank said today. "The matter is now closed," he added.