StanChart Fined $61.5 Million for Misreporting Liquidity Position

StanChart Fined $61.5M for Liquidity Reporting Errors

By Abhinav Ramnarayan

LONDON (Reuters) -The Bank of England said on Monday it was fining Standard Chartered 46.55 million pounds ($61.51 million) for misreporting its liquidity position to the regulator and for failings in its controls.

The Prudential Regulation Authority (PRA) said the fine related to when the regulator was concerned from late 2017 about a “heightened risk” of U.S. dollar outflows from Standard Chartered and had placed additional liquidity requirements on the bank.

The fine is the highest ever imposed by the PRA in a case where it was the sole enforcer, it said in a statement.

The PRA said Standard Chartered made five errors reporting its liquidity metric between March 2018 and May 2019, meaning the regulator did not have a reliable overview of the bank‘s liquidity position.

Regulators monitor banks’ liquidity positions to ensure they have enough cash or cash-like assets if they suddenly face a large number of withdrawal requests.

“We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case,” PRA chief executive Sam Woods said.

“Standard Chartered’s systems, controls and oversight fell significantly below the standards we expect of a systemically important bank,” he said.

The fine will be a blow to Chief Executive Bill Winters, who at the time the errors happened was trying to overhaul the lender’s risk and compliance culture.

Standard Chartered said it accepted the PRA’s findings.

“These errors did not affect Standard Chartered’s overall liquidity position, which remained in surplus throughout the period,” it said in a statement.

“Standard Chartered … has made significant improvements to and substantial investment in its liquidity and regulatory reporting processes and controls and remains committed to accurate regulatory reporting”.

The PRA said that one of Standard Chartered’s errors resulted in an overreporting of the lender’s “US dollar Gap 2 Metric” by $7.9 billion. It said correcting for the errors would have meant there were around 40 days when Standard Chartered fell short of the PRA’s liquitidy expectations.

In a rare insight into the PRA’s dealings with banks, the regulator said one error arose because a cell in a spreadsheet used for liquidity reporting had a positive value when a zero or negative value was expected

Standard Chartered notified the PRA of this error on 1 April 2019, over four months after it was identified.

Another mistake saw the bank report its holdings of U.S. asset-backed mortgage securities securities based on their notional value rather than their carrying value, resulting in an overreporting of approximately $2.5 billion.

The PRA said Standard Chartered’s co-operation in its probe meant the fine was reduced by 30% from 66.5 million pounds.

It also said Standard Chartered’s overall liquidity position was above its core liquidity requirement throughout the period.

($1 = 0.7568 pounds)

(Reporting by Abhinav Ramnarayan;Additional reporting by Rachel Armstrong, Editing by Angus MacSwan)