Central Bank fines Wells Fargo subsidiary €5.88m over ‘serious failings’

The Central Bank has fined a subsidiary of US-based multinational bank Wells Fargo €5.88 million for “serious failings” in its regulatory reporting.

The firm admitted five breaches which varied in dates from January 2014 to February this year.

The regulator said these breaches included a failure to accurately report the firm’s capital position and to comply with a requirement in relation to liquidity testing.

The Central Bank had determined that the appropriate fine was €8.4 million, ever this was reduced by 30% in accordance with the settlement discount scheme.

The submission of inaccurate information undermines the Central Bank’s ability to properly supervise

The fine is the second largest ever handed out by the Central Bank.

The investigation into the holding company started following an inspection of regulatory reporting in five peer credit institutions in 2016.

The inspection focused on end-to-end processes, internal controls and governance of regulatory reporting.

The Central Bank found serious and systemic failings in regulatory reporting capability, relating to a failure to calculate and report accurately the firm’s capital position.

It also found it failed to periodically monetise a sample of liquid assets, as required by legislation, weak governance arrangements including a lack of robust board and senior management oversight, and inadequate internal control mechanisms including a failure to properly document processes and procedures.

It further found an inadequate review by internal audit of regulatory reporting processes and procedures as well as weaknesses in IT systems and a significant number of manual adjustments used to prepare regulatory returns.

Seana Cunningham, the Central Bank’s director of enforcement and anti-money laundering, said: “It is a minimum requirement of being regulated by the Central Bank that firms submit accurate and timely regulatory returns.

“Regulatory returns are a tool used by the Central Bank to monitor the financial position of credit institutions and the risks to which they are exposed.

“The submission of inaccurate information undermines the Central Bank’s ability to properly supervise.

“Miscalculation and misreporting of the firm’s capital position, in particular, is a fundamental failure.

“A firm understanding its capital position, and the accurate reporting of this in its returns, are of paramount importance to understanding its safety and soundness.

“This enforcement action refers to failings in relation to both capital reporting and liquidity testing.

“For that reason it is considered to be particularly serious.

“A firm must have strong internal controls in place to ensure the accuracy and integrity of its data before submitting it to the Central Bank.

Robust governance arrangements, including sound accounting procedures, are the responsibility of the board of directors and are necessary to maintain the integrity of the firm’s regulatory reporting systems and for the early detection of risks.

“Deficiencies in governance arrangements expose firms to unnecessary risk in all areas of their business.

“WFBI’s serious failings are of concern to the Central Bank and indicate that there was a poor compliance culture as it pertained to regulatory reporting.

“The financial penalty imposed by the Central Bank reflects the widespread systemic failures in this instance, and the importance of regulatory returns as a tool used by the Central Bank to supervise firms.”

- Press Association

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