PRA imposes a penalty on Standard Chartered Bank

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The Prudential Regulation Authority (PRA) imposed a financial penalty on Standard Chartered Bank of £ 46.55million for not being open and cooperative.

The fine also concerned breaches of the governance and controls of Standard Chartered Bank’s regulatory reports with regard to an adequate PRA liquidity expectation.

This is the highest fine ever imposed in a PRA-only enforcement case.

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In October 2017, the PRA imposed a temporary hold on additional liquidity on Standard Chartered in response to concerns about the increased risk of USD cash outflows. This temporary wait has now been removed.

While Standard Chartered Bank’s overall liquidity position remained in excess of its baseline liquidity requirements, between March 2018 and May 2019, the bank made five errors in reporting the liquidity metric, which meant that the PRA did not have a reliable overview of its USD liquidity position.

Regarding one of the misreporting errors, the bank did not notify the PRA of the error until after a four-month internal investigation into the issue.

The identification of this problem was information that the PRA reasonably expected to be notified promptly; by delaying, Standard Chartered has not been open and cooperative in violation of Fundamental Rule 7.

The PRA’s investigation revealed that the bank’s internal controls and governance arrangements that underpin its regulatory reporting with respect to liquidity measurement were not being implemented or functioning effectively.

The investigation found that Standard Chartered did not promptly notify the ARP of any of the miscalculation and misreporting errors, despite several opportunities to do so and ensure its escalation framework for the errors. calculation and declaration of liquidity was correctly integrated into the area of ​​activity concerned.

It also has not implemented a documented policy indicating when liquidity errors or potential liquidity errors should be reported to the ARP, maintain and apply adequate controls, test and verify the reporting of the measurement of the liquidity and ensure that it has the appropriate human resources to investigate potential misrepresentations of the liquidity metric.

As a result, the bank violated Ground Rule 6 and Ground Rule 7 of the PRA Rulebook. Fundamental Rule 6 requires a business to organize and control its affairs in a responsible and efficient manner. Fundamental rule 7 requires that a company be open and cooperative with the regulator.

Standard Chartered Bank agreed to resolve the case and therefore qualified for a 30% reduction in the fine, without which it would have been £ 66,500,000.

Sam Woods, Deputy Governor of Prudential Regulation and Managing Director of PRA, said: “We expect companies to promptly notify us of any material issues with their regulatory reports, which Standard Chartered has not done. in this case.

“Standard Chartered’s systems, controls and oversight have fallen well below the standards we would expect from a systemically important bank, and this is reflected in the amount of the fine in this case. “

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