Ulster Bank fined €4.6m for checks failures on arrears data

Central Bank says it must be able to trust the figures supplied by lenders

The Central Bank has fined Ulster Bank €4.6 million for failing to have the correct checks in place to ensure that it was reporting accurate mortgage arrears figures to regulators.

Regulators determined that the Royal Bank of Scotland (RBS) unit should be fined €6.57 million, driven by the fact that it had been subject to three prior enforcement actions. However, the figure was reduced by 30 per cent, in line with its normal practice of applying a settlement discount for cases that are not contested.

“Accurate and reliable data is vital to the Central Bank’s ability to monitor risk and supervise firms effectively, and to ensure the ongoing stability of the financial system,” said Seána Cunningham, the Central Bank’s director of enforcement and anti-money laundering.

“Effective governance is a fundamental part of ensuring data quality. Firms must satisfy themselves that they have robust, effective and tested governance in place to ensure the quality of the data they manage and disseminate. If we cannot trust the data supplied by firms, we cannot do our job.”


Regulator’s targets

The Central Bank set a series of quarterly mortgage arrears reduction targets (Mart) for banks in 2013 as the level of non-performing loans in the industry was at a peak following the property crash.

However, regulators found the same year that there was no evidence that Ulster Bank’s compliance, internal audit or risk divisions were reviewing how the lender compiled data for its regular filings to authorities.

While Ulster Bank promised to address governance failings at the time, it was not until 2015 that it addressed issues.

The Central Bank did not find any evidence that Ulster Bank filed incorrect figures. That’s because regulators did not review individual submissions, but rather the processes around them.

However, the lender’s inability to reconstitute historic returns compromised supervisors’ ability to accurately assess its effectiveness in dealing with borrowers in arrears.

Ulster Bank was fined €3.3 million in 2016 for breaches of anti-money-laundering and terrorist-financing regulations. Two years earlier, it was hit with a then-record €3.5 million fine for a serious IT systems failure in 2012.

The bank was fined €1.96 million in late 2012 for breaking rules on how much day-to-day cash it holds to cover deposits and rainy-day capital for potential losses.

This is the Central Bank’s 134th settlement since 2006 under its Administrative Sanctions Procedure, bringing the total fines imposed by the institution to over €103 million.

Other banks

In addition, Ulster Bank, AIB and its EBS unit, Bank of Ireland and KBC Bank Ireland have each set aside multi-million euro provisions to cover expected fines resulting from Central Bank enforcement investigations into the role individual lenders played in the industry-wide tracker mortgage scandal. Permanent TSB was fined €21 million last year.

Joe Brennan

Joe Brennan

Joe Brennan is Markets Correspondent of The Irish Times