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    ECB Issues AnaCredit Plausibility Checks, Imposes Penalties on Banks

    March 11, 2022

    The European Central Bank (ECB) imposes penalties on Bank of Cyprus and Luxembourg's Banque et Caisse d’Epargne de l’Etat, in addition to updating the plausibility checks for AnaCredit reporting.

    Below are the key details of these recently published updates:

    • The updated AnaCredit document from ECB sets out the plausibility checks performed on AnaCredit datasets. The plausibility checks are intended to ensure that AnaCredit data are of sufficient quality to serve the purposes for which the data have been collected. The document describes plausibility checks, discusses their features, and presents their various different categories, in addition to setting out the external plausibility checks in detail.
    • ECB imposed penalty of EUR 3.755 million on Banque et Caisse d’Epargne de l’Etat, Luxembourg, after the bank miscalculated and misreported its risk-weighted assets for exposures to banks for seven consecutive quarters in 2017 and 2018. The bank did not calculate its capital needs properly and reported a higher Common Equity Tier 1 (CET1) ratio than it should have done. Due to significant deficiencies in its internal control framework on internal models, the bank was unable to detect an inaccurate calibration of the probability of default model for exposures to other banks. The bank may challenge the ECB decisions before the Court of Justice of the European Union.
    • Additionally, ECB imposed an administrative penalty of €575,000 on the Bank of Cyprus for transferring liquidity to subsidiaries, without approval from the supervisor. From September 2016 to December 2017, the bank intentionally carried out numerous transfers to its subsidiaries, despite having the evident knowledge of this requirement and after the bank had correctly sought ECB approval on several other occasions during the same period, thus accepting that it would result in a breach. This prevented ECB from properly assessing the bank’s prudential situation during that period and is, therefore, classed as a high degree of misconduct. The bank may challenge the ECB decisions before the Court of Justice of the European Union.

     

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    Keywords: Europe, Banking, Reporting, Basel, Regulatory Capital, AnaCredit, Plausibility Checks, Luxembourg, Bank of Cyprus, Misconduct Risk, Supervisory Penalties, Liquidity Risk, Compliance Risk, ECB

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