StanChart Hit With $61 Million Fine After Spreadsheet Error

The PRA said that a mistake in a single cell of the lender’s Liquidity Metric Monitor spreadsheet resulted in the bank breaching the regulator’s expected dollar funding threshold after over-reporting certain holdings by $7.9 billion. 

A figure of about $10 billion was input as a positive number “even though it related to liabilities and should therefore have been either zero or negative,” the PRA said. The problem was discovered in late November 2018 but the PRA was only informed in April 2019, despite staff from Standard Chartered’s treasury markets team holding fortnightly meetings with officials from the regulator during that period.

“We expect firms to notify us promptly of any material issues with their regulatory reporting, which Standard Chartered failed to do in this case,” said Sam Woods, chief executive officer of the PRA, in the statement. “Standard Chartered’s systems, controls and oversight fell significantly below the standards we expect of a systemically important bank, and this is reflected in the size of the fine in this case.”

Reporting Lapses
In late 2017, the PRA had become concerned about the risk of U.S. dollar liquidity issues at Standard Chartered and told the bank it should maintain a sufficient buffer that it could survive a period of 91 days of being locked out of all but the most liquid funding markets. As part of the order the bank had to provide regulators with daily updates on its dollar funding position.

Problems with the bank’s reporting of its position were first uncovered in early March 2018. However, the issue was considered relatively minor and the error was not reported to senior management. A second problem was found in May 2018 and a third error was reported to the PRA in July 2018. While none of those issues led to a breach in the PRA’s 91-day period, the November mishap and a subsequent May 2019 error both did.

A later backtesting exercise concluded that on about 40 out of the 413 days under review the lender had breached the PRA’s 91-day “survival horizon”, and that on four instances “survival days were down to single figures.”

Standard Chartered’s struggles with reporting its dollar funding were not helped by the departure of two staff from its specialist liquidity team in mid-2018, the PRA said. The regulator said that despite describing the need to hire a replacement for one of the employees as “urgent” the bank did not replace them during the period covered by its action.

The bank agreed to resolve this matter and therefore qualified for a 30% reduction in the fine, according to the statement. Standard Chartered said in a statement that it “cooperated proactively and fully” with the investigation and accepts the PRA’s findings.

The amount is the highest ever fine in a PRA-only enforcement case and comes after the Financial Conduct Authority fined NatWest Group Plc and HSBC Holdings Plc for anti-money laundering failings. The FCA is making a concerted effort to enforce money laundering regulations more forcefully.