ECB fines Irish bank Permanent TSB for breaching liquidity requirements

The Dublin-based bank breached the ECB's liquid coverage ratio between October 2015 and April 2016, the ECB said.

The liquidity coverage ratio aims to promote short-term resilience by ensuring that a bank has an adequate stock of high-quality liquid assets that can be converted into cash easily and immediately in private markets. It is designed to make sure that a bank could survive a 30-day stress period.

One penalty of €750,000 was imposed after the bank failed to comply with specific liquidity requirements requested by the ECB in February 2015. That breach occurred between 27 October and 31 December 2015, the ECB said.

A second penalty of €1,750,000 was then imposed after the bank again failed to comply in November 2015, over a breach that occurred between 4 January and 26 April 2016.

"The ECB notes that this breach did not change the liquidity position of Permanent TSB and that the bank has fully remediated the issue," it said.

The Permanent TSB said it identified the issue itself and reported it to the ECB.

The breaches were caused by the "misinterpretation of a revised regulation" and that "at no point during this period did the Group’s actual liquidity position deteriorate".

"The group had a liquidity buffer of around €4 billion at the time these breaches occurred and the group’s actual liquidity position was not impacted during the period between October 2015 and April 2016. The current value of the group’s liquidity buffer is in excess of €6.5 billion," it said.

Financial regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com said: "The fine imposed by the ECB not only reflects the seriousness with which it views compliance with the relevant liquidity requirements but also the mitigation by Permanent TSB in bringing this matter to the attention of the ECB. The fine would inevitably have been higher but for this proactive step by Permanent TSB."

"Those banks subject to regulation by the Prudential Regulation Authority (PRA) in the UK may well wish to give some attention to ensuring they do not face the position of having to bring such matters to the PRA’s attention as one would expect a significant financial penalty would almost inevitably follow," Ruck said.