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Central Bank of Ireland imposes fine of EUR600,000 on Scotiabank (Ireland) Limited

June 8, 2011‐ Dublin, Ireland

The Central Bank of Ireland is reported to have imposed a huge fined on Scotiabank (Ireland) Limited EUR600,000 for overstating liquid assets by $300 million and for failing to check the regulatory information it was providing. A press release said that, on June 8, 2011, the Central Bank of Ireland has entered into a Settlement Agreement with effect from the 2nd June 2011 with Scotiabank (Ireland) Limited, a regulated financial service provider in relation to breaches of regulation 16 of the European Communities (Licensing and Supervision of Credit Institutions) Regulations 1992 and section 10 of the Central Bank Act 1971.

The inaccurate data reporting relates to two period - late September 2007 to late June 2008 and between early December 2009 and early March last year.

Scotiabank Ireland appeared to have first told about the issue in 2008 that it had overstated by $300 million liquid assets by inadvertently including some investment grade securities and by failing to include all cash flows for interest rate swaps and other derivative products on the basis of contractual terms.

Later again in April 2010, Scotiabank Ireland told it that a program error meant weekly returns for the four month period to March 2010 had wrongly calculated its reverse repo transactions and understated cash outflows by $106 million.

The central bank appeared to have reached a settlement after taking into account the breaches were not deliberate; that the firm reported these failures to the Central Bank; the extensive remedial steps taken by the firm to rectify the contraventions; and the cooperation of the firm during the investigation and in settling at an early stage in the administrative sanctions procedure. The Central bank confirmed the matter is closed. The fines are imposed in part because of the failure of the bank to have adequate controls and checks to verify the liquidity return process.

Banks across the world are made to work with strict cognizance and their reporting of data is seen pretty seriously because of the potential serious damage they could make to other sectors if the reporting is delayed or is incorrect. Readers may recall that only last year, the UK's Financial Services Authority fined Credit Suisse £1.6 million for failing to report trading data on time.

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