Ireland slams banks’ ‘unacceptable’ reporting standards

The Central Bank of Ireland has warned all banks operating in the country to review their systems for reporting to regulators after an investigation found a number of banks’ standards were “significantly below what is expected”.

The CBI looked into the ways banks generate figures to report important measures of health such as risk-weighted assets and liquidity coverage ratios. It said today that “all banks should evaluate their regulatory reporting framework in the context of the findings”.

Only one of the banks it investigated demonstrated “an appropriate control environment” in the production of regulatory returns, the CBI said. Reporting processes at the other banks were “significantly prone to errors with many instances of duplication, misclassification or incorrect assignment of fields noted by the inspection team”.

The bank said the problems were exacerbated by weak internal audit processes, which are sub-standard in many of the institutions inspected.

More than 450 institutions are licensed to operate in Ireland through European passporting arrangements. The European Central Bank leading supervision of the country’s five biggest banks, Allied Irish Banks, Citibank, Permanent TSB, Bank of Ireland and Ulster Bank.

The CBI’s findings were based on investigation of “a number” of the 15 smaller international banks for which it is directly responsible.

Fiona MacMahon, CBI head of banking supervision, said:

The regulatory reporting requirements for banks expanded in response to the financial crisis as it is essential that bank regulators have timely and accurate information in order to evaluate capital adequacy, large exposures and liquidity in firms. Banks must have a robust regulatory reporting framework as the Central Bank places reliance on regulatory returns to enable it to monitor banks and to act in a timely manner where risks arise.

A number of the findings in this inspection are not acceptable and have resulted in regulatory breaches in certain instances. We will continue to use our supervisory and inspection resources to ensure that the issues identified are comprehensively remediated.