Greg Kilminster
Head of Product - Content
Bank’s ex-CEO fined £118,000 for regulatory failings
The Prudential Regulation Authority (PRA) has fined Iain Mark Hunter, the former CEO of Wyelands Bank Plc, £118,808 for breaching three PRA Conduct Rules between 2016 and 2020. The fine follows on from the PRA’s public censure of Wyelands in April 2023 for significant regulatory failings.
Mr. Hunter is found to have failed to act with due skill, care, and diligence, and neglected to implement adequate systems and controls for managing risks related to large exposures and recordkeeping. These failures contributed to Wyelands breaching multiple PRA rules and regulations, ultimately threatening the bank’s safety and soundness.
Specifically, Mr. Hunter’s failings included:
- Inadequate controls for managing connected party risks: He failed to ensure Wyelands properly identified, assessed, and mitigated risks arising from transactions with connected parties, leading to inaccurate large exposures reporting.
- Defective document retention policy: Wyelands lacked a formal policy for document retention, violating PRA recordkeeping requirements.
- Unclear responsibility for connected party analysis: Before March 2019, there was no clear allocation of responsibility within Wyelands for analysing connected party risks.
- Conflict of interest concerns: Mr. Hunter failed to fully comply with Wyelands’ internal policy aimed at mitigating potential conflicts of interest arising from its membership in the Gupta Family Group (GFG) Alliance.
- Inaccurate statements to the PRA: He provided inaccurate information about Wyelands to the PRA in two letters.
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PRA outlines priorities in Dear CEO letters
The Prudential Regulation Authority (PRA) has issued a series of letters across different sectors outlining the regulator’s priorities for the coming year.
For deposit taking entities (banks), the letter outlines the following areas of focus.
Credit risk: Ensuring credit risk management and measurement practices remain robust and adaptable to changing conditions, ensuring portfolios are closely monitored, customer support and collections arrangements appropriately scaled, and expected credit loss provisions recognised in an appropriate and timely manner. Firms should expect ongoing heightened engagement with the PRA on credit and counterparty credit risk, including targeted requests for enhanced data and analysis.
Financial resilience: Firms should ensure their treasury management is robust and takes into consideration the interaction between capital and liquidity risks, including through interest rate risk, as well as how hedging activity may affect the usability of liquid assets. The letter also notes that stress testing should not be a box ticking exercise and that all firms should be mindful of the upcoming implementation of the Basel 3.1 standards.
Operational resilience: The letter reminds firms that they have until March 2025 to demonstrate that they can remain within impact tolerances for all their important business services (IBS).
The letter also covers model risk, data risk and risks arising from climate change.
The letter covering the supervision of international banks addresses financial and operational resilience but also covers risk management and contr4ols, noting that “Firms and their Boards should ensure that the issues highlighted in our 2021 Dear CEO letter on equity financing, and more recently the Dear CRO letter on fixed income financing, are addressed, and that due consideration has been given to how other businesses may be affected.” It adds that counterparty credit risk and secured financing risks will remain key priorities in 2024.
The letter covering the supervision of the insurance sector adds liquidity risk to the mix, noting “that to further improve our understanding of both credit and liquidity risks to and from insurers in deteriorating economic conditions, we will prepare for both life and general insurance stress tests and the Bank will run an exploratory system-wide exercise (SWES) in 2024”.
For the general insurance sector, the focus will be on cyber underwriting risk; claims inflation; model drift and general insurance stress testing.
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ESMA publishes latest edition of its newsletter
The European Securities and Markets Authority (ESMA) has published its latest Spotlight on Markets newsletter covering the November and December 2023 period.
The contents, drawn from ESMA’s online news, are as follows:
- The average cost of retail investment products declines but significant differences across EU Member States remain.
- ESMA to launch and participate in Common Supervisory Action on ESG disclosures for Benchmarks Administrators.
- Making finance work for a sustainable future.
- ESMA proposes changes and updates timeline for its Guidelines on funds’ names.
- The ESAs provide clarity and tips to consumers on sustainable finance.
- ESAs put forward amendments to sustainability disclosures for the financial sector.
- ESMA to put cyber risk as a new Union Strategic Supervisory Priority.
- ESMA consults on draft guidelines for supervision of corporate sustainability information.
- ESMA presents methodology for climate risk stress testing and analysis of the financial impact of greenwashing controversies.
The newsletter also details current consultations and forthcoming speeches.
Click here to read the full RegInsight on CUBE’s RegPlatform