Bank Of New York Mellon Corporation Fined For 'Unsafe And Unsound' Practices
Thursday, June 29, 2017
The Federal Reserve Board (FRB) announced on Tuesday that it had levied a $3 million fine against the Bank of New York Mellon Corporation (BNY Mellon) for "unsafe and unsound practices." The FRB announcement explained:
"In 2010, following a change in the relevant accounting rules, BNY Mellon consolidated a portfolio of collateralized loan obligations onto its balance sheet. BNY Mellon incorrectly assigned the assets a zero-risk weighting, which was improper under the rules in place at the time. As a result of its improper treatment of the portfolio BNY Mellon understated its reported risk-weighted assets and overstated its risk-based capital ratios for nearly 14 quarters."
When the errors were identified, BNY Mellon has since taken corrective action and is now in compliance. The Consent Order (Adobe PDF) dated June 26, 2017 stated:
"The Board of Governors hereby assesses BNY Mellon a civil money penalty in the amount of $3,000,000.00 which shall be paid upon the execution of this Order by Fedwire transfer of immediately available funds to the Federal Reserve Bank of Richmond... This penalty is a penalty paid to a government agency for a violation of law for purposes of 26 U.S.C. § 162(f) and 26 C.F.R. § 1.162-21. The Federal Reserve Bank of Richmond, on behalf of the Board of Governors, shall distribute this sum to the U.S. Department of the Treasury... Each provision of this Consent Penalty Assessment shall remain effective and enforceable until stayed, modified, terminated, or suspended in writing by the Board of Governors.
The Board of Governors hereby agrees not to initiate any further enforcement actions, including for civil money penalties, against BNY Mellon and its affiliates, successors, and assigns, with respect to the conduct that has been or might have been asserted by the Board of Governors described..."
Earlier this month, the FRB barred two former employees of Regions Bank from working within the banking industry, after both men -- Richard Henderson and Philip Cooper -- pled guilty to conspiracy to commit money laundering, and conspiracy to commit bank bribery and wire fraud. In late May, the FRB levied a $41 million penalty, plus a cease-and-desist order, against the U.S. operations of Deutsche Bank AG for anti-money laundering deficiencies.
BNY Mellon can easily afford this fine. In April, the bank reported first quarter earnings of $880 million on revenues of $3.84 billion. The bank has about $29 trillion in assets under custody and administration, and $1.6 trillion in assets under management.
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