BNY Mellon Fined $6 Million for Mistake in Fed Lending Program

Bank of New York Mellon Corp., the world’s largest custody bank, was fined $6 million by the Federal Reserve Board for misstating the collateral it pledged to a government lending program in 2008.

A portion of the collateral the bank pledged to the Boston Reserve Bank was ineligible for the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, or AMLF, a program set up to help ease the credit squeeze during the financial crisis, the Federal Reserve said today in a press release. As a result, BNY Mellon received more in loans than it should have, according to the statement.

As part of a “consent cease and desist order,” the bank agreed to submit a plan to the Fed to improve its procedures and to step up training for its employees, according to the statement.

“This situation resulted from a failure in our internal reporting and escalation processes related to our use of the program in 2008,” Ron Gruendl, a spokesman for New York-based BNY Mellon, said in an emailed statement. “We are pleased to put this matter behind us.”

To contact the reporter on this story: Charles Stein in Boston at cstein4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.