Bank of New York Mellon Corp. was fined a record 126 million pounds ($185 million) for failing to adequately safeguard client assets, the first time the U.K. Financial Conduct Authority has ever penalized the firm.
The bank didn’t do enough to stop customers’ assets from mixing with the firm’s in some instances, sometimes using those to settle other clients’ transactions, and not submitting accurate reports. The violations began in November 2007 and ran through August 2013, the FCA said Wednesday.
The FCA has clamped down on firms that fail to comply with client-asset rules following the financial crisis, levying 15 sanctions since 2010, a spokesman for the regulator said. Prior to that year, only two companies had been fined for such breaches.
If the bank had “become insolvent, the total value of safe custody assets at risk would have been significant,” Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said in the statement. “This is compounded by the fact that the breaches took place at a time when there was considerable stress in the market.”
BNY Mellon said in an e-mailed statement that no clients suffered any losses. The bank has started a remediation process to improve policies and procedures, it added.
Barclays Plc was fined 37.7 million pounds in September for not properly protecting 16.5 billion pounds of client assets, the FCA’s second-largest penalty. In 2011, the London-based bank was ordered to pay 1.1 million pounds for similar violations.
Safe-custody rules protect client assets in the event of a firm’s collapse, ensuring they can get their money back as quickly and easily as possible. FCA-regulated companies have to ensure they have adequate systems and controls in place to ensure that.
BNY Mellon received a 30 percent discount for early cooperation, without which the fine would have been 180 million pounds.