The European Central Bank (ECB) has imposed two administrative penalties amounting to €1.685 million ($1.8mn) on Banque et Caisse d’Epargne de l’Etat, Luxembourg for misreporting calculated risk-weighted assets for market and credit risk.
Between 2018 and 2022, for 17 consecutive quarters, Banque et Caisse d’Epargne de l’Etat, Luxembourg understated its risk-weighted assets connected to foreign exchange exposures by failing to accurately capture its USD-denominated positions in the own funds requirement for foreign exchange risk in accordance with prudential requirements.
Furthermore, between 2021 and 2023, for eight consecutive quarters, the bank understated its risk-weighted assets by not considering an indirect equity position when calculating the exposure amount of qualifying holdings outside the financial sector. As a result, the bank neither deducted the relevant exposure amount from its own funds nor applied the correct risk weighting prescribed by the applicable framework.