Ethical Performance
inside intelligence for responsible business


BNY Mellon hit by record £126m fine

May 2015

The Bank of New York Mellon, the world’s largest custody bank, has been fined £126m ($188m, €175m) by the City of London regulator for failing to protect customers’ assets.

Two companies within the group – the London branch and the Bank of New York Mellon International – were found to have neglected to account properly for clients’ shares, bonds and other investments between 2007 and 2013.

The Financial Conduct Authority (FCA) ruled that the bank would therefore have found difficulty in restoring assets to the right clients.

Entity-specific records and accounts are vital in insolvency cases as they are used to identify clients whose assets are safeguarded and have to be returned to them.

Instead, said the FCA, the two companies used global platforms to manage clients’ safe custody assets and did not record the entities in the group with which clients had contracted.

The bank’s other breaches included failing to prevent those assets from being mixed up with other accounts and occasionally using them to settle other clients’ transactions without consent.

Georgina Philippou, the FCA’s acting director of enforcement and market oversight, emphasised that safeguarding assets was core to the bank’s business and cautioned the industry: “Other firms with responsibility for client assets should take this as a further warning that there is no excuse for failing to safeguard client assets.”

The FCA said the risks were greater in this case because of the stress in the financial markets at the time.

The bank offered its regrets, assured the FCA that no clients had lost anything through its failures, and insisted it had now improved its practices.

Its spokesman said: “We have taken clear steps to put in place a framework of new and improved policies and operational procedures, as well as enhancing our specialist resources.”

The fine was 30% lower because the bank agreed to settle at an early stage in the FCA investigation. The penalty would otherwise have been £180m.

The bank’s London and international sections provide custody services to 6,089 UK-based clients. At the time of the breaches balances peaked at £1.3tn and £236bn respectively.

Further information here

Global | Business ethics


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