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BNY Mellon fined $6.6m for miscalculating RWAs

12 January 2017

Custodian bank excluded aorund $14bn in collateralized loan obligation assets from its calculations

Read more: collateralized loan obligation RWA BNY Mellon

BNY Mellon will pay a $6.6m penalty to the SEC over charges the US custodian bank miscalculated its risk-based capital ratios and risk-weighted assets reported to investors.

An investigation by the SEC found that BNY Mellon deviated from regulatory capital rules by excluding approximately $14bn in collateralized loan obligation assets from its calculations that the firm consolidated onto its balance sheet in 2010. 

The bank failed to obtained Federal Reserve Board approval, as required under regulatory capital rules, to exclude the assets from its calculations. 

Due to the errors, the SEC claims BNY Mellon understated its risk-weighted assets and overstated certain risk-based capital ratios in quarterly and annual reports from the third quarter of 2010 to the first quarter of 2014.

"Regulatory capital ratios and risk-weighted assets are critical data points for investors in large banking institutions like BNY Mellon," said Michael J. Osnato, chief of the SEC enforcement division’s complex financial instruments unit. 

"We will continue to aggressively focus on these kinds of disclosures to ensure that control failures do not prevent investors from receiving accurate and timely information."

Without admitting or denying the charges, BNY Mellon consented to an SEC order finding that it violated internal controls and recordkeeping provisions.

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