In a coordinated action to punish the “unsafe and unsound” risk management practices of a Global European bank, the US and UK regulators recently fined it more than $300M.
Among the issues raised, the US Fed cited the bank for lacking “adequate governance, experienced staff with sufficient stature, and sufficient data quality”.
In a separate case, the Fed also penalized another Global European bank for slow progress and failure to fix its control laws. This occurred despite the Fed having previously imposed big fines on the bank and warned it to prioritize addressing several of these issues or face “additional and escalated penalties”.
These penalties, handed down by the Fed, have put the spotlight on the severity of the problems these banking giants face when it comes to adhering to necessary financial controls. As we delve into the details behind these headline-making fines, it becomes evident that the crux of the issue includes the banks’ data management practices.
The Fed’s Stern Hand
The Fed’s decision to impose hefty fines on these banks highlights the gravity of their issues with risk management and compliance.
Underscoring Data Mismanagement
Data mismanagement plays a pivotal role in the compliance failures of both banks. Proper data management serves as the backbone of any financial institution, ensuring transparency, accuracy, traceability, escalations, policies adherence, and regulatory compliance. Unfortunately, both banks fell short in this critical aspect, leading to the significant fines.
Regulatory bodies are intensifying their vigilance in enforcing data compliance. The fines imposed are just one aspect; reputational damage and heightened scrutiny are likely to follow. This could hamper future operations and necessitate significant resources to rectify data management practices and rebuild their reputation.
At its worst, the repercussions of poor data management extend far beyond the financial fines and penalties imposed. The loss of trust from clients and investors poses a significant threat to the long-term stability and existence of these institutions.
The Road to Recovery and Next Steps
Recovering from such colossal data management failures will be a challenging journey for both banks. Both institutions must seize this opportunity to reevaluate and overhaul their data management systems. Implementing robust data governance protocols, investing in advanced data analytics tools, and fostering a culture of data responsibility are essential steps to regain the trust of regulators, clients, and the public.
The Artius Global Data Framework (AGDF) is a formidable ally, providing financial institutions with a roadmap to transform their data systems:
Connect with us to find out more.