Shearman & Sterling LLP | FinReg | European Central Bank Publishes Guide to Pecuniary Penalties for Prudential Regulatory Breaches
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  • European Central Bank Publishes Guide to Pecuniary Penalties for Prudential Regulatory Breaches
    03/02/2021
    The European Central Bank Banking Supervision division has published a guide to its method for setting pecuniary penalties for breaches of prudential regulatory requirements by Eurozone banks that are directly prudentially supervised by the ECB. The ECB will adopt a two-stage approach, first determining the base amount, and then deciding whether to adjust that amount by reference to a range of factors.

    The base amount will be determined according to the severity of the breach, classified as either minor, moderately severe, severe, very severe or extremely severe. The impact of the breach and the degree of misconduct will be taken into account in determining the severity of the breach. For breaches classed as "very severe" or below, penalties will be set by reference to a pre-determined penalty grid. For "extremely severe" breaches, penalties will be based on a percentage of the entity's annual turnover.

    The relevant penalty may then be increased or decreased depending on aggravating or mitigating circumstances, whether multiple breaches are derived from the same set of facts, the legal maximum level (being 10% of the total annual turnover in the preceding business year or twice the amount of profits gained or losses avoided as a result of the breach), and the appropriateness of the penalty in light of the entity's financial situation.

    View the ECB's Guide.

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