The European Central Bank (ECB) announced on 20 December 2024 that it had imposed an administrative penalty of €10.4 million on BNP Paribas Fortis SA/NV for reporting miscalculated risk-weighted assets for credit risk.
According to the ECB, between 2014 and 2021, for 31 consecutive quarters, the bank understated risk-weighted assets connected to factoring exposures of its subsidiary in Belgium. It relied on internal models to calculate own funds requirements for these exposures despite having identified severe deficiencies that rendered the models almost inevitably non-compliant with the Capital Requirements Regulation (CRR).
The ECB said the bank knowingly reported wrongly calculated figures to the competent authorities, preventing them from having a comprehensive view of its risk profile. It only informed the ECB once new models had been developed and submitted for regulatory approval, seven years after the deficiencies were identified. As a result of underestimating its risk-weighted assets, the bank did not calculate its capital requirements properly and reported higher capital ratios than it should have.
BREACH CLASSIFIED AS SEVERE
The ECB adopted the penalty decision on 13 November 2024. Applying its public guide to setting pecuniary penalties, it classified the breach as “severe” and assessed the degree of misconduct as high because the breach was committed intentionally. The decision covers breaches of Article 99(1) of the CRR and, from 28 June 2021, Article 430(1)(a).
The ECB's power to impose sanctions stems from Article 18(1) of the Single Supervisory Mechanism Regulation. BNP Paribas Fortis, the Belgian banking subsidiary of BNP Paribas, may challenge the decision before the Court of Justice of the European Union.
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