The European Securities and Markets Authority (ESMA) has amended its enforcement of Nordea Bank, Svenska Handelsbanken, SEB and Swedbank following a decision by the Board of Appeal of the European Supervisory Authorities (BoA).
Originally, the ESMA had issued public notices and fined these four Scandinavian banks as well as Danske Bank €495,000 in June 2018. The reason was that the EU institution had found that the banks had negligently infringed the Credit Rating Agencies Regulation (CRAR) by issuing credit ratings without being authorized to do so. The regulations are in place to ensure financial institutions across Europe all adhere to the same high standards.
The four Scandi financial institutions had issued credit research to their clients between June 2011 and August 2016. SEB reportedly continued to do so until May 2018. This research included the issuance of what the banks described as shadow ratings. The ESMA believed the opinions expressed in these shadow ratings reports met the definition of credit ratings issued by the CRAR. None of the banks had been authorized by the CRAR to issue credit ratings. Hence, the five banks were slammed with the public notices and the fines.
However, the financial watchdog has now downgraded the sanctions to just serving out public notices to Nordea Bank, Svenska Handelsbanken, SEB and Swedbank. It changed its mind after the four banks appealed against the decision to the BoA. They argued that they had not been acting negligently as there had been very unusual circumstances of the banks’ practice and that they had applied the high standard care required of the banks. The appeals office accepted the banks’ claims in February 2019, which is why the ESMA removed the fines but kept the public notices.
The four banks can appeal the downgraded sanctions to the Joint BoA.
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