The UK arm of Qatar Islamic Bank has been fined £1.4m by the Bank of England for significant failings which left it undercapitalised and exposed to too high a level of risk.
The business – which specialises in sharia-compliant property financing – had failed to realise that more than 25% of its capital had been lent to a single group of borrowers, said the Bank of England’s regulatory arm, the Prudential Regulation Authority.
“When this group entered administration, the firm had to provision for the full amount outstanding, which had the effect of removing over 25% of its capital base and leaving the firm dangerously undercapitalised. This issue was only resolved by the firm’s shareholder quickly injecting further capital into the firm,” the PRA said.
The situation dates back to the period between 30 June 2011 and 31 December 2012. QIB (UK) Plc would have been fined almost £2m if it had not agreed to settle with the regulator at the earliest opportunity.
The PRA said that since then the operation had been restructured and a new board was now in place. “The firm has also, since December 2012, committed resource to matters of governance, capital monitoring and reporting systems and controls to mitigate the risk of similar breaches occurring again,” the PRA said.
Before then, the operation had failed to recognise that it had to comply with regulatory requirements relating to the assessment and maintenance of financial resources and capital.
Guy Priestley, acting chief executive of QIB (UK), said the fine would not affect the operations of the business. “It was clearly very unfortunate and we just want to move forward now,” said Priestley.
QIB (UK) is only the fourth firm to be fined by the PRA; most of the fines in the City are levied by the Financial Conduct Authority.
Andrew Bailey, who will become chief executive of the FCA in July but is currently chief executive of the PRA, said: “In failing to assess, maintain and report on its financial resources for over a year, QIB failed to meet some of the most basic regulatory standards. It is essential that regulated firms are aware of, and have the systems in place to ensure adherence to, regulatory requirements. QIB’s failures in this regard were serious, which is why we considered it appropriate in this case to impose a fine.”
This article was written by Jill Treanor, for theguardian.com on Friday 8th April 2016 13.45 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010