European Central Bank (ECB) Banking Supervision has imposed administrative penalties totalling €1.24 million on AS SEB Pank, AS “SEB banka” and AB SEB bankas (together, SEB Baltics) for failing to comply with ECB requirements on the margin of conservatism for certain internal-rating-based (IRB) models, resulting in insufficiently conservative credit risk parameter estimates. The fines were set at €410,000 for AS SEB Pank, €340,000 for AS “SEB banka” and €490,000 for AB SEB bankas. Between July 2022 and September 2024, the entities did not take adequate measures to meet ECB requirements to develop a framework for calculating an adequate margin of conservatism on risk parameters for some IRB models used for a considerable portion of their risk weighted assets, despite additional time granted to remediate deficiencies. The ECB classified the breaches as “moderately severe” under its public guide for setting pecuniary penalties. The banks may challenge the ECB’s decisions before the Court of Justice of the European Union.
European Central Bank - Banking Supervision 2025-04-18
European Central Bank Banking Supervision imposes €1.24 million penalties on SEB Baltics for internal model margin of conservatism breaches
The European Central Bank (ECB) Banking Supervision fined SEB Baltics €1.24 million for non-compliance with ECB requirements on the margin of conservatism for certain internal-rating-based models. The penalties, imposed on AS SEB Pank, AS “SEB banka,” and AB SEB bankas, address insufficiently conservative credit risk parameter estimates. The breaches, occurring between July 2022 and September 2024, were deemed "moderately severe," and the banks may contest the decisions at the Court of Justice of the European Union.