Enforcement Action Publication Notice 01/2019 (P.N.01/2019)

Bank Negara Malaysia (the Bank) had on 14 January 2019, imposed an administrative monetary penalty (AMP) of RM2,700,000 pursuant to section 234(3)(b) of the Financial Services Act 2013 (FSA) on J.P. Morgan Chase Bank Berhad (JPMCB) for exceeding the single counterparty exposure limit (SCEL) under section 50(1) of the FSA read together with paragraph 8.1(b) of the SCEL Policy Document dated 9 July 2014. Under section 234(3)(b) of the FSA, JPMCB can be liable to a maximum fine of RM5,000,000.00 for each breach committed.

The above requirement states that the SCEL shall be 25% of the banking institution’s total capital, and a limit as may be approved by the Bank which shall not exceed 50% of the banking institution’s total capital in the case of exposures to a counterparty who is a related banking entity. JPMCB breached the applicable SCEL for exposures to its related banking entity on 22 January 2018.

The AMP amount was determined taking into account relevant aggravating and mitigating factors. The breach in 2018 was a recurring breach. However, the Bank noted that JPMCB had voluntarily informed the Bank of the breach and taken remedial steps to reduce its exposure within the regulatory limits.

The Bank has further directed JPMCB to undertake a holistic review of the adequacy and effectiveness of its internal SCEL policy and procedures, including the measurement framework for single counterparty exposures which JPMCB has undertaken. This should serve to inform measures by JPMCB to strengthen its management of limits and prevent a recurrence of breaches in future.

On 18 January 2019, JPMCB paid RM2,700,000 for the AMP imposed by the Bank.