The Central Bank has fined Bank of Ireland Mortgage Bank €120,000 for breaches of Asset Covered Securities legislation relating to covered bonds in April-December 2011.

Bank of Ireland’s covered- bond bank breached a cap whereby the subsidiary was not allowed to hold certain assets worth more than 10 per cent of the value of its assets.

The German-owned bank Depfa, which was regulated in Ireland, was fined €250,000 in December 2009 for breaches of the same legislation.

The Central Bank told Bank of Ireland Mortgage Bank in December 2011 that it was in breach of the 10 per cent cap after Bank of Ireland’s credit rating was downgraded in April 2011. The downgrade led to certain deposits held by Bank of Ireland Mortgage Bank in its parent bank being reclassified as “credit transaction assets”, which covered bond banks are allowed to hold outside the pool of covered assets but only up to the 10 per cent limit. The bank did not have proper systems in place to spot the breaches, the Central Bank found.