ORX News digests of the month: Q1 2020

Each month, we share a free operational risk loss event story from ORX News. The story is handpicked by the team as one of the most interesting stories reported by the service in the previous month. Read on for all the featured summaries from Q1 2020.

March's story of the month

Italian AGCM fines four banks for unfair commercial practices

The Italian antitrust authority, Autorita’ Garante della Concorrenza e del Mercato (AGCM), has fined UniCredit, BNL, Intesa Sanpaolo, and UBI Banca a total of €20.8m for mis-selling insurance policies and current accounts when entering into mortgage or subrogation agreements.

The AGCM found that since at least July 2017, the banks had required customers entering into mortgage or subrogation agreements to purchase insurance policies, such as life or fire insurance, offered by the banks as conditions for the financing. The banks did not inform customers that they could choose a policy from another institution, and customers with insurance policies from other institutions were forced to buy a new policy with the banks and terminate their old policy. The AGCM found that employee sales incentives led to the aggressive sales tactics used by the firms.

The ACGM estimated that the forced sale of policies had cost customers a total of at least €241.5m per year and had earned the banks a total of at least €84m.

The AGCM also found that BNL and UniCredit had forced customers to open current accounts as a condition of the financing agreements. The banks imposed commission on instalment collections from other banks but not from their own current accounts, which limited customers’ ability to decide on whether to open a current account when entering into mortgage agreements.

UniCredit was fined €6.6m, BNL was fined €5.7m, Intesa Sanpaolo was fined €4.8m, and UBI Banca was fined €3.8m.

If your firm subscribes to ORX News, then you can read the full story and more like it on the ORX News website.

Data extract for this story

Every ORX News story is categorised to help you get the most from the data. The categories include the business line, event type and scenario category. All of this information makes it easier for you to use and analyse the loss events.

Business line: Retail Banking
Event type: Clients, Products & Business Practices
Loss amount: USD 7,276,198.50
Country: Italy
Scenario category: Retail Mis-selling

February's story of the month

DBS evacuates Singapore employees after confirmed case of coronavirus

On 12 February 2020, as a precautionary measure, DBS Bank evacuated 300 employees from its Marina Bay Financial Centre office in Singapore after one employee was confirmed to be infected with the novel coronavirus COVID-19.

The employee was tested on 11 February and the bank was informed the next morning. Employees immediately vacated the office under instruction to work from home. DBS said that contact tracing was conducted with individuals that the infected employee may have come into contact with. The affected office premises were deep cleaned and disinfected in accordance with Ministry of Health guidelines.

Singapore increased its disease outbreak response to orange on 10 February, meaning that the outbreak is deemed to have moderate to high public health impact but is under control. DBS said that in response it had implemented temperature screening at all office buildings; higher frequency cleaning and disinfection of its premises; hand sanitisers on every floor of its premises; and a requirement that visitors sign health and travel history declaration forms prior to entering its premises. The bank also provided face masks to all front-line employees. Additionally, some employees were working from home or split sites as part of business continuity plans.

DBS said that employees could access a medical helpline and virtual doctors and that all employees would receive a personal hygiene and protection care pack including masks, a thermometer, hand sanitiser and vitamin C. The bank also planned to organise webinars for medical health professionals to update employees on the latest coronavirus developments and to answer medical-related concerns.

If your firm subscribes to ORX News, then you can read the full story and more like it on the ORX News website.

Data extract for this story

Every ORX News story is categorised to help you get the most from the data. The categories include the business line, event type and scenario category. All of this information makes it easier for you to use and analyse the loss events.

Business line: Retail Banking
Event type: Employee Practices & Workplace Safety
Loss amount: SGD 0.00 (not identifiable) 
Country: Singapore
Scenario category: Pandemic

January's story of the month

Citibank fined USD 17.9 million for failure to buy flood insurance on behalf of borrowers

On 21 January 2020, the US Office of the Comptroller of the Currency (OCC) announced that it had ordered Citibank to pay a USD 18 million (EUR 16.2 million) civil money penalty. This was after Citibank failed to timely purchase flood insurance for borrowers who had loans secured by buildings and mobile homes located in areas at risk of flooding, in violation of the Flood Disaster Protection Act of 1973.

The OCC consent order, signed on 17 January 2020, states that Citibank had a flood act compliance programme which involved an unnamed third-party responsible for servicing its loans. This programme aimed to ensure that the collateral securing its customers’ loans had appropriate flood insurance cover.

Banks typically have 45 days after notifying borrowers of the required insurance to put a policy in place. However, an OCC investigation, which began in 2017, uncovered that Citibank’s policies and procedures allowed its third-party servicer to delay buying insurance beyond this 45-day period, resulting in late purchases of flood insurance for borrowers who were at risk. According to court documents, these late purchases occurred since 2014.

As of 21 January 2020, Citibank has neither admitted nor denied the OCC’s allegations, but has paid a civil money penalty of USD 17,998,510 to the Federal Emergency Management Agency’s National Flood Insurance Program.

If your firm subscribes to ORX News, then you can read the full story and more like it on the ORX News website.

Data extract for this story

Every ORX News story is categorised to help you get the most from the data. The categories include the business line, event type and scenario category. All of this information makes it easier for you to use and analyse the loss events.

Business line: Retail Banking
Event type: Clients, Products & Business Practices
Loss USD: EUR 16,226,736.68
Loss EUR: USD 17,998,510.00
Country: United States
Scenario category: Vendor failures