Bank of England Fines Vocalink £11.9 Million in First-Ever Enforcement Action Against a Market Infrastructure Firm

Key Takeaways

• First-Ever Bank of England FMI Fine: The £11.9 million fine against Vocalink is the first enforcement action by the Bank of England against a financial market infrastructure (FMI) firm.
• Compliance Failure Under Banking Act: Vocalink failed to fully comply with a direction issued under section 191 of the Banking Act 2009 to remediate systems and controls by the February 2022 deadline.
• Governance and Risk Management Failures: The Bank found that weak governance, ineffective escalation processes, and an inadequate risk management framework undermined Vocalink’s remediation program.
• Penalty Reduction for Cooperation: Vocalink received a 45% total reduction, 15% for early admission and 30% for settlement, bringing the fine down from £20 million to £11.9 million.

Deep Dive

The Bank of England has recently fined Vocalink Limited £11.9 million for failing to comply with a formal direction aimed at strengthening its risk and control framework, marking the first time the central bank has levied a fine against a financial market infrastructure firm under the Banking Act 2009.

Vocalink, a critical player in the UK’s payment systems infrastructure, has been regulated by the Bank since 2018 as a ‘specified service provider’. These entities provide services integral to systemically important payment systems recognized by HM Treasury.

According to the Bank’s announcement on July 9, Vocalink was issued a direction under section 191 of the Banking Act requiring it to remediate a number of deficiencies in its systems and controls. Although the firm launched a remediation program, it failed to fully comply with the direction’s requirements by the deadline of 28 February 2022.

The Bank’s investigation found that Vocalink lacked an integrated and effective risk management framework to oversee its remediation efforts. Governance weaknesses, ineffective internal controls, and a failure to escalate key risks and information to senior committees ultimately led to the compliance failure.

“Vocalink fell short of its obligation to have adequate risk management and governance arrangements when responding to the Bank’s Direction,” said Sarah Breeden, Deputy Governor for Financial Stability. “Its failure to comply with that Direction in full has resulted in a significant fine.”

The regulator concluded that Vocalink’s governance arrangements did not meet the standards expected of a financial market infrastructure firm, whose operations are considered vital to the functioning of the broader financial system.

The original penalty was set at £20 million but was reduced by 45% in recognition of Vocalink’s early cooperation and agreement to resolve the matter. This included a 15% reduction for early admission and a further 30% for settlement.

Since the compliance failure, Vocalink has made substantial investments in enhancing its risk management and governance systems.

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