WASHINGTON - Bank of New York Mellon is set to pay a $6 million civil penalty for pledging collateral that was not eligible under an emergency liquidity facility, the Federal Reserve Board said Monday.

According to a cease and desist order issued by the Fed, the New York-based bank allegedly breached certain representation and warranties made to the Federal Reserve Bank of Boston as part of the Asset-Backed Commercial Money Market Mutual Fund liquidity facility.

A failure in the Bank of New York’s internal process at the time made it unable to identify and communicate to the Boston Reserve Bank the ineligibility of a portion of the collateral pledged under the liquidity facility.

“As a result, BNYM received more in AMLF loans proceeds than it otherwise would have been advanced based upon the eligible ABCP collateral it pledged,” according to the Fed’s order.

The Fed created the facility in 2008 to aid money mutual funds in meeting demands for redemptions by investors. The facility was closed on Feb. 1, 2010. The bank has since repaid all amounts borrowed.


 

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