The Federal Reserve Board's decision to fine Swiss Bank Corp. $3.5 million for violating the cap on securities revenue shows the central bank will not treat management lapses lightly, observers said.

The Fed charged Swiss Bank on March 6 with improperly calculating the 10% cap on revenue from bank-ineligible securities. Swiss Bank miscalculated revenue it generated from the sale of these securities.

"Obviously, we calculated these revenues different than the Fed," Swiss Bank spokesman Matthias Beckmann said. "Now it is solved, and we understand what the Fed wants."

Gil Schwartz, a partner at the Washington law firm of Schwartz & Ballen, said the Fed would have forgiven a calculation error like that in the past.

"The Fed used to believe that this is an industry where we all have to work together and if you mess up they will give you a chance to fix it," he said. "Now, if you screw up and you were negligent, the message is coming through that the Fed will not have any tolerance."

The Fed's stepped-up enforcement effort is a natural offshoot of its move to risk-based examinations, said Richard Whiting, general counsel at the Bankers Roundtable. These exams are searching for management mistakes, such as the one that tripped up Swiss Bank, he said.

The Fed isn't just cracking down on big banks, said William Sweet, a Washington partner with the law firm of Skadden, Arps, Slate, Meagher & Flom.

Rather, he said, the Fed is targeting institutions that have not enacted comprehensive compliance and auditing programs. Foreign banks likely will bear the brunt of this enforcement initiative, he said.

"Examiners will now be holding them to a higher level of scrutiny than domestic institutions," Mr. Sweet said. "I'd be very surprised if we don't find more institutions being banished from the U.S." like Daiwa Bank was in November.

"This is going to become a bit more routine."

A Fed official, however, cautioned against reading too much into the Swiss Bank order. "We are just trying to give appropriate attention to internal management controls and management processes," the official said. "Recent events have underscored the importance of that."

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