The European Central Bank in September imposed an administrative fine of nearly €1.7 million on state-owned bank Spuerkeess, the ECB announced on Friday.

Two errors on regulatory reporting were at the heart of the sanction imposed on the lender, the central bank said in a statement.

“Between 2018 and 2022, for 17 consecutive quarters, Banque et Caisse d’Epargne de l’Etat, Luxembourg understated its risk-weighted assets connected to foreign exchange exposures by failing to accurately capture its USD-denominated positions in the own funds requirement for foreign exchange risk in accordance with prudential requirements,” the ECB said.

“Furthermore, between 2021 and 2023, for eight consecutive quarters, the bank understated its risk-weighted assets by not considering an indirect equity position when calculating the exposure amount of qualifying holdings outside the financial sector,” it said.

“As a result, the bank neither deducted the relevant exposure amount from its own funds nor applied the correct risk weighting prescribed by the applicable framework,” it concluded.

By underestimating risk-weighted assets, “the bank did not calculate its capital requirements properly and reported higher capital ratios than it should have,” the ECB pointed out, adding that this hindered the ECB in correctly assessing the Spuerkeess’ risk profile.

The errors were considered as “moderately severe” and sanctioned with a €1.685 million fine.

Though Spuerkeess could challenge the ECB’s sanction in front of the Court of Justice of the European Union, the bank on Friday recognised its mistakes in a statement.

The bank explained that it remained stable despite the errors and that it had maintained its credit ratings of AA2/P-1 and AA+/A-1+ given by Moody’s and Standard & Poor’s, respectively.

“Spuerkeess’s internal control system has been adapted and strengthened, and internal procedures have been improved to prevent such errors from occurring in the future,” the bank said.

“Spuerkeess emphasizes that at no time were its financial balances, particularly the bank’s stability supported by its high solvency levels, called into question, ensuring that the bank’s ability to serve its clients effectively was maintained at all times,” the bank concluded.