Reuters: Regulatory News: UPDATE 1-BNY Mellon to pay $6 mln over money market program

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UPDATE 1-BNY Mellon to pay $6 mln over money market program Apr 16th 2012, 16:56 Mon Apr 16, 2012 12:56pm EDT April 16 (Reuters) - Bank of New York Mellon Corp will pay a $6 million penalty for breaching the terms of a 2007-2009 financial crisis era program created to aid the ailing money market mutual fund industry, the Federal Reserve announced on Monday. The Fed said the bank used ineligible collateral when securing some loans from the U.S. government in 2008 and therefore was issued more funding than it should have received. The program in question was created by the government in 2008 to provide funding for banks to buy asset-backed commercial paper from money market mutual funds that were facing liquidity problems. The program was closed in 2010. U.S. regulators are still wrestling with what steps can be taken to make money market funds less vulnerable to the problems they faced during the crisis. The Fed said Bank of New York Mellon realized in September 2008 that it had pledged ineligible collateral but did not immediately inform the government because of a failure of its "internal communication and escalation practices." As part of the agreement the bank will devise a plan to improve its programs for communicating problems when they are discovered.

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