ECB sanctions LHV for misreporting capital requirements

4 November 2025

• ECB imposes penalty of €405,000 on AS LHV Group for breach of market risk reporting rules
• Bank miscalculated its risk-weighted assets related to foreign exchange exposures

The European Central Bank (ECB) has imposed an administrative penalty of €405,000 on AS LHV Group for reporting miscalculated risk-weighted assets for market risk.

For eight consecutive quarters, from the second quarter of 2022 to the first quarter of 2024, the bank understated its consolidated risk-weighted assets for market risk by incorrectly including its intragroup GBP-denominated exposure in the calculation of its net spot GBP position. A bank's net spot GBP position is the net exposure it has to the British pound, calculated as its GBP-denominated assets minus liabilities.

The bank committed the breach with serious negligence, stemming from significant deficiencies in its risk management and internal controls.

When the overall net foreign exchange position is calculated incorrectly, a bank's actual risk exposure is represented inaccurately. In this instance, AS LHV Group understated its risk-weighted assets related to foreign exchange exposures.

Risk-weighted assets are a measure of the risks a bank has on its books. They serve as a basis for banks to calculate their capital requirements. Underestimating risk-weighted assets leads to incorrect capital ratios, which impair the ECB's assessment of the bank's risk profile. Capital ratios are critical indicators of a bank's capital strength and its capacity to absorb losses.

When deciding on the amount of a penalty to sanction a bank, the ECB applies its public guide. The ECB has classified this breach as “moderately severe”. The range of severity categories comprises “minor”, “moderately severe”, “severe”, “very severe” and “extremely severe”.

More details on sanctions imposed by the ECB are available on our supervisory sanctions web page.

The bank may challenge the ECB’s decision before the Court of Justice of the European Union.

For media queries, please contact François Peyratout, tel.: +49 172 8632 119.

Notes

• The ECB’s power to impose sanctions stems from Article 18(1) of Council Regulation (EU) No 1024/2013 of 15 October 2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions.
• The Decision imposing a sanction may be challenged before the Court of Justice of the European Union under the conditions and within the time limits provided for in Article 263 of the Treaty on the Functioning of the European Union.
• Tackling deficiencies in banks’ risk data aggregation and reporting frameworks is part of the ECB's supervisory priorities.