Online bank Knab fined €3 million for insufficiently managing credit risks

De Nederlandsche Bank (DNB) imposed a fine of 2.96 million euros on online bank Knab. According to the regulator, the online bank does not sufficiently manage credit risks in loans it issued on lending platforms, putting its soundness at risk.

DNB already warned Knab in 2019 that it did not have adequate policies in place for managing credit risks on its loans issued on online lending platforms, where credit applicants and providers are brought together to borrow and lend money. In 2022, the regulator performed a closer examination and concluded that Knab still inadequately managed the credits involved with these loans.

That puts the bank in violation of the Financial Supervision Act (Wft), DNB said. Inadequate management of the risks associated with loans it provided through lending platforms “could have resulted in losses which Knab had not factored in and which could have negatively impacted the institution’s soundness,” DNB said. It added that “there is no evidence that these risks have actually materialized.”

The DNB fined Knab 2,968,750 euros. In setting the fine, the DNB took into account that it warned Knab of its non-compliance in 2019 and did not see sufficient improvement three years later. “DNB considers it essential that institutions comply fully with instructions imposed on them.”

Knab has taken steps to mitigate the mentioned credit risks since 2022, the DNB added. “DNB views it as positive that Knab has taken remedial measures, including reducing the portfolio it holds with lending platforms and maintaining an additional buffer to mitigate the credit risk arising from this portfolio.”

Knab confirmed the fine and said that it would not appeal against it. The bank said it has sold most of its loans issued through these platforms. “The investments in these lending platforms amount to less than 1% of Knab’s total balance sheet. Of the remaining part of these investments, over 80% are guaranteed by the British government, which means that credit risks are minimal,” the bank said.

The bank stressed that its investments in these lending platforms “had no impact on customers” and disposing of the portfolios “also did not lead to losses.”