By Francesco Canepa and Padraic Halpin
FRANKFURT/DUBLIN (Reuters) - The European Central Bank has fined bailed-out Irish bank permanent tsb (PTSB) for falling short of cash requirements, it said on Monday, the first such move since taking over banking supervision in 2014.
The 2.5 million euro ($2.98 million) fine adds to PTSB's woes as the mortgage lender is still battling with the aftermath of a ten-year old property crash in Ireland that left the sector saddled with unpaid loans, forcing government rescues.
Regulatory costs have been more onerous on PTSB than its rivals and Monday's fine equates to 5 percent of the 53 million euro profit it made in the first six months of the year.
"The European Central Bank (ECB) has imposed on Permanent tsb Group Holdings plc administrative penalties in an overall amount of 2,500,000 euros," the ECB said in a statement.
It added that the two breaches, which date back to 2015 and 2016, "did not change the liquidity position" of the bank and have since been fully remedied.
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Monday's fine also suggested the ECB, tasked with cleaning up the banking sector after the financial crisis, was keen to establish itself as a tough supervisors after being criticised for failing to act quickly or assertively enough in other cases.
PTSB said the breaches related to the treatment of funding received from the ECB and were caused by a "misinterpretation" of European rules, which the bank itself reported to Frankfurt's supervisors.
"At no point during this period did the Group's actual liquidity position deteriorate," it said in a statement, adding it has been fully compliant since April 2016.
Irish lenders have staged a strong recovery from a banking crisis almost a decade ago, when a massive property crash exposed years of reckless lending during the "Celtic Tiger" boom and required the costliest state rescue in the euro zone.
But PTSB, the smallest of Ireland's three remaining domestically owned lenders, has been lagging rivals and said last month it was highly unlikely to resume dividend payments from 2019 due to a high proportion of bad loans.
Like all Irish banks, the 75 percent state-owned firm has weaned itself off emergency ECB funding which it relied upon when Ireland entered a three-year international bailout in 2010.
PTSB had cut its ECB funding by 83 percent to 230 million euros by the end of June, solely comprising of the ultra cheap Targeted Longer-Term Refinancing Operations (TLTRO) designed by Frankfurt to help revive the euro zone's economy.
($1 = 0.8386 euros)
(Reporting By Francesco Canepa; Editing by Balazs Koranyi and Toby Chopra)