The Central Bank of Ireland has imposed a monetary penalty of €2.45m against Aviva’s two subsidiaries Aviva Insurance Europe and Aviva Life & Pensions Ireland, for violating rules pertaining to stock lending.

As per the settlement agreement, both firms have agreed to pay €1.225m each and will implement preventive measures to avoid such incidents in future.

The apex bank alleges that firms failed to adopt an adequate investment policy for stock lending, performed by its investment managers on behalf of the firms between 2005 and 2011.

The firms also failed to adopt sufficient parameters for stock lending on its investment managers, and could not implement reporting and internal control systems to monitor whether the stock lending was carried out as per policies and procedures.

The Central Bank said, "the firm did not set risk limits in respect of stock lending, and did not receive regular information from its risk management function on assets exposure and the associated risks in respect of stock lending."

The regulatory failures surfaced during a routine review of liquidity swaps among insurance firms, conducted by the Central Bank.

Ireland Central Bank credit institutions and insurance supervision director Fiona Muldoon and director of enforcement Peter Oakes said in a joint statement, "The Central Bank reminds firms that they remain responsible for all regulatory obligations not withstanding any reliance upon group controls or group limits."