In a fierce warning to Santander, the US Federal Reserve has issued an enforcement act against its US arm. The action highlights faults and “deficiencies” in Santander’s practices, and outlines what it must do to rectify these areas. Santander has 60 days to submit details that consider, include and address a number of aspects – such as board oversight, risk management, capital planning, liquidity risk management and legal and regulatory compliance.
If Santander fails to comply with the enforcement action, the Fed reserves the right to levy a fine on the bank
In terms of meeting the Fed’s board oversight requirements, Santander must detail the different committee and officer roles as well as the duties of each and the responsibility of the bank’s board to ensure legal compliance by management. The bank must designate a specific individual as well as create a “formal project plan, including milestones, timetables, success measures, and adequate funding for personnel and other resources” to ensure compliance with the Fed’s conditions.
For risk management, the Fed is insisting that Santander:
- provides an assessment of the effectiveness of the firm’s risk management programme;
- creates risk tolerance guideline limits;
- outlines clearly defined roles to deal with risk; and
- keeps to “the implementation of incentives that are consistent with risk management objectives and standards.”
Capital and liquidity stress test reports are also to be submitted to the reserve bank, as well as general progress reports every “30 days after the end of each calendar quarter.”
The enforcement action is said to be “unusually broad in scope for a bank of Santander’s size”. It is part of a massive crackdown by US regulators into the risk management of the country’s largest banks.
If Santander fails to comply with the enforcement action, the Fed reserves the right to levy a fine on the bank. Speaking about the action, a Santander spokesman said that there would be much work to do to meet the Fed’s “standards of excellence” and “regulators’ expectations”, adding that it would take a “comprehensive, multiyear transformation project” within the US bank.