The Federal Reserve issued an order Tuesday requiring Banco Santander SA to change the way the board of directors oversees the management and operation of its U.S. subsidiaries.
The Fed said an inspection of Santander Holdings USA conducted by the Federal Reserve Bank of Boston identified deficiencies throughout the organization, including its “governance, risk management, capital planning, and liquidity risk management.”
Santander is based in Spain. Its U.S. units operate under Boston-based Santander Holdings USA. The holding company’s subsidiaries include Santander Bank N.A. of Wilmington, Delaware and Santander Consumer USA
Inc., based in Dallas, Texas.
The Fed order (pdf) gave Santander 60 days from July 2 to submit “a written plan acceptable to the Reserve Bank to strengthen board oversight of the management and operations of the consolidated organization.”
The plan has to cover “actions that the board of directors will take to maintain effective control over, and supervision of, the consolidated organization’s risk management, capital planning, and liquidity risk management.”
The Fed didn’t impose any financial penalties on Santander.
Santander’s consumer unit in Dallas is one of the biggest subprime auto lenders in the United States.
Last week, the founder and CEO of the consumer unit, Thomas Dundon, announced his resignation.
Santander said he’ll receive more than $900 million as part of his exit, according to the New York Times. Most of that payment is for about 10 percent of the consumer business that Dundon held.
The NYT’s report said the consumer unit has “faced regulatory problems, including federal investigations into its packaging and selling of subprime auto loans and a rebuke by the Federal Reserve for making an unauthorized dividend payment.”
The Fed order issued Tuesday required Santander’s U.S. holding company to describe “the duties and responsibilities” of its top officers and “actions that the board of directors will take to maintain effective control over, and supervision of, the consolidated organization’s risk management.”
Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.