By James Sterngold
Santander Holdings USA Inc., a unit of Spain's Banco Santander
SA, failed the Federal Reserve's "stress test" for the second year
in a row.
The result came not because of insufficient reserves of capital
after suffering hypothetical losses, but because of weak internal
procedures for managing through the stressed economic scenario, or
so-called "qualitative" concerns, the Fed said.
In fact, Santander was among the stronger bank holding companies
purely in terms of its capital measurements. Its projected minimum
Tier 1 risk-based capital ratio under the adverse economic scenario
was 13%, according to the Fed analysis, while some other banks,
such as Ally Financial Inc., Fifth Third Bancorp and KeyCorp, were
considerably lower.
But the Fed said that Santander had "widespread and critical
deficiencies across" its planning procedures. The statement
identifying the shortcomings was identical to the Fed's statement
from last year, saying the deficiencies included "governance,
internal controls, risk identification and risk management,
management information systems (MIS), and assumptions and analysis
that support the BHC's capital planning processes."
Since its failure last year, Santander Holdings USA has revamped
its senior management, putting in place a new chairman, chief
executive, chief financial officer and chief risk officer.
The new chief executive officer, Scott Powell, said: "The
qualitative assessment highlights that we still have meaningful
work to do to meet our regulator's expectations and our own
standards of excellence," and the chairman, T. Timothy Ryan, Jr.,
added that new management and governance changes "are
forthcoming."
Write to James Sterngold at james.sterngold@wsj.com
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