WASHINGTON--The Federal Reserve took enforcement action against
Banco Santander SA's U.S. unit, saying one of the Spanish bank's
subsidiaries paid a dividend without permission even though the Fed
had barred it from doing so.
Santander Holdings USA, Inc. has been under dividend
restrictions since it failed a U.S. "stress test" in March. The
rejection stemmed from qualitative problems the Fed found with the
bank's stress-test program, such as measurements of potential risks
and losses.
A Santander spokesman declined to comment.
It is the first time the Fed has taken stress-test related
enforcement action against a bank.
The Fed released a written agreement with the U.S. unit of
Santander Thursday that bars the bank from declaring or paying
dividends without the regulators' prior approval. The Fed gave
Santander 30 days to submit a plan for ensuring its board of
directors has oversight of dividend payments.
Banco Santander, the parent company of Santander USA, has
contributed $21 million to the U.S. unit to mitigate the violation,
the agreement said.
The Fed's action is the latest tussle between the regulator and
banks based outside the U.S. The Fed is trying exert more authority
over those banks' U.S. units and recently subjected them to rules
requiring they maintain higher minimum capital levels. It also puts
those banks through the annual stress test exercise--which looks at
a banks' ability to weather a recession--for the first time earlier
this year.
Write to Ryan Tracy at ryan.tracy@wsj.com
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