The enforcement action was filed after the Reserve Bank of Boston’s inspection of Santander identified “deficiencies” in the bank’s governance, risk management, capital planning, and liquidity risk management — including at the bank’s auto lending unit Santander Consumer USA — according to the written agreement.
Under the agreement, Santander had to receive written approval before taking actions such as appointing senior executives and board members. The bank was even required to submit written progress reports every quarter detailing the form and manner of all actions taken to secure compliance with the agreement.
“A written agreement is the second most severe form of regulatory enforcement, the next one being a Cease and Desist order,” an unnamed source told Auto Finance News in a 2016 report regarding the consent order. “I think that was very thinly veiled message from the Fed, that they thought that the management team at SCUSA
was inadequate. So practically speaking, the message you’re sending to an institution in that case, is something has to change. We’re not going to tell you what it is, you tell us what you think is appropriate, and we’ll tell you if we think it’s enough.”
The termination of the 2015 written agreement marks the fourth regulatory milestone Santander has reached in the last year, the company stated in a press release. In August 2017, the Fed ended a separate 2014 enforcement action against Santander that required the bank to seek written approval prior to declaring or paying any dividends.
“Today’s announcement is our most significant step yet towards resolving our legacy issues,” said Scott Powell, chief executive of SHUSA and Santander Consumer USA.
Santander has struggled with other regulatory compliance issues since 2015. The bank also started getting hit with consent orders from the Fed for failure to pass its stress test. Later that year, the Department of Justice sent a consent order alleging the company violated the Servicemembers Civil Relief Act. Then, the Consumer Financial Protection Bureau notified the company of potential violations of the Equal Credit Opportunity Act.
However, Santander has taken steps toward compliance revival since its troubles in 2015, including a beefed-up dealer performance management process to limit fraud, established the office of consumer practices, and a robust compliance program. Additionally, the bank passed the Fed’s stress tests for the second consecutive time in June.