Santander Holdings adopted a firm wide risk management program designed to identify and manage risks across its consolidated organizations.
The move came after the Federal Reserve Bank of Boston found deficiencies in its governance, risk management, capital planning, and liquidity risk management during its most recent inspection.
The board of directors of Santander Holdings authorized its CEO Scott Powell to enter into such agreement with the Federal Reserve Bank of Boston on June 26, 2015.
Santander agreed to submit a written plan to address its deficiencies
Santander Holdings agreed to submit an acceptable, written plan to strengthen its board oversight of the management and operations of the consolidated organization. The plan should be submitted to the Federal Reserve within 60 days.
According to the Federal Reserve, Santander Holdings’ plan must address, consider, and include actions that will maintain effective control over and supervision of the risk management, capital planning, and liquidity risk management.
The plan should also include the structure of Santander Holdings’ oversight of the consolidated organization and responsibility of the board of directors approving policies and procedures related to its businesses and operations among others.
Santander Holdings agreed to submit an acceptable written plan to improve its firmwide risk management program. Some of the factors that must be included in the plan include the following:
- an assessment of the effectiveness of its current firmwide risk management program
- enhanced written policies, procedures, and risk management standards designed to identify, assess, manage, and monitor risk exposures
- establishment of appropriate written risk tolerance guideline limits and controls
- consistency with the Board of Governors of the Federal Reserve System’s guidance related to risk management
- clearly defined rules and responsibilities for the risk management function including staffing levels and expertise required
- steps to improve the information, reports, systems, and data that identify, measure, and aggregate on and off-balance sheet risk and exposure data of the consolidated bank holding company
- the implementation of incentives that are consistent with risk management objectives and standards
To address its deficiency in capital planning, Santander Holdings agreed to submit a written plan that would include the following:
- implementation of an effective capital planning and stress testing process that is well documented and objectively evaluated by its board and senior management
- current and future capital requirements including compliance with applicable minimum capital requirement and overall capital adequacy standard outlined in Regulation Q, and the applicable capital adequacy issued by the bank’s federal regulator
- assessment of capital adequacy that takes into account its risk position across all exposures arising from its activities, the results of stress testing, loss estimates, and risk to capital measures
- enhancements to its systems and processes used to plan, project, and model capital levels as they related to stress testing scenarios that are commensurate with the size, complexity, and risk profile of Santander Holdings
- the requirements of 38A of the Federal Deposit Insurance Act and section 225.4 (a) of Regulation Y of the Board of Governors, which Santander Holdings serve a strength to the Bank
Liquidity risk management
- Santander Holdings agreed to submit a written plan to strengthen its liquidity risk management, which should include
improvements to its liquidity risk management practices consistent with the guidance of the Board of Governors related to liquidity risk management
- a consolidated liquidity stress testing including robust methods for comprehensively projecting cash flows arising from assets, liabilities, off-balance sheet items
- a liquidity buffer metric and limits based on the consolidated stress testing framework
- a comprehensive, well documented, contingency funding plan that defines roles, responsibilities, and accountability for contingency actions and communications
Compliance with laws and regulations
- In appointing any new director, senior executive officer, or changing the responsibilities if any senior executive officer, Santander agreed to comply with laws and regulations:
notice provisions of Section 32 of the FDI Act
- subpart H of Regulation Y of the Board of Governors
- with the restrictions on indemnification and severance payments of section 18(k) of the FDI Act
- Part 359 of the Federal Deposit Insurance Corporation’s regulations.