Fed orders Banco Santander to fix capital flaws at U.S. unit

WASHINGTON – The Federal Reserve is ordering the U.S. unit of Spain’s largest bank, Banco Santander SA, to resolve flaws with management and capital planning, the latest shortcoming in a series of run-ins with regulators.

Santander, whose U.S. division failed the Fed’s stress test for financial resiliency earlier this year, must submit several plans within two months that describe how its board will better oversee operations and how it intends to improve management of risk, capital and liquidity, according to the order released Tuesday.

The Federal Reserve Bank of Boston, which is responsible for inspecting Boston-based Santander Holdings USA Inc. “identified deficiencies in the organization’s governance,” the order said.

“This written agreement underlines how much work we have to do to meet our standards of excellence and our regulators’ expectations,” the bank said in an e-mailed statement. Santander has started a multi-year project that it said “will address the concerns the Federal Reserve has cited.”

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Santander and Deutsche Bank AG were the two firms that had their capital plans rejected by the Fed because of qualitative concerns about internal processes for managing risk.

The firm is also among six that will be restricted in buying mortgage-servicing rights because they haven’t met the demands of previous regulatory orders, the Office of the Comptroller of the Currency said last month.

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