The holding which controls all Santander’s businesses in the US has $142 billion of assets and will no have to take the Fed’s qualitative stress test since from this year only those banks with over $250 billion on their balance sheet will be obliged to.
It should be borne in mind that in the stress tests carried out in 2016, Santander passed the first part which measures in quantative terms the bank’s capacity for resistance in an adverse economic scenario. But it failed the second part of the exam.
The qualitative analysis carried out by the Fed focuses on aspects like the risk control, the corporate organisation, etc… of the biggest banks in the US. In this last part of the test, the Fed highlighted deficiencies in the bank’s internal organisation which are closely linked to the planning for capital generation and the measuring and managing of risks. In spite of all this, the Fed acknowledged the efforts made by the bank and the progress made in improving these weak areas. As reportted by Bankinter’s analysts:
We value the news positively based on: (1) we believe that Santander will not have to continue to hike operating costs as has happened in the past to comply with the deficiencies which were identified, and (2) it increases the bank’s flexibility for implementing its plans to reward shareholders (dividends and/or share buybacks) without any restrictions being imposed by the Fed.