HBL New York branch to shut has now made an out of court settlement with the Department of Financial Services (DFS) of New York State by agreeing to pay a fine of $225 million against numerous violations of the state’s regulatory provisions.
The fine has to be paid within 14 days. It is the largest ever imposed fine upon a Pakistani bank by regulatory authorities. The amount is large, but still far smaller than the $630 million that the regulator had earlier assessed.
The bank had already agreed to surrender its license to operate a branch in New York and closed down its operations there. The branch has been operational since 1978.
The DFS harshly criticized the bank and added that DFS would not stand by and let Habib Bank sneak out of the United States without holding it accountable for putting the integrity of the financial services industry and the safety of their nation at risk.
HBL’s senior management remained confident about coming out safe out of that tiff.
A senior bank officer informed that the charges had been dropped following the consent order. He added that although it would affect the books but HBL has strong capital. The business stand strong. HBL agreed to the settlement as protracted litigation was not in the interest of the bank or the country. The charges were not proven, and they have been dismissed.
The closure of the branch was an immaterial part of the balance sheet and profitability and has no impact on bank operations.
HBL’s correspondent banking relationships remain intact and they have already been providing services to our customers.
The impact of the fine on dividend payouts, staff bonuses and other business is too early to determine, he said.
The regulator announced that it will press on with its investigation, with an expanded “lookback”, which refers to a detailed examination of all foreign transactions going through the branch. The expanded lookback will now cover periods from October 1, 2013 through September 30, 2014 and April 1, 2015 through July 31, 2017, according to the DFS release.
In the year ending Dec 31, 2015, the New York branch processed correspondent banking transactions totaling $287 billion.
HBL had become the target of an enforcement action by DFS for 53 separate violations allegedly committed between 2007 and 2017. A hearing was scheduled for Sept 27, but that has now been cancelled since the matter has been resolved.