HBL to Close its New York Branch After Being Slapped with $629 Million Fine

The management of Habib Bank Limited has decided to shut down its branch and operations in New York due to tough regulatory challenges by the US authorities.

In a stock filing submitted by Habib Bank Limited (HBL) to the Pakistan Stock Exchange today, the bank has decided to wind up its operations in New York city in an orderly manner.

Formal steps will be taken accordingly after an application is filed regarding this matter. The authorities have already allowed the bank to submit the application.

New York State Department of Financial Services (DFS) announced to impose civil monetary penalties of up to $629.625 million on HBL. The bank management has decided to contest the decision as part of its scheduled administrative hearing in the United States.

In December 2015, US FED issued a cease and desist order asking the bank not to increase its aggregate US dollar clearing activities and compelled to avoid any new foreign correspondent accounts or new accounts.

The US authorities slapped Pakistan’s largest bank with a strict enforcement order, saying that they found “significant breakdowns” in the bank’s anti-money-laundering program, which was found to be not in compliance with US federal laws.

According to Wall Street Journal report, HBL has hired new staff and a third-party consultant to resolve the matter as per the requirements of the Federal Reserve authorities.

An HBL official at New York assured the authorities that it would take instructions from regulators very seriously and everything would be fixed according to existing rules.

Apparently US authorities were not satisfied with HBL’s measures complying with US regulations, hence a heavy penalty was imposed on the bank.

According to an estimate, the penalty will negatively impact the bottom-line of the bank for a period of more than one year. During 2016, HBL’s consolidated profits stood at $323 million and such a heavy fine could have an impact of Rs 45/share on the upcoming earnings. However, there is a chance that SBP might allow HBL to book the loss in a staggered manner.

News Reporter