Santander shakes off branch limits as it regains passing CRA score

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Santander Bank in Boston has regained its passing Community Reinvestment Act grade, allowing the bank to once again open new branches and accept public deposits.

The $74.5 billion-asset bank, a unit of the Spanish banking giant Banco Santander, said Monday that it has received a “satisfactory” rating on its biennial CRA evaluation from the Office of the Comptroller of the Currency, a one-notch improvement from its prior rating of "needs to improve." In the OCC's evaluation, which is publicly available at Santander branches, the agency cited the bank’s recent investments in community development, as well its addition of loan and deposit products designed for low-income customers.

The announcement provides some much-needed good news for the bank and its U.S. parent company, Santander Holdings USA. The parent company has run into a number of regulatory headaches in recent years, including an enforcement action taken last year by the Federal Reserve. The bank has also attracted the ire of community activists, who have accused it of mortgage lending practices that discriminate against women and minorities.

“We are proud of our achievements in serving and investment in our communities, and we are pleased with this rating,” Scott Powell, CEO of Santander Holdings, said in a press release announcing the CRA upgrade.

In addition to removing restrictions on branching and on accepting certain public deposits, the passing CRA rating opens the door to bank M&A, though the bank says dealmaking is not currently high on its list of priorities.

“At this time, we are choosing to focus our capital on becoming the best bank in the communities we currently serve,” a spokeswoman said.

The CRA assessment covers 2014 to 2016. In its justification for the upgrade, the OCC said in the evaluation that Santander Bank made “significant enhancements” in community development, including adding 25 employees to its corporate responsibility department, which previously had a staff of six.

Additionally, the OCC noted that the bank in 2016 began offering loans for affordable housing construction, and for community development financial institutions. Around the same time, the bank also introduced deposit products and services tailored to meet the needs of underserved communities, the agency said.

For instance, Santander in 2016 began offering SimplyRight Checking, which allows customers to waive a monthly fee by making just one transaction per month. The bank introduced a financial education program, as well, and formed partnerships with community organizations.

The OCC last year issued a failing grade to Santander for the 2011-13 assessment period; the bank previously had a "satisfactory" rating. A major factor in the downgrade was the bank's string of enforcement actions, including a $10 million penalty from the Consumer Financial Protection Bureau for charging illegal overdraft fees.

Problems with the bank's embattled auto lending affiliate, Santander Consumer, were also a factor in the downgrade, including a $9 million settlement with the Justice Department for illegally repossessing veterans’ cars. The U.S. parent company, Santander Holdings, was hit in March of 2017 with an enforcement action from the Fed, ordering the bank to strengthen oversight of its Dallas-based auto lender.

As part of its latest CRA evaluation, Santander Bank received “high satisfactory” marks on its lending practices and community development efforts. The overall upgrade, notably, came just months after the bank in October announced a five-year, $11 billion commitment to provide mortgages and other small-business loans to underserved communities.

“We’re continuing to work with leading community groups across our footprint and have set ambitious lending, community development and charitable giving goals for the next several years,” bank CEO Duke Dayal said in the release.

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