Habib Bank Ltd (HBL) has received a notice from the Department of Financial Services (a US financial regulator) seeking to impose a civil monetary penalty of up to $630 million on the bank for its New York operations. (despite our best efforts, we are unable to confirm the exact issues which led imposition of these penalties)
This morning, HBL sent a letter to Pakistan Stock Exchange (PSX) and informed the members that it has decided to close its operations in New York due to the issue.
“Steps to formalize this will commence shortly,” reads the letter signed by the company’s secretary, Nausheen Ahmad.
Official letter send by HBL to PSX
Interestingly, the letter states that the New York State’s Department of Financial Services (DFS) imposed a civil monetary penalty of up to $ 629,625,000 or PKR 66.3 billion on HBL.
“HBL shall vigorously contest this in the scheduled administrative hearing and the courts of law in the United States, as being unjustified, capricious, unreasonable, not supported by facts or law and as being time barred,” reads the letter.
It is important to note that the letter further states that penalty notice will not have any impact on the bank’s operations outside the United States.
According to a Wall Street Journal (WSJ) report, after the issuance of an enforcement order in 2015, HBL was barred from opening new dollar clearing accounts – which are one of the US services to send and receive dollars from abroad – or even correspondent accounts with foreign banks.
Adding to that, under the 14-page order, which was issued by the DFS and Federal Reserve Bank of New York, restrictions on HBL were also placed from increasing the amount of dollar clearing transactions from the branch till the issue is completely resolved.
The report indicates that actions were taken against the bank after it failed to address certain issues even after receiving warning from the Federal Reserve and New York State Department officials.