HBL to challenge Rs66 bn penalty on its US branch

ISLAMABAD: In the aftermath of lingering tensions that surfaced following Trump’s policy statement against Pakistan, Habib Bank Limited (HBL) has decided to close down its operation in New York as US authorities imposed a penalty of $629 million (Rs66.386 billion) on alleged regulatory violations against its branch.

In a letter written to the Pakistan Stock Exchange Limited by the HBL management, it was stated that all formal procedures were followed to shut down its branch operation in New York in USA.

The letter states that this is further to the disclosure made to the Pakistan Stock Exchange (PSX) vide our letter dated December 18, 2015 relating to HBL's branch in New York, which is licensed by the New York State Department of Financial Services (DFS). 

“Despite HBL's sincere and extensive remediation measures, DFS is still not appreciating or recognising the significant progress that HBL has made at its branch in New York and HBL has received a notice from DFS in terms of which DFS seeks to impose an outrageous civil monetary penalty of up to US $629625000”, it added. 

HBL, the letter states, 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.

HBL has further decided to close its operations in New York in an orderly manner and DFS has allowed HBL to submit an application for orderly winding down of its New York branch. Steps to formalise this will commence shortly. 

There will be no material impact on HBL's business outside of the United States and HBL will continue to service the requirements of its domestic and international customers including US Dollar business. The members of the Exchange may be informed accordingly.

HBL has hired new staff and a third-party consultant to resolve the matter as per the requirements of the Federal Reserve authorities.  SBP response on HBL: The State Bank of Pakistan (SBP) said on Monday that the HBL has brought to its notice that its New York (NY) branch has received a notice of hearing from New York State Department of Financial Services (NY-DFS) under which NY-DFS proposes to impose a civil monetary penalty on HBL NY.

HBL has informed about its decision to contest the supervisory action by NY-DFS. State Bank of Pakistan is cognizant of these developments and is closely monitoring the situation and finds no imminent risks to HBL operations and banking industry of Pakistan. State Bank of Pakistan reiterates its commitment to safeguard the interests of depositors and to ensure safety and soundness of the banking system of the country.