The Office of the Comptroller of the Currency said in a statement Thursday that the bank failed to develop and maintain an AML program that could monitor compliance with federal regulations. TD has set aside $4-billion to cover financial penalties from three different regulators and the U.S. Department of Justice, but analysts and investors have expressed concern over the long-term damages from non-monetary penalties, including a potential cap on the bank’s asset growth.
The cap on assets is one of the strictest penalties, hindering the bank’s growth avenues. The cap is rarely applied, and analysts and investors thought it was unlikely. The consent order also prohibits the bank from opening new branches or new business lines without approval. The bank had a systemic breakdown in its processes to identify and report suspicious activity, and a pattern or practice of non-compliance with the suspicious activity report filing requirement, resulting in numerous violations. The bank also violated currency transaction reporting requirements on numerous occasions.
An asset cap also does not prevent TD from making new loans altogether. Bank loans are constantly maturing as mortgages and lines of credit are repaid, for instance, and these repayments free up space to lend. On top of pulling Canada’s second-largest financial institution out of its U.S. regulatory crisis, Mr. Chun will have to restore morale because TD has also suffered from a cultural erosion that stifled financial performance, The Globe and Mail reported in August. Inside the bank, conservatism took hold and dense layers of bureaucracy hindered decision-making. Frustration over this, coupled with a U.S.
Beyond the growth limitations, asset caps can be difficult for banks because there often are no specific end dates, and lenders have to apply to regulators to get them lifted. Six years on at Wells Fargo, the bank is still limited by its own cap.