Banco Santander, a retail banking services provider after an appraisal of goodwill attributed to Santander UK (UK subsidiary), has declared an account impairment of approximately 1.5 billion euros ($1.65 billion).
The Spanish lender released a statement saying that the impairment was a result of compulsory regulatory rule practiced in Britain to separate retail banking from investment banking activities.
The impairment will be booked in the third quarter of the financial year which was a result of economic uncertainty caused by Brexit from the European Union and increase in market competition in Britain.
The Bank further announced that it would pay 0.10 euros per share as a dividend from November 1, 2019. It will now pay two annual dividends to the shareholders instead of four.
As a matter of fact, the impairment reflects the unintentional negative ring-fencing impact on UK banks.
Ring-fencing is one of the most remarkable structural change imposed on Britain banks from January 2019. According to this regulation, the Banks with more than £25 billion deposits are imposed to separate their banking services from investment operations. This is said to be the preventive measure to avoid the financial crisis occurred in 2008 due to banks poor investment policies. It affected ordinary accountholders leading to taxpayer-financed bailouts.
Santander UK after Ring-fencing operation
The UK is the third-largest market of Banco Santander after Spain and Brazil. But according to latest official figures, it was under loss in the second quarter due to continued pressure on mortgage margins, bearing the restructuring costs of 26 million euros and additional provisions of 80 million euros.
As the effect of the ring-fencing policy, the balance sheet of the Santander UK has been reduced significantly and it is transferring its assets to their Madrid unit. It has also transferred its 200 employees to the parent company Santander in 2018 as part of the process. The ring-fencing policies have led to a profit of approximately 40 billion euros to the parent company.
More about Banco Santander
Banco Santander is a Spanish commercial bank and financial service provider company with headquarters in Boadilla del Monte, Madrid. It has 48 subsidiaries across the globe.
Recently, it has also automated the bond issuing process on the public blockchain and has settled a mini-bond of $20 million on the Ethereum. Previously, it had tried the process on the private Ethereum platform.