UBL To Shut Down Its Operations In the US

After Habib Bank Limited, another big name of Pakistan’s banking industry, United Bank Limited (UBL), has decided to shut down its operation in the USA with the closure of its branch in New York.

The management of UBL made the decision to wind up its business in the US after being warned by the authorities in New York a few months ago for lack of compliance over anti-money laundering regulations.

In this regard, UBL has notified this intent to New York Department of Financial Services (NYDFS). UBL will continue to work closely with its US regulators throughout the voluntary liquidation process to ensure that the New York branch is wound down in an orderly manner, complying with all applicable Federal and State Laws, Rules, and Regulations, a notification issued stated.

According to the official announcement made by the bank:

As part of its global realignment strategy, UBL intends to voluntarily liquidate and surrender its license pursuant to New York Banking Law § 60S.II(c).  This is a commercial decision keeping in view the commercial viability of NY Branch and is subject to all regulatory approvals.

The bank claimed that it already has well established multiple correspondent banking relationships who provide US Dollar clearing services to its customers.

The decision from UBL is a smart move as it will save the bank from a huge penalty which could be in the range of millions of US Dollars. However, the presence of Pakistani banks is going to be reduced in the US with the closure of the bank’s branch, which could create uneasiness for Pakistani expatriates sending remittances to the homeland.

Besides, the revenue of UBL from its overseas operations will be drastically reduced when it winds up the New York branch.

It is worth mentioning here that HBL’s branch was shut down due to non-compliance of local banking regulatory laws last year. UBL’s branch is next to be closed off. Similarly, National Bank of Pakistan (NBP) is being monitored by USA authorities for the same compliance issues and its business and operations are at risk too.

Recently, the central bank rolled out regulations for Pakistani banks operating overseas to improve the compliance and operational mechanism in different countries but its fruits are likely to be borne in coming years, not in the near future.

There are 9 local banks with a foreign presence in different countries with 117 branches, 18 representative offices (ROs), and 8 subsidiaries as of June 30, 2018. These banks are incurred huge losses in 2018 compared to the last couple of years, reflecting a worrisome situation for the Pakistani banking industry.