UPDATE 1-Santander says will improve U.S. capital plans

Tue Apr 1, 2014 7:42am EDT

(Adds quote from Marin, background)

MADRID, April 1 (Reuters) - Spanish bank Santander's U.S. unit does not need extra capital, Chief Executive Javier Marin said on Tuesday, though he added that plans for dealing with a financial crisis, rejected by the Federal Reserve last week, needed improving.

Marin said Santander's U.S. arm would have to adjust its capital plan before resubmitting it to the Federal Reserve, though he did not say how it could be adjusted or when it would be submitted.

Santander was one of three non-U.S. based banks, alongside RBS and HSBC, whose plans were kicked back after scrutiny from the Federal Reserve.

The Fed did not take issue with the quantity of capital held by banks in their U.S. units, but rather with aspects of their internal controls and risk modelling.

Marin acknowledged the bank "had come out a little worse on a qualitative level ... We will need to adjust a few things ... there are a few things we obviously need to improve," he told journalists on the sidelines of a conference in Madrid.

"There is a certain learning curve here ... we need to refine the process," he said.

Santander, RBS and HSBC said last week they would resubmit their plans.

Santander has been trumpeting the United States, which provided 10 percent of the group's profits in 2013, as a key part of its growth strategy.

It has said it aims to double profits by 2016 in its north-eastern U.S. banking business, which used to be known as Sovereign and has been rebranded Santander, to $2 billion.

In February, Santander Holdings USA, which groups the banking business as well as Santander Consumer Finance, issued $1.75 billion of shares to parent company Santander as it raised capital to back its growth plans.

Marin said the bank's latest capital moves in the United States had not been taken into account by the Fed in its review.

The U.S. central bank said last week it objected to Santander's plan for dealing with a stressed financial circumstances due to "widespread and significant deficiencies" across its capital planning processes.

Those included specific problems in governance, internal controls, risk management and its assumptions and analysis that support capital planning. (Reporting by Jesus Aguado; Writing by Sarah White; Editing by Paul Day and David Holmes)

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