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Santander has closed another chapter in the troubled history of its subprime auto-lending arm in the US, agreeing to pay its former chief executive more than $700m in an exit deal over two years in the making.

In a regulatory filing late on Friday the Madrid-based bank said that it had come to an agreement with Thomas Dundon, who left Santander Consumer in July 2015 at a time of heightened tensions with regulators. Back then, the bank said it would pay him almost a billion dollars in severance and in compensation for his near-10 per cent stake in the Dallas-based subsidiary.

The bank has now agreed a slightly smaller exit package with Mr Dundon, 46, who founded the company in 1995. He receives $942m for his stock and $66m in severance, down $50m from the original deal. 

Mr Dundon, in turn, has agreed to repay a $290m loan to the company, plus interest of $5m, bringing his net proceeds to $713m, before taxes.

A spokesperson declined to comment on the reasons for the delay in finalising the terms of Mr Dundon’s payout, or the $50m reduction from the original deal. She noted that the former chief executive and chairman had agreed to extend a commitment not to compete with, or hire anyone from, Santander Consumer until 2019. 

Governance glitches in the US have long been a headache for Ana Botín, executive chairman of Santander, who vowed to get a better grip on the entire North American business after taking over the top job at Spain’s biggest bank from her late father in 2014.

In June last year Santander Consumer’s parent, Santander Holdings USA, set an unenviable record by becoming the first bank to fail the stress test carried out by the Federal Reserve for a third year in a row. 

The following month, Santander Consumer shocked investors by saying it needed more time to sit down with current and former auditors before filing second-quarter figures. It eventually delivered them in September last year, while admitting a number of errors in more than three years of accounts. 

So far this year, however, relations with regulators appear to be on the mend. In June this year Santander passed its stress test and in August the Fed lifted an order banning the US holding company, or its subsidiaries, from paying dividends.

That banning order, imposed in September 2014, came after Santander Consumer paid its US parent a dividend that violated restrictions put on the bank following its first failed stress test six months earlier. 

Scott Powell, chief executive of the US holding company and also Santander Consumer, said that the return to regular levels of supervision felt like a “turning point” for the bank, underscoring the “key improvements we’ve made to strengthen our capital position, risk management and governance”.

New York-listed shares in Santander Consumer closed on Friday at $16.32, up about one-fifth this year but still well short of the $24 at the initial public offering in January 2014. In his settlement, Mr Dundon was paid $26.17 per share, which was the average price during a 10-day window before his departure.

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