FEDERAL
DEPOSIT INSURANCE CORPORATION

      


      WASHINGTON,
D.C.

      
        
          	 
      	 
      	 
      
	 
      	
                  )

                	 
      
	
                  In
      the Matter of

                	
                  )

                	 
      
	 
      	
                  )

                	 
      
	
                  EUROBANK

                	
                  )

                	
                  ORDER
      TO CEASE AND DESIST

                
	
                  SAN
      JUAN, PUERTO RICO

                	
                  )

                	 
      
	 
      	
                  )

                	
                  FDIC-09-317b

                
	
                  (INSURED
      STATE NONMEMBER BANK)

                	
                  )

                	 
      
	
                          

                	
                  )

                	 
      


        

      

    


    Eurobank, San Juan, Puerto
Rico (“Bank”), having been advised of its right to a NOTICE OF CHARGES
AND OF HEARING detailing the unsafe or unsound banking practices and violations
of law and regulation alleged to have been committed by the Bank and of its
right to a hearing on the alleged charges under section 8(b)(1) of the Federal
Deposit Insurance Act (“Act”), 12 U.S.C. § 1818(b)(1), and having waived
those rights, entered into a STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER
TO CEASE AND DESIST (“CONSENT AGREEMENT”) with counsel for the FDIC, dated
September 1, 2009, whereby, solely for the purpose of this proceeding and
without admitting or denying the alleged charges of unsafe or unsound banking
practices and violations of law and/or regulation, the Bank consented to the
issuance of an ORDER TO CEASE AND DESIST (“ORDER”) by the FDIC.

    


    The FDIC
considered the matter and
determined that it had reason to believe that the Bank had engaged in unsafe or
unsound banking practices and had committed violations of law and/or regulation.
The FDIC, therefore, accepts the CONSENT AGREEMENT and issues the
following:


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    ORDER TO CEASE AND
DESIST

    


    IT IS HEREBY ORDERED that the Bank, its
institution-affiliated parties, as that term is defined in section 3(u) of the
Act, 12 U.S.C. § 1813(u), and its successors and assigns, cease and desist from
the following unsafe or unsound banking practices and violations of law and/or
regulation, as more fully set forth in the joint FDIC and the Office of the
Commissioner of Financial Institutions for the Commonwealth of Puerto Rico
(“Commissioner”) Report of Examination (“ROE”) dated December 29,
2008:

    


    (a)   operating with
inadequate management whose policies and practices are detrimental to the
Bank;

    


    (b)  operating
with inadequate management supervision and oversight by the board of directors
to prevent unsafe and unsound banking practices, violations of law and/or
regulations, and violation of an Order to Cease and Desist issued by the FDIC
effective March 15, 2007 (“March 2007 Order”) regarding a satisfactory
Bank Secrecy Act and Anti-Money Laundering compliance
program;

    


    (c)  
operating in violation of the March 2007 Order;

    


    (d) 
operating with lax underwriting, poor credit administration practices, and
ineffective loan review practices;

    



    
      
         


      

      
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    (e)  
operating with an excessive level of adversely classified loans and/or
delinquent loans;

    


    (f)  
operating with an inadequate allowance for loan and lease losses;

    


    (g) 
operating in such a manner as to produce unsatisfactory earnings;

    


    (h)  operating
with inadequate capital and reserves in relation to the kind and quality of
assets held by the Bank;

    


    (i)   
operating with inadequate liquidity and funds management practices;

    


    (j)   
operating with inadequate interest rate risk management;

    


    (k)  
operating with inadequate internal routine and controls; and

    


    (l)   
operating in violation of laws and regulation, including but not limited
to, violation of sections 326.8 and 353.3 of the FDIC Rules and Regulations, 12
C.F.R. §§ 326.8 and 353.3, regarding a satisfactory Bank Secrecy Act and
Anti-Money Laundering compliance program and satisfactory procedures to
identify, monitor, and report suspicious activities.

    


    IT IS FURTHER ORDERED that the
Bank, its institution-affiliated parties, and its successors and assigns, shall
take affirmative action, as follows:

     

    
      
         


      

      
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    MANAGEMENT

    


    1.     The Bank
shall have and retain qualified management.

    


    (a)   
 Each member of management shall have qualifications and experience
commensurate with his or her duties and responsibilities at the Bank. Each
member of management shall be provided appropriate written authority from the
Bank's Board of Directors (“Board”) to implement the provisions of this
ORDER.

    


    (b) 
  The qualifications of management personnel shall be evaluated on its
ability to:

    


    (i)     comply
with the requirements of this ORDER;

    


    (ii)    operate
the Bank in a safe and sound manner;

    


    (iii)  
comply with applicable laws and regulations; and

    


    (iv)   restore
all aspects of the Bank to a safe and sound condition, including asset quality,
capital adequacy, earnings, management effectiveness, BSA/AML compliance,
liquidity and funds management, and sensitivity to market risk.

    


    2.     (a)    Within
30 days from the effective date of this ORDER, the Board shall retain an
independent third party consultant, acceptable to the Regional Director of the
FDIC’s New York Regional Office (“Regional Director”), with the appropriate
expertise and qualifications to develop an analysis and assessment of the Bank’s
management and staffing needs which shall be summarized in a written report to
the Board (the “Management Report”).  The Bank shall provide the
Regional Director with a copy of the proposed engagement letter or contract with
the third party consultant for review and comment before it is
executed.

     

    
      
         


      

      
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    (b)  
Within 30 days from receipt of the Management Report, the Board will develop a
written plan of action (the “Management Plan”) in response to each
recommendation contained in the Management Report, and a time frame for
completing each action.

    


    (c)   The
Management Plan shall be developed within 90 days after the effective date of
this ORDER. The Management Plan shall include, at a minimum:

    


    (i)    
 identification of both the type and number of officer positions needed to
properly manage and supervise the affairs of the Bank;

    


    (ii)    
identification and establishment of such Board and internal operating committees
as are needed to provide guidance and oversight to active
management;

    


    (iii)   
identification of the type and number of staff positions needed to carry out the
Management Plan, detailing any vacancies or additional needs;

    


    (iv)  
 present a clear and concise description of the relevant knowledge, skills,
abilities, and experience necessary for each position, including delegations of
authority and performance objectives;

     

    
      
         


      

      
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    (v)   
evaluation of all existing Senior Executive Officers of the Bank (as that term
is defined in section 303.101(b) of the FDIC Rules and Regulations, 12 C.F.R. §
303.101(b)), to determine whether these individuals possess the ability,
experience and other qualifications required to perform present and anticipated
duties, including adherence to the Bank’s established policies and practices,
and restoration and maintenance of the Bank in a safe and sound condition;
and

    


    (vi) 
 establishment of procedures to periodically review and update the
Management Plan, as well as periodically review and assess the performance of
each officer and staff member.

    


    (d)  
A copy of the Management Report and the Management Plan and any subsequent
modification thereto shall be submitted to the Regional Director for review and
comment. Within 30 days from receipt of any comment from the Regional Director,
the Board shall adopt the Management Plan as amended or modified by the Regional
Director, which approval shall be recorded in the minutes of the meeting of the
Board. Thereafter, the Bank, its directors, officers, and employees shall
implement and follow the Management Plan and/or any subsequent
modification.

     

    
      
         


      

      
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    (e)
  While this ORDER is in effect, the Bank shall provide written
notification to the Regional Director of the resignations or terminations of any
of its Senior Executive Officers or Board members within 10 days of the event.
In addition, the Bank shall provide written notification to the Regional
Director of any proposed new Senior Executive Officer or Board member at least
30 days prior to the date such proposed officer or Board member is to begin
service; such notification shall include a description of the background and
experience of the proposed officer or Board member.  Such changes will
only be effective upon receipt of the Regional Director’s written approval or
non-objection.  The Bank shall also establish procedures to ensure
compliance with section 32 of the Act, 12 U.S.C. § 1831i, and Subpart F of Part
303 of the FDIC Rules and Regulations, 12 C.F.R. Part 303.

    


    BOARD
PARTICIPATION

     

    3.     Beginning on
the effective date of this ORDER, the Board shall increase its participation in
the affairs of the Bank and assume full responsibility for the approval of sound
policies and objectives for compliance with this ORDER and for the supervision
of all of the Bank’s activities, consistent with its fiduciary responsibilities.
This participation shall include meetings to be held no less frequently than
monthly at which, at a minimum, the following areas shall be reviewed and
approved:  reports of income and expense; reports of new, overdue,
renewal, insider, charged-off, and recovered loans; liquidity levels and funds
management; investment activity; operating policies; compliance with the March
2007 Order; progress reports issued to the FDIC; and individual committee
actions.  Board meeting minutes shall fully document these reviews and
approvals and record the status of the corrective actions taken by the
Bank.

     

    
      
         


      

      
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    LOAN POLICIES AND
PROCEDURES

     

    4.     Within
90 days from the effective date of this ORDER, the Bank shall submit to the
Regional Director written loan policies and procedures that have been approved
by the Board, which shall, at a minimum, address and consider the
recommendations contained in the ROE, and include the following:

    


    (a) 
 adequate underwriting standards for loans, including ensuring sufficient
collateral protection and incorporating limitations on the amount that can be
loaned in relation to established collateral values;

    


    (b)  
the appraisal review process;

    


    (c) 
 the monitoring and reporting of past due loans;

    


    (d) 
 controls and procedures to promptly identity and grade loans with emerging
credit weaknesses, including specific policies for placing loans on a
non-accrual basis;

     

    
      
         


      

      
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    (e) 
 guidelines that set limitations on the use of interest reserves and
establish procedures for identifying and reporting exceptions to the Bank’s loan
policy to the Board, and controlling
and monitoring concentrations of credit, including: (i) establishing
concentrations of credit limits by industries and types of loans; and (ii)
managing the risk associated with asset concentrations; and

    


    (f)  
compliance with the Interagency Guidance on
Concentrations in Commercial Real Estate Lending, Sound Risk Management
Practices (FIL-104-2006, issued December 12, 2006) and Managing Commercial Real Estate
Concentrations in a Challenging Environment (FIL-22-2008, issued March
17, 2008).

    


    LENDING AND CREDIT
ADMINISTRATION

     

    5.     The
Bank shall not grant, extend, renew, alter, or restructure any loan or other
extension of credit without first obtaining and analyzing all relevant credit
information, as well as taking all necessary steps to properly value and perfect
its interest in collateral, where applicable, and the Bank shall also take the
following measures:

     

    
      
         


      

      
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    (a)
  adequate and effective loan review procedures shall be designed to
identify and categorize problem credits and to assess the overall quality of the
Bank’s loan portfolio.  These reviews shall be performed periodically
to identify problem assets and shall be reported to the Board along with the
action taken by management to improve the Bank’s position on each loan adversely
graded. Within 60 days from the effective date of this ORDER, the Bank shall
ensure that the internal audit department’s risk assessment program is expanded
to include the assessment of the Bank’s loan review function.

    


    (b) 
 Management shall enhance loan documentation procedures and correct any
deficiencies identified either internally, by auditors or consultants, or in the
ROE or during any subsequent examination process, including, but not limited to,
exceptions related to the Bank’s loan policy, obtaining accurate and current
income and cash flow information, financial statements, and
appraisals.

    


    (c)  
Reduce the level of classified and delinquent loans through aggressive workout
of problem credits, and maintain strict adherence to prudent underwriting
standards for new extensions of credit.

    


    APPRAISAL COMPLIANCE
PROGRAM

     

    6.     Within
45 days from the effective date of this ORDER, the Bank shall establish an
adequate and effective appraisal compliance program, including enhancing the
Bank’s appraisal policy to capture risk management and internal controls that
ensure that appraisals are obtained in a timely manner when required by law or
regulation and that appraisals contain appropriate valuation approaches to
support assigned values and address the deficiencies and weaknesses identified
in the ROE.  Within 90 days from the effective date of this ORDER, the
Bank shall ensure that adequate training is provided to account managers who are
responsible for obtaining and reviewing appraisals to ensure that they include
all necessary information, employ correct methodology, include reasonable
assumptions and adequately support assigned values.

     

    
      
         


      

      
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    REDUCTION OF CLASSIFIED
ASSETS

     

    7.   
(a)   Within 30 days from the effective date of this ORDER, the
Bank shall eliminate from its books, by collection or charge-off, all items or
portions of items classified “Loss” in the ROE, which have not previously been
charged off or collected.  In addition, the Bank shall, within 30 days
from the receipt of any subsequent report of examination from the FDIC,
eliminate from its books, by collection or charge-off, all items or portions of
items classified “Loss” in such report of examination.  Elimination of
these items through the use of the proceeds of loans or other extensions of
credit made by the Bank will not constitute collection for purposes of this
paragraph.

     

    
      
         


      

      
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    (b)  
Within 90 days from the effective date of this ORDER, the Bank shall formulate a
written plan to reduce the Bank’s risk exposure in each asset classified
“Substandard” or “Doubtful” in the ROE.  For purposes of this
provision, “reduce” means to collect, charge off, or improve the quality of an
asset so as to warrant its removal from adverse classification by the
FDIC.  In developing the plan mandated by this subparagraph, the Bank
shall, at a minimum, and with respect to each adversely classified loan, review,
analyze and document the financial position of the borrower, including source of
repayment, repayment ability and alternative repayment sources, as well as the
value and accessibility of any pledged or assigned collateral, including
possible actions to improve the Bank’s collateral position.

    


    (c)  
The plan shall also include, but not be limited to, provisions
which:

    


    (i)     
prohibit the extension of credit for the payment of interest or
fees;

    


    (ii)   
 include a schedule for reducing the outstanding dollar amount of each
adversely classified asset, including timeframes for achieving the reduced
dollar amounts (at a minimum, the schedule for each adversely classified asset
must show its expected dollar balance on a quarterly basis);

    


    (iii)  
 include specific action plans intended to reduce the Bank’s risk exposure
in each classified asset;

    


    (iv)  
 provide for the Bank’s submission of monthly written progress reports to
the Board for review and notation in the minutes of the meetings of the
Board.

     

    
      
         


      

      
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    (d)  
The Bank shall submit the plan to the Regional Director for review and
comment.  Within 30 days from receipt of any comment from the Regional
Director, the Board shall adopt the plan as amended or modified by the Regional
Director, which approval shall be recorded in the minutes of the meeting of the
Board.  Thereafter, the Bank shall implement and fully comply with the
plan.

    


    RESTRICTIONS ON ADVANCES TO
ADVERSELY CLASSIFIED BORROWERS

     

    8.     (a)    While
this ORDER is in effect, the Bank shall not extend, directly or indirectly, any
additional credit to, or for the benefit of, any borrower who has a loan or
other extension of credit or obligation with the Bank that has been, in whole or
in part, charged off or classified “Loss” and is uncollected.

    


    (b) 
 While this ORDER is in effect, the Bank shall not extend, directly or
indirectly, any additional credit to, or for the benefit of, any borrower who
has a loan or other extension of credit or obligation with the Bank that has
been, in whole or in part, classified “Substandard”, “Doubtful” or is listed as
“Special Mention” and is uncollected, unless the Board has adopted, prior to
such additional extension of credit, a detailed written statement giving the
reasons why such extension of credit is in the best interests of the Bank and
improves the position of the Bank and makes an affirmative determination that
the extension of credit is in full compliance with the Bank’s loan
policy.  A copy of the statement approved by the Board shall be
incorporated in the minutes of the applicable Board meeting and shall be placed
in the appropriate loan file and submitted to the Regional Director with the
quarterly progress reports required pursuant to paragraph 20 of this
ORDER.  The requirements of this subparagraph shall not prohibit the
Bank from renewing, after collecting in cash all interest and fees due from a
borrower, any credit already extended to the borrower.

     

    
      
         


      

      
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    ALLOWANCE FOR LOAN AND LEASE
LOSSES

     


    9.     The Bank
shall maintain, through charges to current operating income, an adequate
allowance for loan and lease losses (ALLL).  The adequacy of the ALLL
shall be determined in light of the volume of criticized loans, the current
level of past due and nonperforming loans, past loan loss experience, evaluation
of the potential for loan losses in the Bank’s portfolio, current economic
conditions, and any criticisms contained in the Bank’s most recent report of
examination. The Bank shall conduct, at a minimum, a quarterly assessment of its
ALLL and shall maintain a written record, for supervisory review, indicating the
methodology used in determining the amount of the allowance needed. The Bank
shall ensure that the methodology utilized to determine the appropriateness of
the ALLL has been periodically evaluated by an independent party.

     

    
      
        
        

      

      
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     PROFIT AND BUDGET
PLAN


    10.   (a)  
Within 60 days from the effective date of this ORDER, the Board shall formulate
and submit to the Regional Director, for review and comment, a written profit
plan and a realistic, comprehensive budget plan for all categories of income and
expense for the remainder of 2009. The plan required by this paragraph shall
contain formal goals and strategies, address executive officer compensation
which incorporates qualitative as well as profitability performance standards,
be consistent with sound banking practices, reduce discretionary expenses
(including board and committee fees), and improve the Bank’s overall earnings
and net interest income, and shall contain a description of the operating
assumptions that form the basis for major projected income and expense
components.

     

    (b)  
Within 45 days from the receipt of any written comments from the Regional
Director, and after revising the profit and budget plan as necessary, the Bank
shall adopt the plan and budget, which adoption shall be recorded in the minutes
of the Board meeting. Thereafter, the Bank shall implement the plan and
budget.


    (c)  
Within 30 days from the end of each calendar quarter following completion of the
profit and budget plan required by this paragraph, the Board shall evaluate the
Bank’s performance in relation to the profit and budget plan and record the
results of the evaluation, and any actions taken by the Bank, in the minutes of
the Board meeting during which such evaluation is undertaken. The Board shall
ensure that the Bank is in compliance with specific goals set by the Board to
improve and sustain earnings, given the level of adversely classified assets,
the Bank’s financial condition and economic and other factors, and shall revise
the profit and budget plan, as necessary, to accomplish these
goals.  In the event the Board determines that the profit and budget
plan should be revised in any manner, the plan shall be revised and submitted to
the Regional Director for review and comment within 25 days after such revisions
have been approved by the Board.  Within 30 days of receipt of all
such comments from the Regional Director, the Board shall approve the revised
profit and budget plan, which approval shall be recorded in the minutes of the
Board meeting in which it is approved.

     

    
      
        
        

      

      
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    (d)  
A written profit and budget plan shall be prepared for each calendar year for
which this ORDER is in effect and shall be submitted to the Regional Director
for review and comment within 30 days after the end of each year. Within 30 days
after the receipt of all such comments from the Regional Director, and after
adoption of any recommended changes, the Board shall approve the written profit
and budget plan, which approval shall be recorded in the minutes of the Board
meeting in which it is approved.  Thereafter, the Bank shall implement
and follow the plan.

     

    CAPITAL
MAINTENANCE

     

    11.   (a)  
The Bank shall achieve and maintain the following minimum capital levels, after
establishing an adequate ALLL:

     

    (i)     
on or before December 31, 2009 its ratio of Tier 1 capital to total assets
(“leverage ratio”) equal to or greater than 6.5 percent and its ratio of
qualifying total capital to risk-weighted assets (“total risk-based capital
ratio”) equal to or greater than 11 percent; and

     

    
      
        
        

      

      
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    (ii)     
on or before March 31, 2010, and at all times thereafter while this ORDER is in
effect, the Bank shall maintain its leverage ratio equal to or greater than 7
percent and its total risk-based capital ratio equal to or greater than 11
percent.

     

    (b)  
If said capital ratios are less than required by this ORDER, as determined as of
the date of any Report of Condition and Income or any future examination, the
Bank shall, within 30 days after notice of its capital deficiency, submit to the
Regional Director a plan to increase its capital or to take such other measures
to bring its leverage ratio and total risk-based capital ratio to the
percentages required by this ORDER. After the Regional Director responds to the
plan, the Board shall adopt the plan, including any modifications or amendments
requested by the Regional Director.

     

    The capital plan shall, at a minimum,
address and consider:

     

    (i)      
the Bank’s current and future capital requirements;

    


    (ii)     
any planned growth in the Bank’s assets;

     

    (iii)    
the Bank’s level of concentrations of credit;

     

    
      
        
        

      

      
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    (iv)    
the volume of the Bank’s adversely classified assets;

     

    (v)    
 the Bank’s anticipated level of retained earnings; and

     

    (vi)    
the source and timing of additional funds to fulfill the future capital needs of
the Bank.

     

    (c)  
Within 90 days from the effective date of this ORDER, the Bank shall develop and
submit a written plan to the Regional Director for systematically reducing and
monitoring the Bank’s portfolio of loans, securities, or other extensions of
credit advanced or committed, directly or indirectly, to or for the benefit of
any borrowers in Commercial Real Estate and Acquisition, Development and
Construction, as identified in the ROE, to an amount which is commensurate with
the Bank’s business strategy, management expertise, size, and
location.  At a minimum, the plan shall include: (i) the dollar levels
and percent of capital to which the Bank shall reduce each concentration; (ii)
timeframes for achieving the reduction in dollar levels identified; and (iii)
provisions for the submission of monthly written progress reports to the Board
for review and notation in minutes of the meetings of the
Board.


    (d)  
In addition, the Bank shall comply with the FDIC’s Statement of Policy on
Risk-Based Capital found in Appendix A to Part 325 of the FDIC Rules and
Regulations, 12 C.F.R. Part 325, App. A.

     

    
      
        
        

      

      
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    (e)  
For purposes of this ORDER, all terms relating to capital shall have the
meanings ascribed to them and be calculated according to the methodology set
forth in Part 325 of the FDIC Rules and Regulations, 12 C.F.R. Part
325.

     

    LIQUIDITY AND FUNDS
MANAGEMENT

     

    12.   (a)   Within
30 days from the effective date of this ORDER, the Bank shall submit to the
Regional Director a revised and comprehensive funds management and liquidity
plan (“Funds Management Plan”).  Annually thereafter, while this ORDER
is in effect, the Bank shall review the plan for adequacy and, based upon such
review, shall make necessary revisions to the plan to strengthen funds
management procedures and maintain adequate provisions to meet the Bank’s
liquidity needs.  At a minimum, the Funds Management Plan
shall:

     

    (i)      
address the means by which the Bank will seek to reduce its reliance on non-core
funding and high cost, rate-sensitive deposits;

     

    (ii)     
summarize the current composition of brokered deposits by maturity and set forth
funding sources that will replace the Bank’s current brokered deposits as they
roll off; and

    


    (iii)    
assess possible liquidity events that the Bank may encounter and identify
contingency responses to the potential impact of such events on the Bank’s
short-term, intermediate-term, and long-term liquidity profiles.

     

    
      
        
        

      

      
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    (b)  The
Bank shall submit the Funds Management Plan to the Regional Director for review
and comment.  Within 30 days from receipt of any comments from the
Regional Director, the Board shall adopt the plan as amended or modified by the
Regional Director, which approval shall be recorded in the minutes of the
meeting of the Board. Thereafter, the Bank shall implement and fully comply with
the plan.

     

    STRATEGIC
PLAN

     

    13.   (a)   Within
90 days from the effective date of this ORDER, the Bank shall develop and submit
to the Regional Director for review and comment a comprehensive
business/strategic plan (“Strategic Plan”) covering at least an operating period
of three years.  The Strategic Plan shall contain an assessment of the
Bank’s current financial condition and market area, and a description of the
operating assumptions that form the basis for major projected income and expense
components.

     

    (b)
  The Strategic Plan shall address, at a minimum:

     

           
(i)       strategies for pricing policies and
asset/liability management;


    
      
         


      

      
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(ii)      specific plans for the maintenance of the
Bank’s capital ratios that may in no event be less than the requirement of the
provisions of paragraph 11 of this ORDER and shall detail the actions to be
taken to maintain the required capital ratios, including but not limited to, the
sale of new securities, the direct contribution of cash by the directors or
parent holding company, or the Bank’s merger with or acquisition by another
federally insured depository institution or holding company
thereof;

     

    (iii)     
plans for sustaining adequate liquidity, including back-up lines of credit to
meet any unanticipated deposit withdrawals;

     

          
 (iv)     goals for reducing problem
loans;

     

    (v)     
financial goals, including pro forma statements for asset growth, capital
adequacy, and earnings; and

     

    (vi)     
formulation of a mission statement and the development of a strategy to carry
out that mission.

     

    (c)  The
Bank shall submit the Strategic Plan to the Regional Director for review and
comment.  Within 30 days after the Regional Director has responded to
the plan, the Board shall adopt the plan as amended or modified by the Regional
Director, which approval shall be recorded in the minutes of the Board meeting
in which it is approved.  Thereafter, the Bank shall implement and
follow the Strategic Plan.


    
      
         


      

      
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    (d)  Within
30 days after the end of each calendar quarter following the effective date of
this ORDER, the Board shall evaluate the Bank’s performance in relation to the
Strategic Plan and record the results of the evaluation, and any actions taken
by the Bank, in the minutes of the Board meeting at which such evaluation is
undertaken.  A copy of the evaluation shall be submitted to the
Regional Director.

     

    (e)  The
Strategic Plan required by this ORDER shall be revised and submitted to the
Regional Director for review and comment 30 days after the end of each calendar
year for which this ORDER is in effect.  Within 30 days after the
Regional Director has responded to the plan, the Board shall adopt the plan as
amended or modified by the Regional Director, which approval shall be recorded
in the minutes of the meeting of the Board.  Thereafter, the Bank
shall implement the Strategic Plan.

     

    BROKERED
DEPOSITS

        

    14.   (a)  
Beginning on the effective date of this ORDER, and so long as this ORDER is in
effect, the Bank shall not solicit, accept, renew, or roll over any brokered
deposits unless it has applied for and been granted a waiver by the Regional
Director in accordance with the provisions of section 337.6 of the FDIC Rules
and Regulations, 12 C.F.R. § 337.6.

     

    (b)  
Within 60 days from the effective date of this ORDER, the Bank shall develop and
submit to the Regional Director a plan to reduce the Bank’s reliance on brokered
deposits and wholesale funding sources to a level acceptable to the Regional
Director.


    
      
         


      

      
        22

        
          

        

      

      
         


      

    

     

    BSA LOOK BACK
REVIEW

     

    15.   (a) 
Within 30 days from the effective date of this ORDER, the Bank shall engage a
qualified independent firm ("BSA Consultant") acceptable to the Regional
Director to conduct a review of account and transaction activity for the six
month time period beginning July 1, 2008 and ending December 31, 2008 to
determine whether suspicious activity involving any accounts of or transactions
within or through the Bank was properly identified and reported in accordance
with the applicable suspicious activity reporting requirements (“Initial Look
Back Review").

     

    (b)  
Within 10 days of the engagement of the BSA Consultant, but prior to the
commencement of the Initial Look Back Review, the Bank shall submit to the
Regional Director for approval an engagement letter that sets
forth:

     

    (i)     
the scope of the Initial Look Back Review and any subsequent Look Back Reviews
that may be required, including the types of accounts and transactions to be
reviewed which shall, at a minimum, include cash intensive business accounts;
customers assigned a “high-risk” rating based upon their profiles and risk
assessment, including, but not limited to, any money service businesses,
privately owned ATMs, lottery agents,  professional service providers,
and jewelers; customers with high, frequent or international wire transactions;
customers with financial transactions in locations linked to terrorist, drug
trafficking or money laundering; and any transactions or accounts identified in
the ROE as requiring additional investigation by the Bank;


    
      
         


      

      
        23

        
          

        

      

      
         


      

    

    


    (ii)     
the methodology for conducting the Initial Look Back Review and any subsequent
Look Back Reviews, including any sampling procedures to be
followed;

     

    (iii)    
the expertise and resources to be dedicated to the Initial Look Back Review and
any subsequent Look Back Reviews; and

     

    (iv)    
the anticipated completion date of the Initial Look Back Review and any
subsequent Look Back Reviews.

     

    (c)   Upon
completion of the Initial Look Back Review and any subsequent Look Back Review,
the BSA Consultant shall provide a copy of the report detailing its findings to
the Regional Director at the same time the report is provided to the
Bank.  The Regional Director may determine, in his or her sole
discretion, that one or more additional Look Back Reviews must be
performed.  Any additional Look Back review shall be conducted by the
BSA Consultant in accordance with the provisions of the engagement letter
previously approved by the Regional Director and be for the six-month time
period immediately subsequent to the Initial Look Back Review or such subsequent
Look Back Review as may be required.

     

    (d)  
Within 30 days of its receipt of the Initial Look Back Review report and any
subsequent Look Back Review reports, the Bank shall ensure that all matters or
transactions required to be reported, that have not previously been reported,
are reported in accordance with applicable laws and
regulations.


    
      
         


      

      
        24

        
          

        

      

      
         


      

    

     

    HOLDING COMPANY –
RESTRICTIONS ON PAYMENTS

     

    16.   As
of the effective date of this ORDER, the Bank shall not declare or pay any cash
dividend, pay any management fee, or make any payment, directly or indirectly,
to or for the benefit of the Bank’s holding company or any other Bank affiliate,
without the prior written consent of the Regional Director.

     

    CORRECTION AND
PREVENTION

       

    17.   (a)  
Beginning on the effective date of this ORDER, the Bank shall take steps
necessary, consistent with other provisions of this ORDER and sound banking
practices, to eliminate and/or correct the violations of law and regulation,
violations of the March 2007 Order, and contravention of federal banking agency
policies, procedures, and guidelines that were identified in the
ROE.  In addition, the Bank shall take all steps necessary to ensure
future compliance with all applicable laws, rules, and regulations.

     

    (b)  
The Bank shall immediately initiate an affirmative compliance program in order
to ensure compliance with the provisions of all applicable laws, rules, and
regulations.

    


    COMPLIANCE
COMMITTEE

     

    18.   Within
30 days from the effective date of this ORDER, the Board shall establish a
compliance committee of the Board composed of at least three directors who are
not now, and have never been, involved in the daily operations of the Bank, with
the responsibility of ensuring that the Bank complies with the provisions of
this ORDER.  The compliance committee shall report monthly to the
entire Board, and a copy of the report and any discussion related to the report
or this ORDER shall be included in the minutes of the Board
meeting.  Nothing contained herein shall diminish the responsibility
of the entire Board to ensure compliance with the provisions of this
ORDER.

    


    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    PROGRESS
REPORTS

     

    19.   Within
30 days after the end of each calendar quarter following the effective date of
this ORDER, the Bank shall furnish to the Regional Director written progress
reports detailing the form and manner of any actions taken to secure compliance
with this ORDER and the results thereof.  Such reports may be
discontinued when the corrections required by this ORDER have been accomplished
and the Regional Director has released, in
writing, the Bank from making further reports.

     

    SHAREHOLDERS

     

    20.   Following
the effective date of this ORDER, the Bank shall send to its parent holding
company the ORDER or otherwise furnish a description of the ORDER in conjunction
with the Bank’s next communication with such parent holding
company.  The description shall fully describe the ORDER in all
material aspects.

     

    OTHER
ACTIONS

     

    21.   It
is expressly and clearly understood that if, at any time, the Regional Director
shall deem it appropriate in fulfilling the responsibilities placed upon him or
her under applicable law to undertake any further action affecting the Bank,
nothing in this ORDER shall in any way inhibit, estop, bar or otherwise prevent
him or her from doing so, including, but not limited to, the imposition of civil
money penalties.


    
      
         


      

      
        26

        
          

        

      

      
         


      

    

     

    22.   It
is expressly and clearly understood that nothing herein shall preclude any
proceedings brought by the Regional Director to enforce the terms of this ORDER,
and that nothing herein constitutes, nor shall the Bank contend that it
constitutes, a waiver of any right, power, or authority of any other
representatives of the United States, departments or agencies thereof, the
Office of the Puerto Rico Commissioner of Financial Institutions, Department of
Justice or any other representatives of the Commonwealth of Puerto Rico, or any
other departments or agencies thereof, including any prosecutorial agency, to
bring other actions deemed appropriate.

     

    ORDER
EFFECTIVE

     

    23.   The effective date
of this ORDER shall be the date of issuance.

     

    24.   The provisions of
this ORDER shall be binding upon the Bank, its directors, officers, employees,
agents, successors, assigns, and other institution-affiliated parties of the
Bank.

     

    25.   The
provisions of this ORDER shall remain effective and enforceable except to the
extent that, and until such time as, any provisions of this ORDER have been
modified, terminated, suspended or set aside in writing by the
FDIC.

     

    
      
        
        

      

      
        27

        
          

        

      

      
        
        

      

    

     

    Pursuant
to delegated authority

     

    Dated: October 9,
2009.

     

    
      
        
          	      
                  /s/
      John M. Lane

                
	
                  John
      M. Lane

                
	
                  Acting Regional
      Director

                
	
                  New
      York Region

                
	
                  Federal
      Deposit Insurance
Corporation

                


        

      

    


    
      
         


      

      
        28

        
          

        

      

      
         


      

    

     

    FEDERAL
DEPOSIT INSURANCE CORPORATION

     

    WASHINGTON,
D.C.

    


    
      
        
          
            	 	
                    )

                  	 
      
	
                    In
      the Matter of

                  	
                    )

                  	
                    STIPULATION
      AND CONSENT

                  
	 
      	
                    )

                  	
                    TO
      THE ISSUANCE OF

                  
	
                    EUROBANK

                  	
                    )

                  	
                    AN
      ORDER TO

                  
	
                    SAN
      JUAN, PUERTO RICO

                  	
                    )

                  	
                    CEASE
      AND DESIST

                  
	 
      	
                    )

                  	 
      
	
                    (INSURED
      STATE NONMEMBER BANK)

                  	
                    )

                  	
                    FDIC-09-317b

                  
	 
      	
                    )

                  	 
      


          

        

      

    

    


    Subject to the acceptance of this
STIPULATION AND CONSENT TO THE ISSUANCE OF AN ORDER TO CEASE AND DESIST
("CONSENT AGREEMENT") by the Federal Deposit Insurance Corporation ("FDIC"), it
is hereby stipulated and agreed by and between a representative of the Legal
Division of the FDIC and Eurobank, San Juan, Puerto Rico ("Bank"), as
follows:

     

    1.    The Bank has
been advised of its right to receive a NOTICE OF CHARGES AND OF HEARING
(“NOTICE”) detailing the unsafe or unsound banking practices and violations of
law and/or regulation alleged to have been committed by the Bank and of its
right to a hearing on the alleged charges under section 8(b)(1) of the Federal
Deposit Insurance Act ("Act"), 12 U.S.C. § 1818 (b)(1), and has waived those
rights.

     

    2.    The Bank,
solely for the purpose of this proceeding and without admitting or denying any
of the alleged charges of unsafe or unsound banking practices and violations of
law and/or regulation, hereby consents and agrees to the issuance of an ORDER TO
CEASE AND DESIST ("ORDER") by the FDIC. The Bank further stipulates and agrees
that such ORDER shall be deemed to be a final ORDER and that such ORDER shall
become effective upon the date of its issuance by the FDIC and fully enforceable
by the FDIC pursuant to the provisions of section 8(i)(1) of the Act, 12 U.S.C.
§ 1818(i)(1), subject only to the conditions set forth in paragraph 3 of this
CONSENT AGREEMENT.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    3.    In
the event the FDIC accepts this CONSENT AGREEMENT and issues the ORDER, it is
agreed that no action to enforce such ORDER in the United States District Court
will be taken by the FDIC unless the Bank or any director, officer, employee,
agent, successor or assignee, or other institution-affiliated party, has
violated or is about to violate any provision of the ORDER.

     

    
      4.    The Bank
hereby waives:

       

    

    (a)   the
issuance and service of a NOTICE;

     

    (b)   all
defenses to the allegations to be set forth in the NOTICE;

     

    (c)    a
hearing conducted for the purpose of taking evidence on the allegations to be
set forth in the NOTICE;

     

    (d)    the
filing of proposed FINDINGS OF FACT AND CONCLUSIONS OF LAW;

     

    (e)     A
RECOMMENDED DECISION of an Administrative Law Judge;

     

    (f)      the
filing of exceptions and briefs with respect to such RECOMMENDED DECISION;
and

     

    (g)     review
of the ORDER by any Federal agency or court.

    


    Dated:
September 1 , 2009

    


    
      
        
          
            
              	
                      FDIC

                    	 	
                      EUROBANK

                    
	
                      LEGAL
      DIVISION

                    	 	
                      SAN
      JUAN, PUERTO RICO

                    
	 
      	 	 
      
	
                      BY:

                    	 	
                      BY:

                    
	 	 	 
	      
                      /s/
      G. Michael Saran

                    	 	      
                      /s/
      Rafael Arrillaga Torrens, Jr.

                    
	
                      G.
      Michael Saran

                    	 	
                      Rafael
      Arrillaga Torrens, Jr.

                    
	
                      Acting
      Deputy Regional Counsel

                    	 	
                      Director

                    


            

          

        

      

    

    


    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

    


    
      
        
          
            
              
                
                  	      
                          /s/
      Pedro Feliciano Benitez

                        
	
                          Pedro
      Feliciano Benitez

                        
	
                          Director

                        
	 
      
	      
                          /s/
      Juan R. Gomez-Cuetara Aguilar

                        
	
                          Juan
      R. Gomez-Cuetara Aguilar

                        
	
                          Director

                        
	 
      
	      
                          /s/
      Placido Gonzalez Cordova

                        
	
                          Placido
      Gonzalez Cordova

                        
	
                          Director

                        
	 
      
	      
                          /s/
      Luis F. Hernandez Santana

                        
	
                          Luis
      F. Hernandez Santana

                        
	
                          Director

                        
	 
      
	      
                          /s/
      Ricardo Levy Echeandia

                        
	
                          Ricardo
      Levy Echeandia

                        
	
                          Director

                        
	 
      
	
                          
                            /s/
      Antonio R. Pavia Bibiloni

                          

                        
	
                          Antonio
      R. Pavia Bibiloni

                        
	
                          Director

                        
	 
      
	
                          
                            /s/
      Jaime Sifre Rodriguez

                          

                        
	
                          Jaime
      Sifre Rodriguez

                        
	
                          Director

                        
	 
      
	
                          
                            /s/
      William Torres Torres

                          

                        
	
                          William
      Torres Torres

                        
	
                          Director

                        
	 
      
	
                          Comprising
      the Board of

                        
	
                          Directors
      of

                        
	
                          Eurobank

                        
	
                          San
      Juan, Puerto
Rico

                        


                

              

            

          

        

      

    

     

    
      
         


      

      
        -3-