StanChart joins banking march into mire

August 6, 2012

By Peter Thal Larsen
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

And then there were none. The global banking industry, already painfully short of institutions untarnished by financial or regulatory woes, has just seen another of its leading lights dragged into the mire. Allegations by U.S regulators that the top brass at Standard Chartered helped cover up at least $250 billion of sanctions-busting transactions with Iran look damaging. Even if the emerging market lender escapes with a mere fine, the backlash could be severe.

StanChart isn’t the first bank in trouble for hiding from U.S. regulators dollar-denominated trades conducted on behalf of Iranian clients. Many of its competitors have already paid fines for similar violations. Even so, accusations set out by the New York State Department of Financial Services look particularly bad.

The regulator alleges that over almost a decade, StanChart processed 60,000 transactions worth more than $250 billion. Worse, senior executives failed to stop it. According to New York authorities, one of StanChart’s group executive directors, when warned by a colleague of potential criminal liability, responded: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”

The accusations severely dent the reputation of StanChart, one of the few lenders to emerge from the crisis with its status enhanced. Not only did the bank avoid any serious financial slips – it recently reported its tenth consecutive half-year of record profit – but also established itself as an industry leader, aspiring to high ethical standards under the slogan “Here For Good”.

The financial damage is hard to judge. The regulator’s threat to revoke StanChart’s New York banking licence amounts to a death sentence for any bank with global aspirations. A large fine, perhaps accompanied by a grovelling apology and an extended probation period is more likely.

Another scandal is the last thing the banking industry needs. It’s especially terrible for the United Kingdom, already reeling from the rate-rigging mess at Barclays and revelations of widespread money-laundering at HSBC. It gives politicians and regulators even greater incentive to tighten the screws. On the available evidence, the crackdowns are looking long overdue.

Comments

one of StanChart’s group executive directors, when warned by a colleague of potential criminal liability, responded: “You f—ing Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with Iranians.”
Wish more voices make their voices heard, or maybe this is just the start!

Posted by politicaljunkie | Report as abusive
 

This case is totally unremarkable. Try reading the half dozen news stories and facts about other European Bank cases where they were settled and doing the same historical conduct (ING, Lloyds, Credit Suisse, ABN, Barclays). The only thing that is remarkable here is that the New York State jumped first to the microphone to make it appear as if there is a “New Sheriff in Town” and the press are eating it up. The best part is it appears that they have charged mostly transactions that would have complied with US Treasury Department regulations! Pesky details.

Posted by MilesCole77 | Report as abusive
 

Post Your Comment

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/