Comments on: How many U-turns can a bank fit inside a loophole? A slice of lime in the soda Sun, 26 Oct 2014 19:05:02 +0000 hourly 1 By: MrRFox Sat, 11 Aug 2012 07:40:07 +0000 @FS – you might care to re-examine the wisdom of your ascribing benign intentions to StanChart’s management after you closely consider this – 0/us-standardchartered-iran-privilege-id USBRE8791AT20120810?feedType=RSS&feedNam e=topNews

IMO the documents cited in the article establish a strong ‘prima facie’ case of the bank knowingly engaging in transactions which it understood to be highly likely to be in violation of US law. Equally gag-inducing is the apparent blatant complicity of the bank’s attorneys in the planning and execution and concealment of the improper activity. This is unambiguously out-of-bounds – and every lawyer knows it. The traditional attorney-client privilege has no application to such a matter – just ‘cause your partner in crime is a lawyer doesn’t get your conspiratorial conversations any special legal status.

By: kurtkendis Fri, 10 Aug 2012 14:56:02 +0000 Felix…Isnt this an excellent example of the perils of the regulatory capture strategy? No matter how many of the King’s men a company hires to write the rules and make the regulations and accounting as opaque as possible — there will always be a new kid on the block ready to go back ten years and raise serious reputational risks. The strategy may cause irreversable harm…think of UBS whose transparency efforts were swamped by the tsunami of the Libor headlines.

By: fresnodan Fri, 10 Aug 2012 11:03:24 +0000 I tend to agree with Doly and FifthDecade about the regulations not containing “common sense” provisions.
The market would supposedly prevent a loan being made to someone who couldn’t afford it. Due diligence. But it didn’t (ninja loans – yet I must have supplied hundreds of documents back in 1993 when I got a loan for a house, and supplied them several times – apparently mortgagers do not know how to file documents, and still don’t).
Due diligence, prudence, conservative – supposed financial attibutes. Yet nothing could be further from the truth. And we bail out such people – if we must print money, how about not giving it to the people who got us into this mess? Maybe instead of laws that never seem to be appropriate (and yes, I know that the banks are defacto writing the rules themselves – which just argues even more that to depend on laws is hopeless)we should go back to this….oh what was it???? Hmmmmm, oh yeah – profit and LOSS. FAILURE. ACCOUNTABILITY. Of course, we might even be so radical as to fire someone who says “subprime is contained…”
But what is most astounding is that people still use these banks, and still use Moody’s, S&P, and Fitch.

By: FifthDecade Fri, 10 Aug 2012 02:07:10 +0000 @Doly Agree with that totally. The amazing thing is that it was perfectly legal to lend money to people whom it was abundantly clear could not afford to repay loans at standard rates. It was also completely legal to securitise those mortgages, bundle them into “safe” products and oversell them around the world. There definitely was a common sense bypass in operation at the time, but which regulator or politician is going to admit to having no common sense? So, they grasp at a straw far removed from the real deal, and attack that hoping everyone will forget the real story happened closer to home.

By: Doly Thu, 09 Aug 2012 23:09:59 +0000 People have been screaming for bankers to be hung from lampposts for a while since the financial system came crashing down and destroyed a few trillions of money. The assumption was that there must have been plenty of fraudulent activity for this to happen. Now, we are starting to see some real accusations, and for the most part, they seem relatively minor in comparison with the size of the holes that have appeared everywhere. I have the nasty suspicion that the problem here is that the vast majority of the money disappeared by performing perfectly legal financial activities, some of which probably should have been forbidden in the first place. But regulators are too afraid to admit that they know too little of what’s been going on to work out which activities they should regulate much more tightly. So instead, they’re going after people that have broken some regulation or other, and with that they hope to appease those that want to see some blood.

By: realist50 Thu, 09 Aug 2012 20:21:46 +0000 “Isn’t $250 million a startling large amount of money for a sanctioned nation to receive?”

No, in the context of trade flows for a nation of 75 million people that exports $80 billion of oil per year, $250 million is chickens**t, particularly when the transactions in question occurred over a period of several years.

By: AABender1 Thu, 09 Aug 2012 18:52:11 +0000 I suggest you read the Bloomberg article as well:  /standard-chartered-probe-deal-said-to- require-up-to-700-million.html

To quote from that article:
“Lawsky alleged in the order that Standard Chartered executed 60,000 wire transfers, amounting to $250 billion, on behalf of Iranian financial institutions during that period.

In its response to Lawsky’s order, the bank said its own review of those transactions, conducted by Promontory Financial Group, showed that 99.9 percent of those transfers complied with existing rules regarding so-called “U-turn” transactions involving sanctioned nations. Sands said today that none of the transactions reviewed by the bank were linked to terrorist organizations.”

Assuming Gene Ludwig’s people (Promontory) did a thorough job, a bit of math would reveal that something on the order transfer amounting to $250 million were in violation of law and regulation.

Isn’t $250 million a startling large amount of money for a sanctioned nation to receive? (Stanchart now claims it is only $14 million, but Promontory’s review didn’t seem to find that.)

So isn’t StanChart’s first public rebuttal to Lawsky a clear admission of guilt?

And so why again is Lawsky on trial here?

By: Curmudgeon Thu, 09 Aug 2012 18:13:30 +0000 If in fact the now-infamous quote was placed in an email by Standard Chartered’s CFO in response to a concern from it’s NY office, that was an enormously and dangerously stupid thing to do. Stupidity may not be a crime, but it this case it is prima facie evidence of one.

By: f.fursty Thu, 09 Aug 2012 16:10:59 +0000 John Mann’s complaint is silly in so many respects. Usually banks complain about stringent regulators and darkly warn that strict enforcement will chase them out of the jurisdiction to a more bank-friendly place. And yet in this case Mann is arguing that strict regulators in New York will hurt London as a banking center and help New York? On the face of it it makes no sense.

I think part of the issue and the surprise here — and what drives Felix’s question at the end — is that banks have, for the first time in a very long time, run into a regulator who seems focused on the fact that they might have broken the law, and interested in holding them accountable for that. Banks have gotten used to breaking laws and then paying trivial fines, coming to secret agreements with regulators, and neither admitting nor denying guilt. So now everyone seems shocked at the notion that they might actually be penalized for breaking the law.

If they didn’t break the law, more power to them. They’ll be vindicated. But Felix: I don’t think Lawsky has anything to answer for to you or to anyone else for trying to hold a company accountable for its actions.

By: Suncaked Thu, 09 Aug 2012 15:46:43 +0000 @MB-11

It is more the historical approach to regulating banks that differs. In the US, most banking supervision is directed by strict rules – your leverage limit must be X, you must have Y amount of money on hand for intraday transactions, etc. In the UK, up until recently much of the supervision was based on principles, i.e. “banks should have in place policies and systems to ensure they are not overleveraged” or “banks should calculate their required daily intraday cash needs in a stressed scenario”.

However, Felix probably has not spoken with UK bankers in the last couple of years – the UK FSA has become relentlessly focused on rules-based supervision and is one of the jurisdictions most stringently implementing Basel III, which prioritizes rules over principles in key areas like liquidity.