All data is delayed
See More

StanChart CEO takes charge of Iran talks

Aug 14 2012 15:11

London/New York - Standard Chartered's Chief Executive Peter Sands has flown to New York to take personal control of the bank's attempts to reach a settlement with US regulators over allegations it hid transactions involving Iran.

Sands is also ready to attend a hearing set for Wednesday at which the London-based bank has been told by the New York banking regulator that it must demonstrate why its state banking licence should not be revoked over the transactions.

A Standard Chartered spokesperson said the bank was waiting to hear from the Department of Financial Services (DFS) what form the hearing will take.

"Peter is happy to go if that's appropriate," a Standard Chartered spokesperson said on Tuesday.

Sands will work with the bank's lawyers, who are attempting to negotiate a settlement over the issue with US authorities, the spokesman said.

Last week, New York's Financial Services Superintendent Benjamin Lawsky alleged the bank had hidden Iran-linked transactions with a total value of $250bn and called it a "rogue institution" for breaking US sanctions.

Though Sands has long known that US regulators were looking into Standard Chartered's Iranian dealings, he had been confident the bank would escape the kind of regulatory scandals that have hit British rivals HSBC and Barclays.

"This is very different to some of the things you've been hearing about elsewhere," he had told reporters after the bank's first half results were published on August 1.

Just days later, the 50-year-old was taken by "complete surprise" by the ferocity of Lawsky's attack, which he described as "disproportionate", and cut short his vacation to mount a swift defence. He denied the allegations and said the value of transactions that failed to adhere to the sanctions was less than $14m.

Sands and Chief Financial Officer Richard Meddings, who had also departed on holiday after the results, were among top executives who scrambled together a conference call to tackle the accusations.

With its shares having lost nearly 15% of their value, the bank has come under pressure from shareholders to settle early rather than engage in a legal battle.

"Clearly there was concern amongst all our stakeholders. Obviously a swift settlement would be ideal, but it has to be on acceptable terms," the Standard Chartered spokesperson said.

Political dimension

The affair has also taken on a political dimension, with some British members of parliament suggesting it is part of a US effort to undermine London as a financial centre. Britain's finance minister George Osborne made a series of phone calls to his US counterpart last week expressing concern at the way details of the case came out.

A UK government source told Reuters that Osborne had engaged in "quiet diplomacy" to ensure British business was getting a fair hearing.

The stakes for Standard Chartered are high, given that the loss of its state banking licence would effectively cut it off from direct access to the US bank market. Most of Standard Chartered's business is in Asia and the Middle East.

The DFS has declined to comment on the negotiations.

A person familiar with the situation, who spoke on condition of anonymity, said Lawsky was seeking a settlement of about $350m. Another person with knowledge of the situation said the figure had dropped to $250m.

Standard Chartered is already cooperating in a separate probe dating to 2010 that includes the US Justice Department and the Manhattan district attorney. That investigation is aimed at determining whether Standard Chartered violated US sanctions laws. Those talks have been taking place separately from the discussions with Lawsky's agency.

The bank's preferred option is still a deal with all the regulators, but the decision by Lawsky to go it alone and issue an order against the bank last week has made a collective settlement less likely.

Shares in Standard Chartered were up 1% to 1,346.5 pence at 11:15 GMT on hopes of a resolution.

Investec analyst Ian Gordon believes the bank will end up paying a fine running into several hundred million dollars but said it could afford to do so because of its strong balance sheet. He recommends clients buy the stock.

standard chartered  |  banks



Read Fin24’s Comments Policy publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

We're talking about...


So, the worst has finally happened. S&P and Fitch officially downgraded SA to junk status following the ill-timed Cabinet reshuffle.

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Do you have a budget set aside for Easter holiday spending?

Previous results · Suggest a vote