The market value of British banking major Standard Chartered Plc tumbled $15 billion by Tuesday after New York’s banking regulator threatened to tear up its state banking licence for hiding $250 billion in transactions tied to Iran.
The New York State Department of Financial Services (DFS) said on Monday that Standard Chartered was a “rogue institution” that “schemed” with the Iranian government, which is subject to US sanctions over its nuclear programme, and hid 60,000 secret transactions to generate hundreds of millions of dollars in fees over nearly 10 years.
Shares in the Asia-focused bank fell 21% at £12, their lowest in three years, taking their losses to 27% since the news surfaced just before Monday’s close.
“Even the so-called ‘safe’ banks like StanChart and HSBC seem to be crumbling, with their reputation in tatters. No one, it seems, is immune,” said one institutional investor.
The bank, which has been in talks with US authorities for years over the matter, had exposed the US banking system to terrorists, drug traffickers and corrupt states, the DFS said.
The New York regulator described how officials at Standard Chartered, one of the banks least tarnished during the financial crisis thanks to its focus on emerging markets and a conservative approach to capital and liquidity, had debated whether to continue Iranian dealings.
In October 2006, the top official for business in the Americas, whom the regulator did not name, warned in a “panicked message” that the Iranian dealings could cause “catastrophic reputational damage” and “serious criminal liability.”
A group executive director in London shot back: “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 reply showed “obvious contempt for US banking regulations,” the regulator said.
At that time the bank had five executive directors: Peter Sands, now CEO; Richard Meddings, now finance director; Mervyn Davies, a UK Labour Party peer; Kai Nargolwala, who left the bank to join Credit Suisse; and Mike DeNoma, who resigned as CEO of Chinatrust Financial in August.
Standard Chartered's Americas CEO was Ray Ferguson.
None of the people could be reached for comment or else declined to comment on the development.
Bank refutes US charges
StanChart claimed the US order does not present the “full and accurate” picture and over 99.9% of its Iran-related business was in compliance with the relevant regulations. It put the value of transactions in non-compliance with the related US regulations at less than $14 million and said it had stopped all new businesses with Iranian clients over five years ago. London/PTI