Standard Chartered Plc (STAN) Chief Executive Officer Peter Sands hit back at a New York regulator’s claims the bank broke US sanctions, and said he saw “no grounds” for revoking the lender’s license.
Standard Chartered has tumbled about 16 percent in London trading this week after New York regulator Benjamin Lawsky threatened to strip the London-based bank of its license to operate in the state, alleging it processed $250 billion of deals with Iranian banks subject to sanctions.
“We reject the position and portrayal of facts by the Department of Financial Services (HIG),” Sands said on a conference call with reporters yesterday, his first public comments since the regulator’s report on August 6. “It would be disproportionate and wholly inconsistent with the actions of other US authorities in other sanctions matters” to revoke the bank’s New York license, he said.
The dispute is becoming increasingly political. Mayor of London Boris Johnson yesterday accused New York of seeking to damage its biggest competitor as a financial centre, while Bank of England Governor Mervyn King criticised the regulator for failing to co-ordinate with its counterparts.
The stock rallied 7.1 percent to 1,315.5 pence in London trading yesterday from 1,228.5 pence the day before. It had started trading without the right to the latest dividend. Excluding the effect of the dividend, the shares would have climbed 8.6 percent. In Hong Kong, the bank rallied 3 percent to HK$164.1 as of 9:49 a.m. after losing 15 percent over two days.
Sands, 50, said the probe has been “very damaging” to the British lender’s brand, and denied that there was anything wrong with the bank’s culture. He added that none of the transactions reviewed by the bank were linked to terrorist organisations.
“There are lots of matters in that order that frankly either we don’t recognise or we don’t understand or are factually inaccurate,” Sands said, referring to the report.
The lender has consulted lawyers and been advised that it may have a case for claiming reputational damage, the Financial Times reported today, citing two people it didn’t identify. Standard Chartered is aware of the sensitivity involved in taking a militant stance toward its regulator, the paper said.
The bank might be asked to pay as much as $700 million to resolve money-laundering allegations filed by Lawsky, New York’s banking superintendent, after the Department of Financial Services grew impatient with inaction by federal regulators, a person familiar with the case said.
Lawsky tried unsuccessfully a few months ago to get US regulators to punish the bank for conduct involving disguised Iranian money transfers, said the person, who asked not to be identified because the matter is confidential. The transfers have been under investigation by federal agencies for more than two years, according to Lawsky’s statement.
“The order we received from the DFS came as a complete surprise,” Sands said on the call. “The surprise was in the manner of the announcement and that the DFS made an announcement on its own and without giving us prior notice. The resolution of such matters normally proceeds through a coordinated approach by the different agencies.”
King yesterday criticised Lawsky’s order, saying at a press conference that UK authorities would “ask that various regulatory bodies that are investigating a particular case try to work together.” Johnson used a column for the London-based Spectator magazine to attack the regulator.
Motivated by Jealousy
“You can’t help wondering whether all this beating up of British banks and bankers is starting to shade into protectionism,” he wrote. “And you can’t help thinking it might actually be at least partly motivated by jealousy of London’s financial sector – a simple desire to knock a rival centre.”
There was also friction with the Federal Reserve and US Treasury Department, the Financial Times reported, citing another person it didn’t identify. The two, and the Justice Department and Manhattan district attorney’s office, are probing the bank’s links to Iran, it said.
“The federal authorities have been quieter because they understand they have to work this out at international level, where Lawsky has gone ahead,” Syed Kamall, a UK Conservative member of the European Parliament and member of its Economic and Finance Committee, said. “And it’s a nice story, Iran-bashing, at the moment, given the current concerns internationally.”
The investigation is focusing on so-called U-turn transactions, which could allow an Iranian bank to access the US banking system indirectly through a third-party bank.
Standard Chartered hired an external consultant to probe about 150 million payment transactions conducted between 2001 and 2007, Sands said.