One of Standard Chartered’s key UK investors has questioned the bank’s decision to pay a $340m (GBP 216.6m) fine for suspect Iranian dollar trades, despite insisting that the claims against it were flawed.
The bank surprised some shareholders last week when it agreed to pay the fine after the New York State Department of Financial Services (DFS) alleged that up to $250bn worth of transactions involving Iranian clients could have been unlawful.
The DFS accused the bank of entering “a scheme” with the Iranian government to “hide from regulators roughly 60,000 secret transactions involving at least $250bn”.
Although Standard Chartered initially denied the claims – and said suspect transactions only amounted to $14m – it agreed to pay the amount and could now face further fines totalling $700m from other American regulators.
“I do not understand how paying $340m has been the right thing to do,” the shareholder said. “If the bank did not do anything wrong, why has it chosen to settle so quickly? Their behaviour makes no sense whatsoever.
“Generally, the tone at the top is very good. This is a bank with a very good chair. Their initial statement was in line with protecting this reputation.
“What is not clear is why their position changed so radically. If they did not breach the rules, why have they agreed to pay the settlement and open themselves up to further fines with other US regulators?”
Sources at the bank have made it clear that many investors were keen to reach a settlement as a protracted battle with the American authorities would have weighed heavily on its share price. There were also fears at the top of the bank that the DFS could unilaterally suspend the bank’s New York licence for a 90-day period.
Standard Chartered lost a quarter of its market capitalisation when the DFS announced its accusations. The share price has recovered some value since.
The bank’s key investor, the Singaporean sovereign wealth fund Temasek, which owns 18pc of the bank, is thought to be one of those who pushed for a deal.
In an effort to put Standard Chartered back on the front foot, the bank is to radically overhaul its board following the scandal to make it better positioned for running a global bank. Sir John Peace, the bank’s chair, wants to hire at least two “international big hitters” before the end of the year, probably from outside the UK, with America and Asia favoured locations. Although the process of strengthening the board was initiated before the DFS allegations, it is now seen as more urgent. Announcements could be made as soon as next month.
Investors are concerned that many of the present board members have been serving for a decade or more and that the vast majority are from the UK. Standard Chartered operates in more than 70 countries and has little presence in Britain.
A spokesman for the bank said: “We continuously refresh our board membership to ensure it retains the right dynamics.”