Standard Chartered shares rise after payout
Wednesday 15 August 2012
Shares in scandal-hit bank Standard Chartered continued to recover today after it agreed a “lower than anticipated” settlement with regulators over allegations that it hid transactions with the Iranian government.
The 160-year-old bank agreed to pay the New York State Department of Financial Services (DFS) 340 million dollars (£217 million) after it was accused of exposing the US to terrorists, drug kingpins and weapon dealers.
Shares rose 3% as investors said the pay-out showed that Standard was taking quick action to resolve the reputation-damaging situation - although other regulators are investigating.
The bank saw £6 billion wiped from its value in the immediate aftermath of claims that it hid 250 billion dollars (£160 billion) of transactions, and shares are still some 9% lower than when the scandal emerged.
Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: "The quick and decisive action which Standard has shown in settling this initial claim, which itself is lower than anticipated, has resulted in a further spike to the share price in early trade.
"The market will remain cautious until the extent of any further regulatory sanction is known, but in the meantime Standard appears to have taken its rap on the knuckles and is preparing to move on."
A hearing in which Standard was set to be grilled by the regulator today has been adjourned.
Standard was accused by the DFS of keeping around 60,000 transactions secret from US regulators over nearly 10 years.
The regulator's superintendent said a monitor would be installed at the bank for at least two years to evaluate money-laundering controls at its New York branch.
Standard, which employs 2,100 staff in the UK, previously said in a statement it "strongly rejects" the portrayal by the DFS.
It said the claims were inaccurate and 99.9% of its dealings with Iran complied with regulation.
Standard, which employs nearly 90,000 people worldwide and sponsors Liverpool Football Club, was threatened with losing its licence to operate within New York state.
In an explosive legal order, DFS superintendent Benjamin Lawsky said: "In short, SCB (Standard Chartered Bank) operated as a rogue institution."
Between January 2001 and 2010, Standard conspired with Iranian clients to route payments through New York after stripping information from wire transfer messages used to identify sanctioned countries, the regulator claimed.
The bank moved 60,000 transactions through its New York branch that were subject to US economic sanctions, and then covered up the dealings, the financial watchdog claimed.
The institutions include the Central Bank of Iran as well as Bank Saderat and Bank Melli, both of which are also Iranian state-owned.
The US suspected that Iran was using its banks to finance "terrorist groups" such as Hezbollah, Hamas and the Palestinian Islamic Jihad.
Findings include a memo sent in October 2006 from the bank's US chief executive to the group executive director in London, raising concerns about the activities with Iran.
He said: "Firstly, we believe (the Iranian business) needs urgent reviewing at the group level to evaluate if its returns and strategic benefits are ... still commensurate with the potential to cause very serious or even catastrophic reputational damage to the group.
"Secondly, there is equally importantly potential of risk of subjecting management in US and London (for example you and I) and elsewhere to personal reputational damages and/or serious criminal liability."
To which the group executive director allegedly replied: "You f****** Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians?"
The watchdog, which reviewed 30,000 pages of documents during the investigation, also uncovered evidence of apparently similar schemes at the bank with other US-sanctioned countries such as Libya, Burma and Sudan.
A statement released by Standard last week said: "The group does not believe the order issued by the DFS presents a full and accurate picture of the facts.
"Standard Chartered ceased all new business with Iranian customers in any currency over five years ago."
Unveiling a 9% rise in pre-tax profits for the first half of the year to 3.6 billion dollars (£2.3 billion), chief executive Peter Sands said the bank sees "some virtue in being boring".
Mr Sands, previously touted as a successor to Bank of England governor Sir Mervyn King, said: "For me as chief executive, our culture and values are a top priority, something we can never take for granted, something we embed in our systems of measurement and reward."
The bank has no UK branches but is headquartered in London, a key hub for its wholesale banking business.
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