The bank released the news just before the stock market closed, but several rumours, including the possibility of a lawsuit and worries over lending exposure in Hong Kong, had already hit the share price.
Standard's shares finished 18p down on the day at 925p, having touched 913p.
The legal dispute is with Monsia Investments, a company controlled by the Malaysian businessman Data Yap Yong Seong. Monsia has started proceedings in the High Court in Singapore against Standard, claiming Sdollars 237.94m ( pounds 98m).
The dispute concerns the sale of assets, including a hotel, that Monsia had pledged to Standard as collateral for loans. When the bank called in the security and sold the hotel, Monsia argued that the bank had accepted too low a price.
Standard said it considered the claim, which originated in Malaysia in 1989, to be 'without merit and wholly misconceived'.
On the basis of legal advice it would 'vigorously and confidently' defend the action.
In 1989 Monsia launched a lawsuit in Malaysia against Standard for pounds 165m over the same matter, but the courts threw the case out. Monsia is incorporated in Singapore but the assets sold off by Standard are in Malaysia.
Standard referred to the lawsuit in its report and accounts for 1989, but it is understood that this new claim will not be mentioned in the next annual report and the bank will not be making any provision against the case.
The bank said yesterday that it would continue to press its own claims against Data Yap and associated companies in the Malaysian courts for sums that were still due.
Standard is keen to play down the dispute as it has worked hard to rid itself of the title 'the bank looking for a banana skin'. After being hard hit by the Third World debt crisis in the early 1980s, it started a disastrous expansion in lending to British companies.
The bank lent more than pounds 100m to George Walker's Brent Walker group, which is still in danger of receivership despite a recent debt-for-equity restructuring.
In 1992 several employees in India were implicated in a massive securities fraud that caused huge losses and further adverse publicity.
Malcom Williamson, chief executive, has insisted modern management techniques have replaced an anachronistic approach inherited from the bank's colonial past.
The share price has more than doubled over the past year and buoyant business in the Far East helped first- half profits to reach pounds 168.8m, against pounds 59.3m last time.Reuse content