Standard Chartered Questions New York Action

New York’s top bank regulator has threatened to revoke the bank’s state licence over alleged Iran ties.



A New York bank regulator’s broadside against Standard Chartered Plc over transactions tied to Iran left investors and the bank questioning the action, which on Tuesday wiped $17 billion off the bank’s value.

The White House signaled its strong interest in the case, saying the U.S. government takes alleged violations of economic sanctions “extremely seriously.”

London-based Standard Chartered said it has been in talks with U.S. authorities over its Iran transactions since early 2010 and said the public accusations by New York came as a shock.

The state’s banking regulator, Benjamin Lawsky, called Standard Chartered a “rogue institution” and threatened to revoke its state banking licence on Monday.

Lawsky, head of the state’s Department of Financial Services, accused the bank of hiding 60,000 secret transactions worth $250 billion over nearly a decade. The transactions generated hundreds of millions of dollars in fees, Lawsky said.

Chief Executive Peter Sands scrambled back from vacation to help the bank plan a defence and limit damage to its reputation.

Shares in Standard Chartered closed down 16.4 per cent at 12.28 pounds, taking their losses to 24 per cent since the news surfaced just before Monday’s close. They had earlier slumped as low as 10.92 pounds, their lowest for three years.

The White House said it took sanctions violations seriously but made no direct reference to Lawsky’s action.

“Sanctions violations are something that this administration takes extremely seriously and has a strong record of action to this end,” White House Press Secretary Jay Carney told reporters. “The Treasury Department remains in close contact with both federal and state authorities on this matter.”

The bank had been one of the least tarnished during the financial crisis because of its focus on emerging markets and conservative approach to capital and liquidity. It said Lawsky’s order does not present “a full and accurate picture.”

“Some people were walking around under the illusion that Standard Chartered was the world’s first riskless bank, and it’s not,” said Gareth Hunt, financials analyst at Canaccord Genuity, who rates the stock a “sell.”

“We’ve discovered that Standard Chartered is a mortal bank — as they all are.”

Standard Chartered has hired two prominent law firms — Sullivan & Cromwell in New York and Slaughter and May in London — to represent it in its dealings with various U.S. authorities over transactions linked to Iran.

Among the Sullivan & Cromwell partners working for Standard Chartered is Rodgin Cohen, one of the best-known U.S. corporate lawyers, a person familiar with the matter said.

Sullivan & Cromwell has represented other non-U.S. banks probed for allegedly ignoring U.S. sanctions against countries.