Tags: Standard | Chartered | CEO | iran

Standard Chartered CEO Takes Charge of Iran Probe Talks

Tuesday, 14 Aug 2012 09:01 AM

 

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Standard Chartered's Chief Executive Peter Sands has flown to New York to take personal control of the bank's attempts to reach a settlement with U.S. regulators over allegations it hid transactions involving Iran.

Sands is also ready to attend a hearing set for Wednesday at which the London-based bank has been told by the New York banking regulator that it must demonstrate why its state banking license should not be revoked over the transactions.

A Standard Chartered spokesman said the bank was waiting to hear from the Department of Financial Services (DFS) what form the hearing will take.

"Peter is happy to go if that's appropriate," a Standard Chartered spokesman said on Tuesday.

Sands will work with the bank's lawyers, who are attempting to negotiate a settlement over the issue with U.S. authorities, the spokesman said.

Last week, New York's Financial Services Superintendent Benjamin Lawsky alleged the bank had hidden Iran-linked transactions with a total value of $250 billion and called it a "rogue institution" for breaking U.S. sanctions.

Though Sands has long known that U.S. regulators were looking into Standard Chartered's Iranian dealings, he had been confident the bank would escape the kind of regulatory scandals that have hit British rivals HSBC and Barclays.

"This is very different to some of the things you've been hearing about elsewhere," he had told reporters after the bank's first half results were published on August 1.

Just days later, the 50-year-old was taken by "complete surprise" by the ferocity of Lawsky's attack, which he described as "disproportionate", and cut short his vacation to mount a swift defense. He denied the allegations and said the value of transactions that failed to adhere to the sanctions was less than $14 million.

Sands and Chief Financial Officer Richard Meddings, who had also departed on holiday after the results, were among top executives who scrambled together a conference call to tackle the accusations.

With its shares having lost nearly 15 percent of their value, the bank has come under pressure from shareholders to settle early rather than engage in a legal battle.

"Clearly there was concern amongst all our stakeholders. Obviously a swift settlement would be ideal, but it has to be on acceptable terms," the Standard Chartered spokesman said.

POLITICAL DIMENSION

The affair has also taken on a political dimension, with some British members of parliament suggesting it is part of a U.S. effort to undermine London as a financial centre. Britain's finance minister George Osborne made a series of phone calls to his U.S. counterpart last week expressing concern at the way details of the case came out.

A UK government source told Reuters that Osborne had engaged in "quiet diplomacy" to ensure British business was getting a fair hearing.

The stakes for Standard Chartered are high, given that the loss of its state banking license would effectively cut it off from direct access to the U.S. bank market. Most of Standard Chartered's business is in Asia and the Middle East.

The DFS has declined to comment on the negotiations.

A person familiar with the situation, who spoke on condition of anonymity, said Lawsky was seeking a settlement of about $350 million. Another person with knowledge of the situation said the figure had dropped to $250 million.

Standard Chartered is already cooperating in a separate probe dating to 2010 that includes the U.S. Justice Department and the Manhattan district attorney. That investigation is aimed at determining whether Standard Chartered violated U.S. sanctions laws. Those talks have been taking place separately from the discussions with Lawsky's agency.

The bank's preferred option is still a deal with all the regulators, but the decision by Lawsky to go it alone and issue an order against the bank last week has made a collective settlement less likely.

Shares in Standard Chartered were up 1 percent to 1,346.5 pence at 1115 GMT on hopes of a resolution.

Investec analyst Ian Gordon believes the bank will end up paying a fine running into several hundred million dollars but said it could afford to do so because of its strong balance sheet. He recommends clients buy the stock.

© 2014 Thomson/Reuters. All rights reserved.

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