StanChart begins fightback

Aug 08, 2012, 12:17 PM EDT
REUTERS/Kevin Lam/Files

* BoE's King says regulators should coordinate action

* King asks regulators to publish only when investigationcomplete

* Source says Group CFO Meddings made alleged anti-US rant

* StanChart shares up 8.3 pct

By Carrick Mollenkamp and Steve Slater

NEW YORK/LONDON, Aug 8 (Reuters) - Standard Chartered won some help from Britain's central bank governor onWednesday in its fightback against the New York bankingregulator's allegations that it had hidden $250 billion oftransactions with Iran.

The London-based bank lost more than a quarter of its marketvalue in 24 hours after the New York State Department ofFinancial Services threatened late on Monday to cancel its statebanking licence, dubbing it a "rogue institution" for breakingU.S. sanctions against Iran.

Standard Chartered shares bounced 8.3 percent on Wednesdayto 13.32 pounds, up from the 3-year low of 10.92 pounds they hitin the last two days, but still down 17 percent since the NewYork regulator made the allegations.

The bank's top executives were working on its defencestrategy on Wednesday, having already contested the regulator'sfigures, saying only a tiny proportion of the Iran-relatedtransactions - less than $14 million - were questionable underU.S. sanctions rules.

Bank of England Governor Mervyn King drew unfavourablecomparisons on Wednesday between this case and other U.S. actionagainst British banks, such as the interest rate-manipulatinginvestigation into Barclays PLC.

In the Barclays case, all regulators in Britain and theUnited States produced coordinated reports after theinvestigation was complete, he said, but in Standard Chartered'scase, "one regulator but not the others has gone public whilethe investigation is still going on".

Sources familiar with the matter told Reuters that the NewYork regulator Benjamin Lawsky had angered officials at the U.S.Treasury Department and Federal Reserve by going it alone.

"I think all the UK authorities would ask is that thevarious regulatory bodies that are investigating the particularcase try to work together and refrain from making too manypublic statements until the investigation is completed," saidKing.

 

F-WORD RANT

On Monday Lawsky had reproduced what he said were quotesfrom an unidentified Standard Chartered executive in aconversation in 2006 that demonstrated the bank's "obviouscontempt" for U.S. banking regulations.

"You f---ing Americans. Who are you to tell us, the rest ofthe world, that we're not going to deal with Iranians?" thequote read.

A source familiar with the situation said the bank's GroupFinance Director Richard Meddings, one of five executivedirectors at the time, was the unnamed man.

Meddings did not respond to repeated requests for comment.

A spokesman for Standard Chartered in London said: "This isnot a quote we recognise as coming from Richard or any other ofour directors."

The bank emphasised that the remark was "something someonesaid had been said" and did not appear in any document.

The BoE's King said he did not share the view held by somethat the move was part of a concerted U.S. effort to undermineLondon as a financial centre, following the Barclays probe and aU.S. Senate panel report that criticised HSBC Holding's efforts to police suspect transactions.

One British lawmaker said the affair was part of a"political onslaught" in the United States against Britishbanks.

"I think it's a concerted effort that's been organised atthe top of the U.S. government. I think this is Washingtontrying to win a commercial battle to have trading from Londonshifted to New York," said John Mann, a member of parliament'sfinance committee, who also called for a parliamentary inquiry.

A British executive at an institution that ranks among thetop 25 shareholders in Standard Chartered also said politics wasmotivating U.S. officials.

"Are we starting to see an anti-London bias in U.S.regulatory activities?" the executive asked. "Oh yes. Is thereany subtle form of banking sector protectionism going on? Yes."

One of Standard Chartered's top 10 shareholders said it wassurprising that the bank had been caught up in the scandal,given that the bank had reassured investors it was clean and hada "superior culture".

"I get the impression that they do think a lot about risk,or at least they communicate that to investors, and so it isquite interesting that they have tripped up on a risk thing.According to the DFS, they were undertaking such activitiesknowing what the risks were."

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