Standard Chartered reaches $340m settlement over Iran

Standard Chartered plc agreed to pay $340 million to New York’s bank regulator over transactions linked to Iran, in a speedily arranged deal that helped push up the emerging market-focused lender’s shares.

The deal with New York Superintendent of Financial Services Benjamin Lawsky caps a week of transatlantic tension and a furore over why a state agency had upstaged other authorities. The British bank still faces a separate probe of its Iran-linked transactions by other US agencies.

The resolution also averted a hearing yesterday at which the bank had been called to demonstrate why its licence to do business in New York should not be revoked.

“Standard Chartered has probably done the right thing. You just pay up and get on with life however innocent you feel you are. Otherwise, it’s something that could hang over you for years,” said Hugh Young, Asia managing director at Aberdeen Asset Management, Standard Chartered’s third-biggest shareholder according to data released by Thomson Reuters.

The settlement agreed by the bank is equal to less than nine per cent of its first-half pre-tax profit. At the latest levels, Standard Chartered’s market value is around $3.5 billion less than it was before Mr Lawsky’s allegations.

Ian Gordon, an analyst at Investec Securities in London, said the risks of further regulatory costs “appear sufficiently contained” to allow the bank’s shares to build on a rally from their lows after Lawsky brought his case last week. “Standard Chartered’s management team have conducted themselves admirably in the face of extreme provocation,” he said.

Mr Lawsky on August 6 called Standard Chartered a “rogue institution” that had broken US sanctions on Iran, saying it hid Iran-linked transactions with a total value of $250 billion from regulators.

Mr Lawsky’s order came out of the blue, the bank said, hitting its share price and bringing top executives hurrying back to London from vacation. Bank of England Governor Mervyn King said Mr Lawsky was out of step with other US authorities. And Standard Chartered CEO Peter Sands strongly denied the allegations, saying illegal transactions totalled less than $14 million.

In his announcement, Mr Lawsky said Standard Chartered “agreed that the conduct at issue involved transactions of at least $250 billion.” But he gave no details on what protections the deal gave Standard Chartered.

Standard Chartered confirmed that the two sides had reached an agreement, including the payment of $340 million, and said detailed terms would be concluded soon. “It was a pragmatic decision in the best interest of shareholders and customers,” a spokesman for the bank said. In addition to the civil penalty, Mr Lawsky said the bank agreed to an outside monitor for at least two years to check on controls on money-laundering at its New York branch.

Mr Lawsky’s aggressive stance heightened his public profile just months after the Department of Financial Services, the agency he heads, was created out of the state’s banking and insurance regulators. Within minutes of the announcement, New York Governor Andrew Cuomo lauded the agency’s “effectiveness and leadership”.

“New York needed a tough and fair regulator for the banking and insurance industries to protect consumers and investors,” Mr Cuomo said.