STANDARD Chartered’s treatment at the hands of the New York state Department for Financial Services (DFS) has shocked the more established authorities, which are in frantic negotiations with the new regulator to ensure it doesn’t strike out alone again.
Regulators in the UK, US and Hong Kong are understood to be furious that they were given almost no advanced warning of last week’s explosive accusations by the newly-established DFS, which sent Standard Chartered’s share price plummeting. The Bank of England, which will soon take over many regulatory responsibilities from the FSA, and the chancellor have also made their concerns clear.
A source with knowledge of the relations between the authorities told City A.M. the rest of the regulatory establishment feels “blindsided” by the surprise publication of claims that the bank had broken sanctions with $250bn (£158.8bn) of transactions involving Iran from 2001 to 2007.
Four other US regulators were already negotiating with Standard Chartered, which hopes to settle the charges with all four simultaneously.
But the DFS did not join in the co-ordinated approach.
“Different regulators usually discuss these announcements weeks in advance,” said the source.
“We have made it clear that this is not a satisfactory way to do things. But regulators are pragmatic about this – we are working through what happened with the DFS to make sure it does not happen again.”
Bank of England governor Sir Mervyn King last week suggested British banks were being unfairly targeted by US regulators.
And George Osborne called US treasury secretary Tim Geithner to express his concern over the way the allegations were handled.
Standard Chartered expressed surprise throughout the case.
It carried out its own investigation into transactions involving Iran and found $14m of rule-breaking trades.
After telling regulators the details of this internal study, it was hit by the far higher accusation of $250bn of wrongdoing.
The bank settled those claims for $340m earlier this week, and is expected to settle for a far lower sum with the other US authorities.