STANDARD Chartered was last night forced to take a $340m (£217m) hit to settle US regulators’ charges that it broke sanctions against Iran and attempted to hide the evidence.
The emerging markets banking group will also have to bring in a monitor to evaluate money-laundering risk controls in its New York branch, reporting back to the regulators for at least two years.
Markets seemed relieved that the bank has successfully avoided having its licence revoked by the authorities, sending its US securities up more than seven per cent.
In its announcement last night, the New York state Department of Financial Services (DFS) said the bank had “agreed that the conduct at issue involved transactions of at least $250bn”.
Standard Chartered’s own investigation had found $14m-worth of trades were in breach of sanctions.
The late-night deal concluded eight tense days of claim and counter-claim that saw the bank accused of being a “rogue institution” by the DFS’s superintendent Benjamin Lawsky.
The legal wrangling culminated in chief executive Peter Sands flying to New York on Monday night to fight back against the charges and reach this agreement with the authorities.
The DFS had earlier summoned the bank to a hearing due today to explain why it should be allowed to keep its banking licence. The hearing could have been held in public and prove very embarrassing, but it has now been called off.
The settlement and the adjournment of the hearing means the bank can begin to repair the reputational damage caused by this unexpected blow to its global image – but it will still face ongoing negotiations with four other US regulators that began in early 2010.
Standard Chartered is looking to settle cases with the New York Fed, US Treasury, district attorney and Department of Justice.
Although substantial, the $340m fine is far lower than some analysts had feared.
RBS’s Prateek Datta had initially thought the “best-case scenario” would see the bank face a fine of up to $1bn and had warned that the levy could potentially have reached as much as $3bn. In such an eventuality the bank might have had to cut dividends and made other economies to shore up its capital ratios. Mediobanca analyst Christopher Wheeler had earlier considered $500m a high price to pay, but added that the bank “needed to get on with business.”
■ Standard Chartered must pay $340m to settle the claims, but keeps its licence
■ The bank must also install a monitor to keep an eye on compliance procedures and report back to the regulators
■ But the bank is not out of the woods – four more regulators also want their say