Standard Chartered shares rebound as British politicians and officials rally behind the bank, blaming protectionist US regulators for attacking London to boost Wall Street's fortunes.
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Shares in the 160-year-old British bank rose 8.62 per cent to close at 1,315.5 at the closing bell in London earlier, recovering some of its substantial losses.
Shares had fallen on Monday and Tuesday after the New York State Department of Financial Services accused the bank of scheming with Iran to hide 60,000 "secret" transactions from regulators involving at least $250bn.
Bank of England governor Mervyn King criticised the New York regulator on Wednesady, saying UK authorities will ask US regulators to refrain from public statements before investigations are completed, and to coordinate actions.
However Sir Mervyn said he did not believe US regulators were engaged in a trade war against UK banks:
"I think all that the UK authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed," Sir Mervyn said at a press conference in London. "That seems to be the appropriate time to make clear what the judgment is and what the punishment is."
Americans: self-interested protectionists?
Politicians including London Mayor Boris Johnson accused the New York regulator of launching a "self-interested attack" and using the guise of regulation as an excuse for protectionism to weaken London. Labour MP John Mann, who sits on the Treasury Select Committee, said he was concerned by the increasing anti-British bias by US regulators and politicians.
It is the third allegation by a US regulator against British banks in months. In July, HSBC was accused of facilitating money laundering for Mexican and Russian clients. Barclays was fined $450m in June for rigging the Libor, used to set prices for trillions of dollars of financial securities. Unlike many of its rivals, however, Standard Chartered does not have an investment banking arm.
“We were surprised," Standard Chartered Bank (SCB) Chief Executive Peter Sands said yesterday, noting that discussions with the US agencies were ongoing. "Resolution of such matters normally proceeds through a co-ordinated approach by such agencies."
Mr Sands cut short his holiday and returned to London in an attempt to limit the fallout.
'Scheming with Iran'
Benjamin Lawsky, superintendent of the New York State Department of Financial Services, acted unilaterally when he accused Standard Chartered of scheming with Iran for more than 10 years to hide 60,000 "secret" transactions from regulators involving at least $250bn for which the bank received hundreds of millions of dollars in fees. The US ‘Treasury’s Office of Foreign Assets Controls was blind-sided and angered by Mr Lawsky’s action, Reuters reported.
"SCB's actions left the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity," Mr Lawsky claimed in a statement posted online on Monday.
Standard Chartered fired back immediately saying the bank "strongly rejects" the allegations and that 99.9 per cent of its transactions relating to Iran complied with regulations.
Who is this Lawsky chap anyway?
Mr Lawsky, 42, is a Columbia Law School-educated former prosecutor and chief of staff to New York Governor Mario Cuomo. He has headed the New York financial services regulator since May 2011.
Prior to that, he specialised in white collar crime, organised crime and terrorism as assistant US attorney in the southern district of New York and was instrumental in charging Bank of America with misleading government officials about losses at Merrill Lynch.
Lawsky now oversees most of the New York-based branches of international banks and supervises financial services providers including mortgage bankers and New York insurance companies. In total, he is in charge of regulating 4,400 entities with assets of about $6.2 trillion.
He also has the power to licence London banks operating in New York, and to that end a hearing has been set for 15 August to discuss the Standard Chartered allegations. It is not clear yet whether Mr Sands will fly to New York to tackle Mr Lawsky's accusations head-on.
07 August 2012
07 August 2012