British politicians and bankers launched an unusual public counterattack against the New York banking supervisor that this week accused a top U.K. bank of misconduct.
The scandal enveloping Standard Chartered PLC, the latest in a series involving British banks and U.S. regulators, drew Bank of England Governor Mervyn King and the bank’s own chief, Peter Sands, into the fray as they acknowledged the gravity of the allegations but urged against a rush to judgment.
Their remarks follow those of a number of senior British lawmakers who have accused the New York regulator of pursuing an agenda designed to hit the City of London, the U.K.’s financial center.
New York’s Department of Financial Services on Monday accused the internationally focused bank of running a “rogue institution” that worked from 2001 to 2010 with the Iranian government to conceal more than $250 billion of transactions between Iranian financial groups and outside counterparties, The department, which threatened to revoke Standard Chartered’s license to operate in the state of New York, alleges that the transactions were meant to work around U.S. Office of Foreign Assets Control requirements on sanctions.
The allegations blindsided Standard Chartered’s management and caused the lender’s share price to slide Tuesday as investors fretted the bank would lose its New York banking license. Standard Chartered has denied the accusations, saying in a statement that it “strongly rejects the position or the portrayal of facts as set out in the order” and that the accusations are “incorrect as a matter of law.”
The allegations follow two other high-profile cases. In June, Barclays PLC settled with regulators over allegations that it tried to fix a key interest rate, leading to the resignations of bank Chief Executive Bob Diamond and Chairman Marcus Agius. In late July, a U.S. Senate committee attacked HSBC Holdings PLC for allegedly handling money for drug gangs and terrorist groups.
While U.K. officials largely showed contrition in the Barclays and HSBC cases, they are now striking back and speaking up for Standard Chartered, an institution that had enjoyed a sterling reputation.
In a news conference Wednesday, Mr. King spoke out on the spate of U.S.-led regulatory probes in general and advised against a rush to judgment on the Standard Chartered case in particular. The central-bank chief called on his U.S. counterparts to work together with U.K. authorities and refrain from making public statements on the case before the completion of an investigation.
“All the U.K. 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. That seems to me the appropriate time to make clear what the judgment is and what the punishment is,” he said.
However, Mr. King rejected the idea that there was any political or malicious intent driving a decision to accuse Standard Chartered of disguising the Iranian transactions.
“Overall, I don’t judge my colleagues or others in the United States as having any such intention,” Mr. King said. “If there have been cases where they [the banks] have behaved badly and against the regulatory framework, regulators have taken action. I think it’s perfectly reasonable.”
The spat comes as London tries to protect its reputation as Europe’s financial-services hub. In the wake of a 2008 financial crisis that saw two major British banks partially nationalized, U.K. authorities are beefing up financial regulation and politicians are coming down hard on issues including banker pay. However, a series of scandals occurring out of London have fed fears that the U.K. is unable to rein in the industry. “It seems to be that every big trading disaster happens in London, and I would like to know why,” said Carolyn Maloney, a New York Democrat, at a recent Financial Services Committee hearing into J.P. Morgan Chase & Co.’s “London Whale” trader.
The case involving Standard Chartered is particularly damaging as it focuses on one of the few British banks to survive the crisis relatively untouched. Mr. Sands on Wednesday hit back at the New York regulator’s claims.
Standard Chartered says that the allegations overstated several facts over the bank’s use of “U-turning”—a system by which Iranian banks could buy and sell dollars providing a non-U.S. bank acted as intermediary on both sides of the deal. The regulator alleged Standard Chartered stripped many trades of their coding so they couldn’t be traced back to Iranian clients.
“There are a lot of matters that we don’t recognize, we don’t understand and are factually inaccurate,” Mr. Sands said of the report. “It’s clearly very damaging, it would be unrealistic to pretend otherwise.”
Standard Chartered paid an independent group to review 150 million payment transactions between 2001 and 2007. Of these only 300 weren’t valid “U-turn” transactions, Mr. Sands said.
He added that the $250 billion number quoted by the New York regulator would imply that every U-turn transaction that went through the New York unit during that time frame was illegal.
The executive also played down the profitability of the transactions with Iranian clients, saying it amounted to “tens of millions” of dollars, not hundreds of millions as the regulator had alleged.
The bank continues to conduct a line-by-line review of the report issued by the regulator and said it didn’t recognize a quote cited by the watchdog stating, “You f— Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with the Iranians?”
Mr. Sands declined to comment on whether the bank had been used as a political football.
But the allegations and report by the New York regulator prompted a number of senior British lawmakers to question whether this was a snide attempt to undermine the already damaged reputation of the City of London.
John Mann, a Labour member of the U.K. Treasury select committee, said Tuesday that he detected an “increasingly anti-British bias” in recent statements and actions by U.S. regulators and politicians. Boris Johnson, the Conservative mayor of London, wrote in the Spectator magazine that the move “is starting to shade into protectionism.”
“You can’t help thinking it might actually be at least partly motivated by jealousy of London’s financial sector—a simple desire to knock a rival center,” he added.
–Ainsley Thomson
contributed to this article.
The scandal enveloping Standard Chartered PLC, the latest in a series involving British banks and U.S. regulators, drew Bank of England Governor Mervyn King and the bank’s own chief, Peter Sands, into the fray as they acknowledged the gravity of the allegations but urged against a rush to judgment.
Their remarks follow those of a number of senior British lawmakers who have accused the New York regulator of pursuing an agenda designed to hit the City of London, the U.K.’s financial center.
New York’s Department of Financial Services on Monday accused the internationally focused bank of running a “rogue institution” that worked from 2001 to 2010 with the Iranian government to conceal more than $250 billion of transactions between Iranian financial groups and outside counterparties, The department, which threatened to revoke Standard Chartered’s license to operate in the state of New York, alleges that the transactions were meant to work around U.S. Office of Foreign Assets Control requirements on sanctions.
The allegations blindsided Standard Chartered’s management and caused the lender’s share price to slide Tuesday as investors fretted the bank would lose its New York banking license. Standard Chartered has denied the accusations, saying in a statement that it “strongly rejects the position or the portrayal of facts as set out in the order” and that the accusations are “incorrect as a matter of law.”
The allegations follow two other high-profile cases. In June, Barclays PLC settled with regulators over allegations that it tried to fix a key interest rate, leading to the resignations of bank Chief Executive Bob Diamond and Chairman Marcus Agius. In late July, a U.S. Senate committee attacked HSBC Holdings PLC for allegedly handling money for drug gangs and terrorist groups.
While U.K. officials largely showed contrition in the Barclays and HSBC cases, they are now striking back and speaking up for Standard Chartered, an institution that had enjoyed a sterling reputation.
In a news conference Wednesday, Mr. King spoke out on the spate of U.S.-led regulatory probes in general and advised against a rush to judgment on the Standard Chartered case in particular. The central-bank chief called on his U.S. counterparts to work together with U.K. authorities and refrain from making public statements on the case before the completion of an investigation.
“All the U.K. 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. That seems to me the appropriate time to make clear what the judgment is and what the punishment is,” he said.
However, Mr. King rejected the idea that there was any political or malicious intent driving a decision to accuse Standard Chartered of disguising the Iranian transactions.
“Overall, I don’t judge my colleagues or others in the United States as having any such intention,” Mr. King said. “If there have been cases where they [the banks] have behaved badly and against the regulatory framework, regulators have taken action. I think it’s perfectly reasonable.”
The spat comes as London tries to protect its reputation as Europe’s financial-services hub. In the wake of a 2008 financial crisis that saw two major British banks partially nationalized, U.K. authorities are beefing up financial regulation and politicians are coming down hard on issues including banker pay. However, a series of scandals occurring out of London have fed fears that the U.K. is unable to rein in the industry. “It seems to be that every big trading disaster happens in London, and I would like to know why,” said Carolyn Maloney, a New York Democrat, at a recent Financial Services Committee hearing into J.P. Morgan Chase & Co.’s “London Whale” trader.
The case involving Standard Chartered is particularly damaging as it focuses on one of the few British banks to survive the crisis relatively untouched. Mr. Sands on Wednesday hit back at the New York regulator’s claims.
Standard Chartered says that the allegations overstated several facts over the bank’s use of “U-turning”—a system by which Iranian banks could buy and sell dollars providing a non-U.S. bank acted as intermediary on both sides of the deal. The regulator alleged Standard Chartered stripped many trades of their coding so they couldn’t be traced back to Iranian clients.
“There are a lot of matters that we don’t recognize, we don’t understand and are factually inaccurate,” Mr. Sands said of the report. “It’s clearly very damaging, it would be unrealistic to pretend otherwise.”
Standard Chartered paid an independent group to review 150 million payment transactions between 2001 and 2007. Of these only 300 weren’t valid “U-turn” transactions, Mr. Sands said.
He added that the $250 billion number quoted by the New York regulator would imply that every U-turn transaction that went through the New York unit during that time frame was illegal.
The executive also played down the profitability of the transactions with Iranian clients, saying it amounted to “tens of millions” of dollars, not hundreds of millions as the regulator had alleged.
The bank continues to conduct a line-by-line review of the report issued by the regulator and said it didn’t recognize a quote cited by the watchdog stating, “You f— Americans. Who are you to tell us, the rest of the world, that we’re not going to deal with the Iranians?”
Mr. Sands declined to comment on whether the bank had been used as a political football.
But the allegations and report by the New York regulator prompted a number of senior British lawmakers to question whether this was a snide attempt to undermine the already damaged reputation of the City of London.
John Mann, a Labour member of the U.K. Treasury select committee, said Tuesday that he detected an “increasingly anti-British bias” in recent statements and actions by U.S. regulators and politicians. Boris Johnson, the Conservative mayor of London, wrote in the Spectator magazine that the move “is starting to shade into protectionism.”
“You can’t help thinking it might actually be at least partly motivated by jealousy of London’s financial sector—a simple desire to knock a rival center,” he added.
–Ainsley Thomson
contributed to this article.