Standard Chartered Plc Chief Executive Officer Peter Sands is in New York and prepared to attend a hearing this week as the London-based bank faces money laundering allegations from state regulators.
Sands traveled to the city to work with the company’s lawyers, Julie Gibson, a spokeswoman for Standard Chartered (2888), said in a phone interview today. Sands has been there for “a couple days,” she said.
“If there is a hearing on Wednesday, he will participate in that,” the New York-based spokeswoman said.
Benjamin Lawsky, the state’s banking superintendent, alleged this month that Standard Chartered flouted U.S. banking laws by helping launder about $250 billion in Iranian funds. He set an Aug. 15 hearing at which the bank must persuade him not to revoke its license to operate in New York.
Sands, 50, said the vast majority of wire transfers identified by Lawsky complied with federal law. Standard Chartered said the allegations pertain to less than 1 percent of the 60,000 Iranian wire transfers asserted by Lawsky.
“He hasn’t gone personally to negotiate with regulators or specifically to attend the meeting,” Melissa Cheah, a Singapore-based spokeswoman for the bank, said in an e-mail. “He is willing to do so if appropriate.”
Standard Chartered rose 1.8 percent to 1,357 pence at 8:45 a.m. in London, trimming the stock’s decline since the investigation was announced on Aug. 6 to 13 percent.
Reputational Damage
The CEO’s presence in New York was reported earlier by the Telegraph newspaper. The Telegraph said that Sands was in New York to personally intervene in negotiations and win a settlement.
Loss of the New York license could result in a 40 percent drop in earnings, according to Chirantan Barua, an analyst at Sanford Bernstein Research in London. Barua has had an underperform rating on the stock since at least March, according to data compiled by Bloomberg.
The reputational damage alone from the regulator’s allegations is credit negative for the bank, Moody’s Investors Service said yesterday.
The cost of insuring Standard Chartered Bank debt from non- payment declined 4.6 basis points to 145 basis points yesterday, according to data provider CMA. The contracts have ranged between 122.7 and 195 this year, CMA data show.
Regulator’s Discretion
Lawsky is said to seek as much as $700 million to settle the investigation, according to a person familiar with the case. Standard Chartered has already agreed to a New York Department of Financial Services demand that the bank hire an outside monitor to ensure compliance with anti-money laundering laws, another person familiar with the matter said.
The regulator has grounds to shut Standard Chartered in the state even if he accepts the firm’s argument that it illegally laundered only a fraction of the $250 billion he claims.
As the state’s top banking regulator, Lawsky has power to act in his discretion against any financial institution he deems untrustworthy, according to the charter of his year-old department.
The potential settlement figure he is said to be considering would match the amount HSBC Holdings Plc (HSBA) set aside last month to resolve allegations of similar behavior.
Bloomberg
