Shares in Standard Chartered rallied yesterday after news that it agreed to pay $340 million to a New York regulator to settle accusations that it hid illegal transactions with Iran and violated U.S. sanctions law.
The New York State Department of Financial Services had threatened to revoke the bank’s license to operate in New York, which would have wiped out Standard Chartered’s dollar-based businesses.
The DFS’s Superintendent, Benjamin Lawsky, said Tuesday the bank will pay the civil penalty to the state and has agreed to strengthen oversight of overseas transactions. A hearing on the issue scheduled for yesterday in New York City was adjourned.
Shares in Standard Chartered closed 4.4% higher in London trading at 1,430 pence. The bank’s stock had fallen by nearly 12% since regulators announced its charges last week.
However, the bank’s dealings with Iran are under investigation by the U.S. Department of Justice, the Treasury and the Federal Reserve. Analysts say investors are likely to remain cautious about its shares matters are resolved.
The U.S. imposes financial sanctions on its political enemies to hinder their access to the global financial system. The goal is to choke off banks and other sources of capital, limiting their economic growth and their ability to buy weapons, food and other items available through global trade. Sanctions ensure that U.S. banks don’t get involved in the process.
Carl Levin, chairman of the Senate Permanent Subcommittee on Investigations praised the actions of the DFS. “The agency… showed that holding a bank accountable for past misconduct doesn’t need to take years of negotiation over the size of the penalty,” he said in a statement. “It simply requires a regulator with backbone to act.”
In a brief statement to the market, Standard Chartered said it continues to engage constructively with the other U.S. agencies.
“While not wishing to down play the magnitude of such a settlement, we think this is an excellent outcome for the group, in terms of the size of the settlement, the fact that the banking license has been retained and the speed with which the issue has been resolved,” said Gary Greenwood, analyst at Shore Capital in London.
Other British banks have faced investigations for possible breaches of U.S. laws.