Tuesday, August 7, 2012

Standard Chartered gets hammered over Iran

Security is very tight as we arrive to HQ. The attack has been less then six hours ago and they already conducted an initial security sweep and analysis of the most recent events. HQ has been on lock-down and the entire security system has been revamped in record time. My security detail and I arrive at the first check-point and endure the procedure to gain access to the ground floor.

One of my colleagues already inside HQ rushes over as I relieve my security detail of their duties while inside the building. I command them to get some much needed and well deserved rest. My colleague asks me if I was briefed on the Standard Chartered situation on my way to HQ to which I simply shake my head. I did not get any information and ask him for the short version as we are headed to the elevator check-point which was set up after that attack. Only senior members with top security clearance are allowed past this point.

Standard Chartered may face losses in excess of $5.5 billion to to its transactions with Iranian financial institutions which face sanctions by the U.S. Standard Chartered is being accused of violating U.S. anti-money laundering laws. Iran booked transaction worth over $250 billion with Iranian banks over the past seven years. The bank has pocketed hundreds of millions of dollars in fees associated with those transactions.

Here is a quick overview of what Standard Chartered may face in its very near future:

1. $1.0 billion in lost revenues from its Iranian business transactions.

2. $1.5 billion in fines from U.S. regulators.

3. $3.0 billion in lost valuations due to the resignation of senior management.

4. The banks U.S. unit will be expelled from the U.S. and banned from doing business in the country.

The last point will have a very limited impact on Standard Chartered as the bank earns over 90% of its revenues from Asia, Africa and the Middle East. The bank saw its share price drop as much as 24% today and Standard Chartered strongly rejects the accusations of the U.S. regulator. One executive said what needed to be said when asking who the U.S. was to tell the bank as well as the rest of the world who to do business with.

Standard Chartered had a total of $14 million which were not in compliance with regulations while the rest was in compliance. The charges brought forward by the U.S. regulator are ridiculous and a desperate attempt to shore up much needed revenues for the U.S. which struggles with its budget situation.

The loss if its U.S. banking license in New York, the bank's headquarters for its U.S. operations, will have an impact on its ability to process U.S. Dollar transactions which the bank will solve faster than the Department of Financial Services, the U.S. Department of Justice, the U.S. Treasury Department, the Federal Reserve Bank of New York and the New York District Attorney can finish their case against the bank.

Let's face it; the U.S. is pissed that London became the financial capital of the world after the U.S. imposed new laws and regulations and a decade later they go after U.S. units of British banks. This will have severe consequences for the U.S. before the decade will turn. Barclays, Lloyds and HSBC were fined already over similar accusations and unfortunately all have settled. Eventually the leftovers of the U.S. units will flee the country and take their tax revenues with them.

I thank my colleague for the short brief. He is not allowed on the upper floors do to lower security clearance and I make may way through the security check-point into the elevators. Armed guards are stationed everywhere and the rest of chain of command is already in the conference room to discuss our future steps. I enter the elevator and I am on my way to the conference room.

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