Standard Chartered to set aside US$900 million for potential fines in US, UK inquiries
- British regulators plan to fine the bank US$133 million
- Standard Chartered is set to report its full-year results on Tuesday
Standard Chartered said on Thursday that it planned to set aside US$900 million in the fourth quarter to cover potential fines for its past conduct after regulators in the United Kingdom indicated they planned to fine the bank.
The bank, which is based in London but generates much of its revenue in Asia, has faced scrutiny from regulators over its prior dealings with clients facing US sanctions, paying a US$1.9 billion settlement in 2012.
It said on Thursday that the UK’s Financial Conduct Authority had issued a notice imposing a £102.2 million (US$133.2 million) penalty in an inquiry “concerning the group’s historical financial crime controls”.
Standard Chartered, which is set to report its full-year results on Tuesday, said it was “considering its options” in relation to the notice.
The British watchdog declined to comment on Thursday.
Following the announcement, the bank’s shares closed 0.55 per cent lower at HK$63.45 in Hong Kong.
Standard Chartered chief executive Bill Winters, who joined the bank in 2015, is eager to conclude the various regulatory inquiries for past conduct that have continued to hang over the lender.
“Concluding these historical matters remains a focus for us,” Winters said in September.
Srikanth Vadlamani, a senior credit officer at Moody’s Investors Service, said the bank’s strong capital base should help it absorb any one-off penalties for legacy issues.
“While the US$900 million in litigation provisions will have a negative impact on profits, given the large amount, the figure is equivalent to only 2 per cent” of the bank’s common equity tier 1 capital, Vadlamani said. He was referring to a measure of capital consisting largely of common stock.
In 2012, the bank agreed to pay a settlement of US$1.9 billion in an investigation by US regulators into whether it had transferred billions of dollars on behalf of Iranian clients and others facing American sanctions. The conduct at issue took place between 2001 and 2007.
A deferred prosecution agreement with the US in that case has been extended several times since 2014.
Since the settlement, Standard Chartered has overhauled its anti-money-laundering controls and established a board-level financial crimes risk committee to oversee its compliance efforts.
Last month, the bank said it had agreed to pay a US$40 million civil penalty to settle an inquiry by the New York State Department of Financial Services into “past control failure and improper conduct” in its currency trading business. The conduct at issue in that inquiry occurred between 2007 and 2013.
On Thursday, Standard Chartered said it was setting aside the US$900 million provision to cover potential penalties related to a series of previously disclosed investigations, including the FCA case, a US investigation into its potential historical violations of American sanctions laws and inquiries into its foreign exchange business, including the New York settlement announced in January.
“Resolution of the US investigation and of the FCA process might ultimately result in a different level of penalties,” the bank said.
The latest provisions come at a time investors have been expressing frustration with the pace of the lender’s turnaround.
Since joining in 2015, Winters has overhauled the bank’s executive ranks, cut 15,000 jobs and sold several underperforming businesses.
The lender’s shares are off 30 per cent from its 52-week high set last February, which has fuelled the frustration of some investors.
