Wednesday, 15 August 2012

Money, dirty money...


Standard Chartered and the New York Department for Financial Services (NYDFS) have rushed a settlement agreement over the weekend which will see the British bank paying $340m to the regulator for alleged illegal transactions with Iran. The Wall Street Journal reports that The settlement took the form of a term sheet signed by Mr. Sands that spelled out the key points in the agreement, including the monetary penalty” and that “because the deal was struck so quickly, the final settlement agreement is yet to be drafted in its full legal format”.

We certainly understand the reasons why Standard Chartered would want to strike a quick settlement, even if expensive and unfair. From their perspective they need to get the issue out of their way as soon as possible and move on with business as usual in order to avoid further uncertainty and support the share price. What we do not know for certain is why the regulator has agreed to such a quick and cheap deal. As Zerohedge reports the NYDFS has settled for a ridiculous 0.14% per each allegedly illegal transaction. If the NYDFS is really acting to protect Americans and to avoid dealings with terrorist regimes around the world, as the strong language used in last week’s order against the bank seemed to suggest, it should have not settled the case or, at least, should have imposed a far greater fine in line with the alleged crimes committed and also to set a clear example to other banks.

However, this time around it is not a banking scandal that we are witnessing. This is a regulators' scandal. A “rogue” regulator pushing the limits, acting with impunity and aiming to elevate its status and public image as well as cashing in some additional funding. After all, in the public sector, as in the private, it’s all about status, reputation, power and money, a big bunch of dirty money...

And by the way, do not believe the BBC and other left leaning media headlines. The fact that in the settlement Standard Chartered acknowledged that the fine covers all the transactions that the New York regulator claims were illegal does not mean that the transactions were actually illegal. Nothing has been proven so far and therefore I believe Standard Chartered is innocent until proven otherwise. Standard Chartered is simply protecting itself for future legal proceedings by covering all transactions the NYDFS claimed to be illegal. That is how settlements work: nothing is proven or admitted and the defendant tries to close the loop to avoid further proceedings. Only fools or extremely biased people could confuse these concepts.

Tuesday, 7 August 2012

What are the real reasons behind US authorities vs. Standard Chartered?

The US authorities have recently hit on HSBC and Barclays with hefty fines for breaching anti money laundering laws and massive settlement payouts for alleged Libor rigging. But this week the spotlight turns to Standard Chartered which has been beaten up by strong language and accusations from US officials. Share price was tumbling today.

You may think that this is just a coincidence or perhaps you are a bit suspicious like me and think that possibly there is something else behind these fines. If I know something about regulators and politicians is that behind every action they take there is always a broader intention, a priority. Regulators focus their limited resources in certain priorities as we all do. Priorities are decided regularly at the top level and these top officials expect results. According to the results, these couple of years it seems that UK banks were a priority. The question then is, why UK banks? Following an easy logic the answer would be that US authorities are attempting to destroy the financial powerhouse that is the City of London and bring all that business (and revenue) to New York.

Perhaps too simple to be true and perhaps I am making too many assumptions some may argue. But don’t be fooled. Politicians and regulators are very simple and  unsophisticated men trying to appease normal folks, so do not expect over-engineered intentions or actions in whatever they do. 99% of the time it will be a simple action to obtain a simple and visible (especially visible to voters) result. In this case, it may be a hike in revenue to pay for crazy Obamanomics spending or possibly to improve the general economy indicators ahead of next year’s presidential election.

Whatever the motive is, I betcha  stopping the Iranian regime to move funds across the world is the facade and the least of their worries.