True cost of Standard’s $340m payment for a quiet life yet to be calculated

What price a quiet life? Standard Chartered says $340m (€270m).

That’s how much the British bank paid to call off an assault from New York’s department of financial services, which had accused it of sanctions-busting trades.

Now here’s another question: Why would Standard pay so much, when it had loudly proclaimed that the suspect transactions amounted to just $14m?

Standard’s shareholders may be too relieved to ask. The shares rose as much as 5%t in Hong Kong on the settlement, which also involves installing a “monitor” at the bank’s offices. The UK-based lender’s market capitalisation is still about $5bn less than before the department called it a “rogue institution” on Aug 8, but at least the department now looks like a rogue regulator in full retreat.

Still, these numbers don’t obviously stack up. Dutch bank ING paid a settlement of $619m for about $1.6bn of similar transactions. Barclays paid $298m for transactions of about $500m, although those settlements were to different agencies.

More puzzlingly, the department says both sides agreed the transactions at issue were $250bn, a number Standard Chartered originally denied.

Of course, a fierce defence would have been risky for Standard’s shareholders. The department could be a powerful enemy and the loss of access to the US clearing system — the ultimate penalty — would have been a grave blow. But then again, in most worlds other than banking, to make unjust and untransparent payments in return for being left in peace would sound like giving in to blackmail.

However, there is another possibility: That Standard Chartered got its numbers wrong. But that would call the credibility of its key executives and chairman, John Peace, into question. For now, it isn’t saying.

Shareholders may be reasonably happy with this settlement, but they’re not always the best judge of what’s right. Paying to be rid of an angry regulator may make business run more smoothly, but sets a bad precedent and makes the economy less efficient. If $340m is the price of a quiet life, Standard Chartered now needs to explain why it’s worth it.

Standard Chartered settled accusations it had facilitated illegal trades for Iranian clients for $340m on Aug 14, according to the New York department of financial services. The city’s regulator had accused Standard Chartered of transactions contravening sanctions against Iran in a filing released on Aug 6.

Along with the civil penalty, Standard agreed to host a monitor for two years who would report directly to the New York department, as well as allowing examiners to be placed onsite at the bank.

The regulator said both sides had agreed “the conduct at issue involved transactions of at least $250bn”. Standard had previously argued that only $14m trades were potentially suspect. On Aug 15 the bank said it expected detailed terms of the settlement to be concluded shortly.


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