Tim Geithner tells chancellor that US regulators investigating handling of Iranian money will try to coordinate their actions
US Treasury secretary Tim Geithner has reassured George Osborne that US regulators investigating breaches of sanctions by Standard Chartered will try to coordinate their actions.
As the London-based bank prepares for a hearing with New York state’s department of finance services regulator, which has accused it of moving $250bn of Iranian money around the financial system, the chancellor has sought assurances that the bank will be treated fairly.
Osborne and his team spoke to Geithner and officials on Tuesday and received assurances that the US Treasury’s Office of Foreign Assets Control (OFAC) would work with the myriad of other regulators looking at Standard Chartered’s dealing with Iranian clients between 2001 and 2007.
Sir Meryvn King, the governor of the Bank of England, had already called publicly for the US regulators to work together after the surprise decision by the New York regulator to publish an order against Standard Chartered on Monday.
While the bank had known since 2010 it was being investigated for breaches of sanctions – it had shared information with regulators – it had not expected the New York regulator to go it alone in making public the alleged range of the breaches of the rules.
A government source said the chancellor had been deploying quiet diplomacy in contacting his US counterpart amid claims that some US politicians were trying to undermine London’s position as a financial centre. Osborne, however, is thought to have made clear that breaches of rules should not be tolerated.
The credit rating agency Fitch warned on Thursday that it might downgrade the bank’s credit rating as result of the accusations, which the bank strongly denies.
Fitch said: “The accusations and strong market reactions to it have damaged the bank’s reputation and it is possible that its franchise will suffer depending on how and when the case is resolved.”
There is speculation that the regulators would agree on a fine for the bank before Wednesday’s hearing although this seems unlikely given the scale the disagreement between Standard Chartered and the regulatory bodies.
Peter Sands, the bank’s chief executive, argues that while the regulator is focusing on $250bn of payments channelled for Iranian clients, the bank believes that the sum is closer to $14m.
The discrepancies relate to interpretation of the rules on U-turns which allow the banks to deal with Iranian clients as long as the money does not end up in US bank accounts.