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.

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