Standard Chartered Plc’s settlement with New York regulators indicates authorities are finding that banning banks from certain businesses is a more effective punishment than just fining them for wrongdoing, Fitch Ratings Ltd. said.
“These restrictions may have longer-lasting implications for banks’ business profiles than one-off fines,” Fitch said in the statement today. “This may be a useful way for the enforcement authorities to remedy identified weaknesses for banks more broadly, instead of withdrawing business authorization completely.”
As part of the agreement with the New York Department of Financial Services on Aug. 19, Standard Chartered will pay a fine of $300 million, suspend dollar clearing work for high-risk clients in Hong Kong and stop some services for high-risk customers through United Arab Emirates branches. The bank will also need to get regulator approval before undertaking new dollar-clearing clients.
Standard Chartered has been under the scrutiny of an independent monitor imposed to ensure compliance with sanctions and money laundering rules by Superintendent Benjamin Lawsky’s office two years ago, part of a wider $667 million settlement over breaches of U.S. bans concerning Iran. The settlement with Lawsky’s department follows a record $8.9 billion fine for BNP Paribas SA (BNP) from U.S. authorities earlier this year.
“It’s embarrassing,” said Chris Wheeler, a London-based analyst at Mediobanca SpA with a neutral rating. “It feels as though the U.S. regulator is running your business.”
The restrictions could be a more effective method of penalizing banks in future, Fitch said.
The settlement suggests a “lack of sufficient internal controls and compliance mechanisms,” said the ratings company, which gives the bank a AA- rating with a stable outlook. “We will assess the potential broader impact of the settlement on Standard Chartered’s ratings during the coming weeks.”
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