Bank of England Governor Mervyn King criticized New York regulator Benjamin Lawsky for failing to coordinate the announcement of the probe into Standard Chartered Plc over alleged violations of money laundering laws.
“I think all that the U.K. authorities would ask is that the various regulatory bodies that are investigating a particular case try to work together and refrain from making too many public statements until the investigation is completed,” King said at a press conference in London today. “That seems to be the appropriate time to make clear what the judgment is and what the punishment is.”
Standard Chartered shares have slumped 15 percent in London this week after the New York banking superintendent threatened to withdraw the bank’s license in the state, saying it processed $250 billion of deals with Iranian banks subject to U.S. sanctions. King suggested the 290-million pound ($454 million) fine levied by U.S. and U.K. authorities on Barclays Plc in June following the submission of false London interbank offered rates had been better handled.
“In the Libor case, all the regulators involved, whether it was in the U.S. or the U.K., produced coordinated publication of reports which came out after the investigation was completed and they had made their judgement,” he said. “That’s very different from what’s happened in the Standard Chartered case, where one regulator, but not the others, has gone public while the investigation is still going on.”
Standard Chartered might be asked to pay as much as $700 million to resolve the claims filed on Aug. 6 by the New York’s Department of Financial Services after the regulator moved forward alone on a probe that has been ongoing for more than two years and involves various federal agencies.
Lawsky, who runs the DFS, tried unsuccessfully a few months ago to get U.S. regulators to punish the U.K. bank and grew impatient with inaction, a person familiar with the case said. The person asked not to be identified because the matter is confidential.
Standard Chartered, which has said it will “vigorously” contest the regulator’s findings, is also being investigated by the Federal Reserve Bank of New York, the Justice Department and the New York District Attorney.
“I’m not going to prejudge what that will show, but clearly if there has been wrongdoing, then action should certainly be taken,” King said today. He also said he doesn’t see the investigation as a U.S. measure to wage an anti-British trade war.
“Overall, I don’t judge my colleagues in the U.S. as having any such intention,” he said.
Future of Libor
Asked about the future of Libor, which is used to price about $500 trillion of derivatives worldwide, King said the financial crisis had meant there was no longer a common interbank lending rate as funding costs were now being determined by the credit risk associated with individual banks.
“The fundamental question that people need to face up to is, ‘Does it make sense to place hundreds of billions in dollars and pounds of transactions on linking to something that doesn’t actually exist?” he said. “That may lead people to think about the overnight policy rate, a rate which always does exist.”