Over the last 2 years, Europeans had been saying that the rating downgrades (by US rating agencies) of European countries in the middle of 'sovereign crises' were 'political in nature'. A few days ago, a German MP of the CDU ruling party of Angela Merkel said Europe must do whatever it takes to 'fight the attacks'.
Now in Aug 2012, FT reports that "British MPs accuse US of anti-City agenda"
Aug 2012: Standchart accepting transactions with Iran despite sanctions &
BOA downgrade standchart shares which plunged 8% or $16b drop in capitalisation. NY threatens to revoke license.
Jul 2012: HSBC money laundering for drug cartels
http://www.businessweek.com/news/2012-07-16/hsbc-aided-money-laundering-by-iran-drug-cartels-probe-shows
Jun 2012: Barclays LIBOR manipulation (see blog post)
Recently, a friend working in Rabobank HK said that US banks had been arranging with their counterparties to 'unwind' their derivative transactions. When viewed in context of the artifically low USD interest rates and huge derivative positions held by US banks (which were reportedly used to manipulate interest rates to keep the cost of their country's borrowings low) that is not surprising. I suspect that even their 'own gang' Brits are now betting on interest rates going up (that's why they are going after the UK banks) and US banks' attempt to unwind their derivative positions is to get rid of as much of those exposures as possible before they lose control of the interest rates especially when Europe gets their house in order and the focus turns away from Europe to the UK, US and Japan which have worse debt situations than Europe.
StanChart dives after Iran allegations, downgrades
Bank says it ‘strongly rejects’ New York regulator accusations
http://articles.marketwatch.com/2012-08-07/industries/33066479_1_stanchart-hsbc-holdings-plc-allegations
HONG KONG (MarketWatch) — Shares of Standard Chartered PLC tumbled in Hong Kong Tuesday after a New York regulator alleged that it “schemed” with Iran and hid transactions worth at least $250 billion, threatening to cancel its state banking license.
StanChart said Tuesday it “strongly rejects” the position and portrayal of facts by the New York State Department of Financial Services.
The U.K.-based bank, which has a strong focus on emerging economies, said in a statement on its website that more than 99.9% of transactions relating to Iran complied with regulations, and that those didn’t were valued at less than $14 million.
Shares of StanChart (HK:2888)(US:SCBFF) (UK:STAN) tumbled 7.4% in Hong Kong to 174.10 Hong Kong dollars ($22.45) in heavy volumes, with about 3.05 million shares changing hands in the first 100 minutes of trading.
On Monday, StanChart’s American Depository Receipts skidded 8.9%, while its London-listed shares sank 6.2%.
Tuesday’s drop came as Bank of America Merrill Lynch downgraded its shares to underperform from buy and slashed its price target to HK$186 from HK$219, “given the scale of the allegations and potential for loss.”
“While the underlying fundamentals and earnings growth of the group’s businesses remain intact, we believe the allegations leveled at StanChart by the [New York regulator] will weigh on the share price for the near term,” the BofA Merrill Lynch analysts wrote in a report Tuesday.
They added that the allegations were similar to those leveled against rival HSBC Holdings PLC (HK:5) (US:HBC) (UK:HSBA), but on a “bigger scale.”
Last month, a U.S. Senate committee said HSBC allowed its banking network to be used by drug traffickers, terrorists and rogue states to launder billions of dollars because of poor controls. HSBC admitted lax controls and promised to address the issue. Read full story on the Senate allegations against HSBC.
Analysts at Nomura, meanwhile, downgraded StanChart’s London-listed shares to neutral from buy.
In a report released Monday, the New York state DFS said its investigation and review of more than 30,000 pages of documents, including internal bank emails, “describe willful and egregious violations of law.”
For almost a decade, StanChart schemed with the government of Iran and hid roughly 60,000 transactions from regulators, involving at least $250 billion that helped the bank earn millions of dollars in fees, the DFS said.
The actions “left the U.S. financial system vulnerable to terrorists, weapon dealers, drug kingpins and corrupt regimes, and deprived law-enforcement investigators of crucial information used to track all manner of criminal activity,” the DFS report said.
The regulator directed StanChart to explain the apparent violations of law and demonstrate why its license to operate in New York state shouldn’t be revoked.
In its response to the allegations, StanChart said it doesn’t believe the DFS statement “presents a full and accurate picture of facts.”
It said the bank had in January 2010 “voluntarily approached” relevant U.S. agencies, including the DFS, with its review that focused primarily on transactions relating to Iran in the period 2001 to 2007, and in particular, its compliance with transactions that enabled U.S. dollar trade between Iran and other countries.
“The group’s review of its Iranian payments also didn’t identify a single payment on behalf of any party that was designated at the time by the U.S. government as a terrorist entity or organization,” StanChart said in its statement, adding that the bank had ceased all new business with Iranian customers more than five years ago.
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