Regulatory accusations against Standard Chartered Bank aren’t affecting its credit rating, but Moody’s Investors Service says that it will be monitoring the case.
Earlier this week, the New York State Department of Financial Services (DFS), which regulates Standard Chartered in New York alleged that the bank systematically sought to evade regulatory requirements relating to transactions for Iranian clients while the country was under sanctions. It is requiring the bank, which denies the allegations, to explain its conduct at a meeting later this month.
Moody’s said Tuesday that it would view any limitation on Standard Chartered’s U.S. dollar clearing activities, which directly supports its global commercial and trade-finance franchise, as credit negative. The potential closure of Standard Chartered’s New York branch would have broader implications, in particular in terms of the firm’s reputation, it adds.
“The DFS has given no indication of the scale of potential fines, if any, in this case. However, from a ratings perspective, they are likely to be less significant than the franchise and control considerations,” Moody’s says, noting that Standard Chartered has a strong liquidity profile.
The rating agency says that it will closely monitor developments in the case; and notes that concerted actions by regulators that indicate serious concerns over the control environment at the bank, or which meaningfully curtail its core business activities would have negative rating implications; as would regulatory actions that inflict a sustained negative impact on the bank’s franchise, in particular a material loss of deposit funding.
Moody’s also notes that this case again “highlights the difficulty of large banks in assuring tight controls within their wholesale banking operations