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Standard Chartered heads down, down and down

Shares in Standard Chartered have had an absolute savaging this morning on the stock market in London. At one point they were down almost 25%. To put that into context shares in Barclays fell 15% when news of their involvement in rigging interest rates broke. There have been bigger falls, for example RBS lost 40% in one day during the teeth of the credit crunch back in 2008. But dives like this are extremely unusual, and extremely serious for any company.

The Standard Chartered building in the City of London Credit: Yui Mok/PA Wire

So what is going on? Well the bank itself issued a very strong statement saying the New York regulators have described the facts of the case wrongly, saying 99.9% of transactions with Iran were fine. But interestingly, they have owned up to $14 million of questionable transactions - not a total, emphatic categoric denial of all of the charges. It seems more likely at this stage that the bank will end up with a whopping fine rather than the more extreme action of losing their licence and being drummed out of Wall Street. But the fine could be as much as a billion dollars. Even with profits of seven billion dollars, that is still an extremely heavy financial price to pay, and the cost to the bank's reputation more serious still.

Interestingly though there are whispers among the powers that be in London that the bank in part is victim to an overly zealous regulator in Manhattan. The regulator involved, incredibly called Benjamin Lawsky, is described as someone who is keen to make his name. The agency he works for was only created 10 months ago and also wants to make its mark. One senior Westminster source suggested to me that there must have been some negligence, but it was very unlikely the Americans would be able to make all of the charges stick. Another said that many of the allegations fall in a legally grey area. That said, share price falls on this scale are just not sustainable for any company. What is seen by some as drastic action against what is generally considered to be a well respected bank, may yet prove to require a drastic response.

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