StanChart faces huge fine as Barclays chairman ponders current account fees

Standard Chartered is attempting to reach a settlement ahead of a Wednesday hearing with New York regulators, David Walker says Barclays may charge for current accounts, and Coutts gets even more exclusive.

by Michael Northcott
Last Updated: 19 Aug 2013

The situation with Standard Chartered is looking increasingly desperate as it battles to reach a settlement with the New York Department of Financial Services. The scuffle arose after the regulator accused StanChart of violating US law that makes dealings with Iranian entities illegal, and the regulator want its pound of flesh for the breach. But rumour has it the bank is trying to settle with a $500m fine. That will make a huge dent in its £4bn profit fore the first half of this year, and the regulator may just kick the offer into the high grass.

StanChart’s share price plummeted last week after the allegations came to light, over fears that the bank could lose its license to trade using the US dollar. This would wipe out its Asia business, which accounts for more than 40% of the bank’s revenues. Shareholders are also worried that the bank will not be able to reach a settlement at all: the DFS says that the breaches of US law apply to $250bn worth of transactions, whereas StanChart reckons only $14m worth is affected. The row is certainly doing wonders for the profile of the previously unknown US regulator and its ambitious boss, Benjamin Lawsky.

However much it ends up costing, the fine will be the third such punitive measure faced by the banking industry in as many months. Earlier this year, ING was fined $619m over sanctions breaches, and in recent weeks HSBC has been setting aside the best part of a $1bn to pay fines in relation to money laundering legislation. No doubt the top brass at the Wall Street watchdogs will now looking for a hefty pay rise…

Talking of banking scandals, the Libor fiasco is still garnering column inches after new Barclays chairman Sir David Walker said he was looking to install a new CEO within days, and plans to reform pay at the bank. He also said that ring-fencing the investment and retail banking functions will be sped up, and that he agrees ‘in principle’ with the idea of making customers pay a monthly fee for their current account. If Barclays starts charging, the change could herald the end of ‘free’ banking altogether. It is pretty hard to make serious money out of high street banking at the moment. Prepare to add another bill to the monthly outgoings.

And in the more discreet spots on the high street, the private banking model may also be under revision. The Queen's banker, Coutts has decided decided to change its customer focus. Its old minimum investable assets threshold was £500,000, but earlier this year, CEO Alex Classon told MT: 'We would expect a client to have at least £1m in liquid assets.'  Today the bank insisted it is not kicking out older customers with smaller assets than that, but it is clear that it wants bigger money on its books. The move signals a change from the service-focused private banking offering to a full-blown asset management focus. So if you thought you were big time with your Coutts chequebook and half a million in the bank, you might have to think again…

We doubt the fines, the post-Libor changes, or the increasing elitism at Coutts will affect service to your average account-holder. But after a year of abuses, it’s certainly a decent circus for the put upon British bank punter. Although the Olympic closing ceremony cheered us up a bit. 

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