Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
Everyone's heard of Citibank (NYSE: C ) and Bank of America (NYSE: BAC ) . Most people know JPMorgan Chase (NYSE: JPM ) and Goldman Sachs (NYSE: GS ) . Some people have even heard of Bank of New York Mellon (NYSE: BK ) . But before eight days ago, how many people had heard of Standard Chartered: the big U.K. bank that suddenly blew up all over the news, engulfed in allegations that it had secretly been dealing with the Iranian government?
But as quickly as the flames of scandal arose, they seem to have been extinguished, at least as far as New York state is concerned. StanChart, as it's commonly known, has agreed to pay $340 million to settle the charges the Empire State's regulatory agency made against it, putting an end to what was shaping up to be a full-on fight between U.S. and U.K. banking regulators and yet another drawn-out drama involving misbehaving big banks.
New York's Department of Financial Services brought the suit against StanChart. Superintendent Benjamin M. Lawsky had accused the bank of hiding up to $250 billion in transactions with Iran over a 10-year period. Lawsky went so far as to call the bank a "rogue institution," one that left "the U.S. financial system vulnerable to terrorists, weapons dealers, drug kingpins, and corrupt regimes."
The showdown between DFS and StanChart had been scheduled for today, in a meeting in Manhattan between bank officials and state regulators. At stake was the bank's ability to operate in the state of New York -- a big deal for a global bank like StanChart.
When money gets dirty, someone has to wash it
Big banks from around the world have had a tough time of it for more than five years now. Except for BNY Mellon, all of the American banks I mentioned took a financial pounding during the crash, even as they were dealing one out to the rest of the economy. Germany's Deutsche Bank also played a key role in the financial crisis. Two of Britain's biggest banks, Lloyds and Royal Bank of Scotland, were partially nationalized in the economic tumult.
And not too long ago, the LIBOR scandal erupted. The London Interbank Offered Rate is the interest rate banks and companies around the world use as a starting point for financial products and services. It was recently revealed that LIBOR had been manipulated, going back at least as far as the financial crash. While that scandal has slowly migrated off the front page, it's far from over: In fact, as consumers, businesses, and governments around the globe get their lawsuit machines in motion, it's probably just getting started.
So the last thing banking needed was yet another hit to its reputation, and the StanChart allegations are a big one. Sanctions of one sort or another have been in place against the Iranian government since the shah was overthrown in the country's 1979 Islamic uprising, so everyone knows you're not supposed to be dealing with Iran in any way, shape, or form. StanChart was specifically accused of stripping out coding that would have tipped off U.S. regulators to the fact that the bank was processing money for Iran -- a nice way of saying "laundering."
Instead of just saying "sorry," try being a financial steward
So far, no one is specifically saying that StanChart copped to the allegations, but the very nature of the last-minute deal strongly implies that's exactly what happened. But even that doesn't mean the worst is over for StanChart: There are four more U.S. regulators making similar charges that aren't part of today's settlement.
The world needs good banks. Our economic system can't survive without them. People need to be able to trust banks, and the people who run them, once again. But just when it seems like it's safe to go back into the bloodied, moneyed waters, another scandal erupts. Gillian Tett, Financial Times reporter and author of one of the seminal books on the financial crisis, Fool's Gold, has a solution, which she put this way in a recent column about the Bob Diamond/Barclays scandal: "Instead of just saying 'sorry,' try talking about being a financial steward, too. And then act as if you mean it."
Well put. Here's to that. And here's to a big bank that, even in the run-up to the financial crash, managed to keep its nose clean and avoid many of the pitfalls that befell its peers. It's one of the few big banks today that can be recommended as a good investment. Learn more about it in this Motley Fool special free report: The Only Big Bank Built to Last. Download it while it's still available.