StanChart credit head describes ‘horrific’ loss of regulators’ trust

A senior banker has warned of the breakdown in trust between banks and regulators, during the Annual Risk Management convention run by the Global Association of Risk Professionals in New York this week.

Robert Scanlon, group chief credit officer at Standard Chartered, told the conference that relationships with regulators have changed dramatically over the last five years. “Nobody will put their hand up and say five years ago they were worried about having a conversation with the regulator at that time because it wasn’t the same.

“But right now, it is horrific. First of all they don’t believe you and they start off not believing you so your proof points go up, your evidence points go up, the time you have to prepare for a meeting goes up.”

Over the past five years, authorities in the US and elsewhere have uncovered a raft of cases in which banks have deceived their regulators, their customers and each other. Standard Chartered is no exception. In August last year, the New York Department of Financial Services announced that Standard Chartered Bank, “schemed with the Government of Iran and hid from regulators roughly 60,000 secret transactions, involving at least $250 billion, and reaping SCB hundreds of millions of dollars in fees. SCB’s actions left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes, and deprived law enforcement investigators of crucial information used to track all manner of criminal activity.” 

Standard Chartered Bank “operated as a rogue institution” by removing the information identifying the transactions as Iranian in breach of US sanctions, the regulator added.

The bank paid $340 million to settle the charges, and agreed to enhanced monitoring of its compliance and anti-money laundering functions.

Scanlon stressed the importance of consistency within an organisation in its dealings with the regulator. However, he added this could be difficult to police.

“It is harder to get a relationship now than it was five or six years ago, but if you don’t have it your disadvantage is absolutely huge,” he told the conference. “Secondarily you have to orchestrate [matters] to ensure everybody does actually say the same thing – not because you make it up but because it is true.”

He said this was crucial because regulators now forensically examine their own minutes to pull out inconsistencies in what people may have said. “And if you fall foul of that, it’s horrific,” he added.

 

This article was first published on Risk

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