"Billion-dollar banking scandal" is becoming the new "Dog bites man."
The banking industry hasn't exactly been hitting it out of the park lately in terms of public relations, and the latest news about U.K.-based Standard Chartered Bank probably isn't going to help things. This week, the massive British bank agreed to pay New York's Department of Financial Services $340 million to settle charges that it laundered money for Iranian nationals trying to skirt U.S. sanctions.
From Liz Rappaport of The Wall Street Journal:
The sum is the largest fine ever collected by a single U.S. regulator in a money-laundering case. The agreement came just eight days after the regulator, Superintendent Benjamin M. Lawsky of the state Department of Financial Services, stunned the banking world, and fellow U.S. regulators, by accusing the fifth-biggest U.K. bank by assets of illegally scheming over a decade to hide more than 60,000 financial transactions totaling $250 billion for Iranian clients. The allegations and the settlement, which were first reported by The Wall Street Journal, sparked criticism of Mr. Lawsky from senior U.K. officials, including central banker Mervyn King.
It's been a tough summer for global banking giants when it comes to huge national scandals. Just last month, three American banks were accused of manipulating Libor, the key international interest rate used as a benchmark for many variable-rate consumer loans.
July also saw global banking giant HSBC accused of laundering billions of dollars for Iranian clients and Mexican drug cartels. Then, of course, there were the allegations that JPMorgan Chase manipulated the California energy market and cost California utility customers up to $200 million.
Even if you take the banks' word for it when they claim that incidents like these are the result of poor oversight, rather than, say, actions tacitly sanctioned by top management because they make big piles of money, they've been making a great case recently for an even broader regulatory crackdown and/or a government-sponsored split-up. After all, if banks have grown so large that multibillion-dollar violations of U.S. law go unnoticed for years, it may be they've grown too large to be effectively managed, and that doesn't serve U.S. taxpayers, or these banks' shareholders, particularly well.
What do you think? Should the biggest banks be broken up? Or are we just talking about a few bad apples?
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