Standard Chartered (LSE: STAN) is in trouble once again with US regulators. Andthis time it could be the end of the road for the bank if it is found guilty.
The current troubles stem from issuesthattook place around nine years ago. Standard Chartered was found guilty by US regulators of breaching US sanctions against Iran, for which it was forced to pay nearly $1bn in fines.
After settling with the authorities the first time around, Standard promised to stop working withIranian and Iran-connected companies. However, new evidence suggests that the bank continued to seek business with Iranian clients after promising regulators it would stop.
Unfortunately, this isnt the first time that Standard hasmisledregulators to boost business. Back in 2012 the bank was fined $667mby US regulators and signed a deferred prosecution agreementfor violating sanctions on Iran, Sudan, Libya and Myanmar. With such a checkered past behind it, some analysts have speculated that, if the latest set of accusationshassome weight behind them, Standard could be shut out of the global financial markets.
Shut out
Standard Chartered is currently being investigated by the US Department of Justice, the Manhattan district attorney, the Federal Reserve, the New York Department of Financial Services (DFS) and the New York attorney generals office, regarding potential new breaches of sanctions .
And if Standard is found guilty of violating sanctions,it is possible that regulators could suspend the banksdollar-clearing rights, which would be a crippling blow to Standards ability to conduct cross-border deals.
Such as drastic move israre, but Standard has fallen foul of regulators so many times in the past that the authorities might decide to make an example of the bank. Back in 2012, the DFS accused Standard of being a rogue institution, which left the US financial system vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes.
Time to bail out
Standard is being buffeted by all sides. A slowdown in Asia has knocked the banks income and aspike in losses on legacy loans is eating away at Standards capital reserves. The bank has already been forced to cut its dividend payout totry to save cash.During the first-half of the year, Standard was forced to write off $1.7bn worth of loans.
Whats more, as Ive written before,City analystshave estimated that around 20% of Standards total loan book is linked, directly and indirectly, to the commodity market. As commodity prices continueto slide,Standards financialsituation could be deteriorating almost every day.
The bottom line
Overall, its difficult to find anyreason to invest in Standard. If the bank is convicted of misleading regulators, it could face crippling sanctions. At the same time, the groups balance sheet is coming under enormous pressure and profits are sliding.It could be years before the bank returns to growth.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.