Standard Chartered faces $13.6b fine for Indian bank takeover

Enforcement Directorate, the Indian anti-money laundering agency, has slapped Standard Chartered bank with a $13.6 billion fine for breaking the country's foreign exchange rules in a 2007 local bank takeover deal.

The orders for the fine was passed in August, making it one of the largest fines imposed by any Indian agency on an oversees lender. It is, however, not clear if the bank will pay the fine or appeal against the order.

As reported by Bloomberg on Tuesday, the hefty fine was imposed after a probe continuing for eight years involving the purchase of a stake in Tamilnad Mercantile Bank Ltd. in 2007.

The agency was investigating the transfer of 46,862 shares of the local bank to overseas investors without seeking the permission of the Indian central bank, which is mandatory for such transactions. The foreign investors include GHI Ltd., Swiss Re Investors, FI Investments, and Cuna Group. The order also detailed that a portion of the shares was then transferred to Standard Chartered affiliate Sub-Continental Equities Ltd in 2008. The British lender did not seek permission from the monetary regulator for that transaction either.

Furthermore, Standard Chartered is also blamed for providing custodian services in the deal. The agency found that the international bank has violated the country's foreign exchange management act that monitors offshore financial transactions. The agency also fined Tamilnad Mercantile Bank with around 170 million rupees (around $2.3 million) for similar charges. "Senior officials at Standard Chartered saw an investment in TMB shares as an opportunity that might ripen into an eventually larger ownership for the bank," Sushil Kumar, a special director at the Enforcement Directorate, stated in the order.

"Standard Chartered through its affiliate Subcontinental was a proposed and eventually an actual investor in TMB shares to be purchased through the escrow agreement arrangements." Asian markets ticked higher Tuesday as investors edged back after last week's steep drops, brushing off Donald Trump's latest anti-China salvo, while sterling struggled to bounce back after fears over Brexit trade deal talks.

With New York closed for a public holiday, dealers took a positive lead from Europe and took the opportunity to pick up cheaper stocks. Despite continued uncertainty about the timetable for economic recovery-and with no vaccine yet available-investors remain safe in the knowledge central banks around the world are willing to play backstop and keep monetary policy supportive for years to come.

The wall of cash put up by authorities has been credited with fuelled an incredible surge in world markets from their March troughs, led by tech firms which have benefited from people staying at home during the pandemic.

Last week's harsh sell-off brought that rally to a juddering halt but analysts do not expect a retreat anything like that seen earlier in the year. "The sell-off provides a stark reminder that with everybody holding on to the same side of the vaccine life-raft, it should not be too unexpected that when the seas turn rough, many will fall into the drink on the first significant starboard list," said Stephen Innes at AxiCorp. "Still, investors have ample flotation thanks to the Federal reserve, and the fiscal harness would allow them to hurry back aboard with relative ease if they so choose."

Tokyo, Hong Kong, Seoul and Sydney all rallied, while there were also gains in Shanghai, Taipei, Singapore, Jakarta and Wellington. There was little initial reaction to Trump's warning that he wanted to wind back Washington's economic relationship with China, warning he would stop US firms doing business with the country from winning federal contracts.

"We'll manufacture our critical manufacturing supplies in the United States, we'll create ' made in America' tax credits and bring our jobs back to the United States and we'll impose tariffs on companies that desert America to create jobs in China and other countries," the president said in a White House news conference.

He also said he would "hold China accountable for allowing the virus to spread around the world". The remarks are Trump's latest outburst against Beijing as he looks to win re-election in November, though observers said that while tensions between the two countries continue, their pledge to stick to the trade pact signed in January has soothed many investors' worries for now.

On currency markets the pound was unable to bounce back from losses after Prime Minister Boris Johnson revived the prospect Britain will not get a post-Brexit trade deal with the European Union, saying if a deal is not struck by October 15 then there will not be one. That was followed by reports the government was planning legislation to override parts of the Withdrawal Agreement that would undermine issues relating to Northern Ireland customs and state aid. The eighth round of negotiations resume this week, with both sides talking increasingly tough and sparking accusations of intransigence and political brinkmanship.