Standard Chartered tells thousands of UAE firms it's shutting their accounts
Exit meets deadline of New York regulator that fined bank for risky transactions
Standard Chartered said it would exit part of its small and medium-sized enterprises (SME) business in the United Arab Emirates, leading to the closure of thousands of accounts there.
The UK-based bank's move comes after a New York regulator fined the bank US$300 million in August for failing to flag high-risk transactions in the UAE and Hong Kong.
At the time, the regulator gave the bank 90 days to exit its high-risk SME business in the UAE.
The closure of accounts in the UAE did not foreshadow the shutting down of SME accounts in Hong Kong, analysts said, as the regulations that Standard Chartered must comply with in the UAE were tougher than in Hong Kong.
Standard Chartered would exit businesses in the UAE "where increased regulatory costs could undermine their economic viability", it said in a statement.
Thousands of customers in the UAE had been notified that their accounts would be closed in 30 days, Reuters reported yesterday, drawing complaints that the bank did not give sufficient warning.
A "select number of clients" in the SME sector would be brought under a newly created business for "commercial clients", according to the statement. "This newly formed segment looks at banking mid-sized enterprises with annual sales turnover in the range of US$10 million up to US$150 million with a strategic focus on clients that will trade, expand and invest across Asia, Africa and the Middle East," the statement said.
The New York Department of Financial Services in mid-August fined Standard Chartered US$300 million after its New York branch failed to flag high-risk transactions from clients in Hong Kong and the UAE.
In Hong Kong, the implementation of new regulations would not result in sweeping account closures, analysts said.
"The regulations are simply less onerous in Hong Kong," said Ian Gordon, a banks analyst at Investec Securities, noting that rules explicitly required the bank to close certain accounts in the UAE within the 90-day period. "The scale of impact in the UAE is considerably higher."
The US regulator has required Standard Chartered to suspend some dollar-denominated payments in Hong Kong.
The bank's share price in Hong Kong yesterday closed up 1.7 per cent at HK$134.
