Iran probe widens to 2 more banks

RBS and Commerzbank fall under US checks over a possible breach of economic sanctions

PUBLISHED : Thursday, 23 August, 2012, 12:00am
UPDATED : Thursday, 23 August, 2012, 2:13am


US authorities are investigating Royal Bank of Scotland and Commerzbank over possible breaches of sanctions on Iran, in a widening crackdown which has already cost Standard Chartered a hefty fine.

An RBS spokeswoman declined detailed comment but referred to disclosures published with the bank's half-year results earlier this month. These disclosures said RBS had initiated talks with US and British authorities on whether it complied with economic sanctions on Iran, and that it could face a "material impact" from the investigation.

The inquiry raises the possibility of a substantial punishment for the part-nationalised British bank, which is also being investigated for its involvement in the Libor rate rigging scandal, ramping up pressure on chief executive Stephen Hester.

The US first imposed sanctions on Iran more than 30 years ago but has tightened them in recent years as it tries to stifle Tehran's nuclear programme.

In the disclosures accompanying the RBS results on August 3, the bank said it had "initiated discussions with UK and US authorities to discuss its historical compliance with applicable laws and regulations, including US economic sanctions regulations".

These followed an internal review begun by Hester after his arrival at the bank in 2008.

"The investigation costs, remediation required or liability incurred could have a material adverse effect on the group's net assets, operating results or cash flows in a particular period," the bank said. RBS had been making similar disclosures for the past 18 months, the spokeswoman said.

The scale of the transactions being investigated at RBS, which is 82 per cent owned by the taxpayer, was not clear.

The Financial Times reported yesterday that the US Federal Reserve and the Department of Justice were conducting the investigation, citing several people close to the situation. It cited a person familiar with the situation as saying one risk manager had already left the bank following the internal review.

A spokesman for the Federal Reserve said it could not "comment on supervisory matters pertaining to individual institutions". A representative at the Justice Department did not respond to a request for comment.

Germany's second-biggest lender, Commerzbank, also said in a regulatory filing that US investigations into violations of sanctions on Iran and other countries could hold "considerably negative" consequences.

Commerzbank, which is 25 per cent owned by the German government, said US authorities were investigating whether its dealings with Iran, Sudan, Myanmar, North Korea and Cuba had violated US embargoes, and pointed out that other banks had paid large settlements to end such investigations.

"The financial impact of the procedure and its termination cannot be predicted and could exceed eventual provisions, which could have considerably negative consequences," it said.

Commerzbank repeated yesterday that it had had no new business with Iran since 2007 and that it was too early to say what the financial consequences of the US investigations would be.