Standard Chartered struck a deal with New York state's financial regulator to hire an outside monitor to ensure future compliance, the latest development in a regulatory fracas involving allegations that the British lender improperly did business with Iran. The deal comes ahead of a hearing set for tomorrow that will determine whether Standard Chartered Bank's operations in the United States will be suspended. The New York Department of Financial Services will select the monitor, and Standard Chartered would provide access to all compliance and transaction records, according to the terms of the order. It is yet to be decided which monitor would be hired. Analysts said the new deal narrows the chances of the bank losing its licence to operate in the US. "It is one thing to kick a marginal bank from a marginal country out of the US. It is quite another to consider taking such a punitive action against one of the leading European banks," said James Antos, a senior analyst at Mizuho Securities in Hong Kong. Standard Chartered is ranked seventh globally in clearing US dollar-denominated transactions. Investors dumped its shares last week on fears that the bank will lose its clearing capability, which has been crucial to supporting its global commercial and trade-finance franchise. Global rating agency Moody's said New York's threat to withdraw Standard Chartered's licence was "credit-negative" for the bank. A restriction on Standard Chartered's US-dollar clearing would raise the cost of doing business, and closure of its New York operations would weaken its ability to access US-dollar liquidity in the nation's financial centre, said Moody's. The loss of Standard Chartered's New York licence could result in a 40 per cent drop in earnings annually in the coming years, said Chirantan Barua, an analyst at Sanford Bernstein Research in London. Last Monday, the New York finance regulator accused Standard Chartered Bank of systematically evading regulatory requirements for at least nine years, including falsifying business records and filings and evading US sanctions on Iran. New York banking superintendent Benjamin Lawsky is seeking as much as US$700 million to settle the investigation, according to people familiar with the case. The US Treasury Department, which has ultimate jurisdiction over whether Standard Chartered's wire transfers complied with the law, said it was co-ordinating its efforts with other US regulators in the case, which include the Federal Reserve, the Justice Department, the New York District Attorney as well as New York financial services authorities. Standard Chartered strongly rejected the New York regulator's portrayal of its alleged wrongdoing last week. The bank said it initiated an external review of its 2001 to 2007 compliance with the so-called U-turn transactions, which allowed US banks to process payments involving Iran that begin and end with a non-Iranian foreign bank. Standard Chartered said it had been sharing the findings of this review with a range of bank supervisors.