* StanChart confirms settlement talks with New York
* Amount of settlement is changing, sources say
* Bank to defend New York license Wednesday
* Shares up 0.5 percent as hopes rise for resolution
NEW YORK/LONDON, Aug 13 (Reuters) - Standard Chartered Plc
said on Monday it was in talks with New York's banking
regulator to try to settle allegations it hid transactions with
Iran.
The two sides have been negotiating ahead of a hearing set
for Wednesday at which the bank must demonstrate why its state
banking license should not be revoked over the transactions.
Last week, state Financial Services Superintendent Benjamin
Lawsky said the bank hid Iran-linked transactions with a total
value of $250 billion.
Standard Chartered Chief Executive Peter Sands has denied
Lawsky's allegations and said the total amount that failed to
adhere to U.S. sanctions on Iran was less than $14 million.
A bank spokeswoman said negotiations were continuing, but
she declined to give details. "We're still trying to reach a
settlement," the spokeswoman said.
New York's Department of Financial Services declined to
comment.
The size of the settlement was fluid and subject to
negotiation. Also, the talks could still collapse and
Wednesday's hearing could be postponed to allow more time for
negotiation.
A person familiar with the situation, who spoke on condition
of anonymity because of not being authorized to speak about the
matter, said that Lawsky was seeking a settlement of about $350
million. Another person with knowledge of the situation said the
figure had dropped to $250 million.
Nevertheless, both sides were under pressure to reach an
agreement.
"When parties talk about dollars, that is usually an
indication that they are converging," said John Coffee, a
white-collar crime professor at Columbia Law School.
The stakes for Standard Chartered are high, given that the
loss of its state banking license would effectively cut it off
from direct access to the U.S. bank market.
Lawsky, too, needs a settlement, after taking criticism for
acting alone in bringing regulatory action against Standard
Chartered while probes by federal and other state agencies were
ongoing.
In the past, New York bank regulators acted in concert with
federal authorities and state prosecutors. Lloyds Banking Group
paid $350 million to state and federal authorities in
2009 to settle charges it altered records for clients from Iran
and other countries. Credit Suisse AG settled similar
charges for $536 million the same year, Barclays Plc
agreed to pay $298 million in 2010, and in June ING Bank
agreed to pay $619 million.
Standard Chartered is already cooperating in a separate
probe dating to 2010 that includes the U.S. Justice Department
and the Manhattan district attorney. That investigation is aimed
at determining whether Standard Chartered violated U.S.
sanctions laws. Those talks have been taking place separately
from the discussions with Lawsky's agency.
A settlement with federal officials could also result in a
multimillion-dollar fine.
Officials for the Justice and Treasury departments and the
Manhattan district attorney either weren't available for comment
or declined to comment.
Standard Chartered's shares, which fell sharply last week
after Lawsky's announcement, rose 0.5 percent to 1,333.5 pence
on hopes of a resolution.
"It looks like, rather than fight this in the courts,
they're looking to resolve this, hopefully ahead of Wednesday,"
analyst Vivek Raja at Investec said.
The Department of Financial Services has released no details
of how Wednesday's hearing will be conducted and David Neustadt,
a spokesman for Lawsky, declined to comment on whether the
hearing would be open to the public.
The bank is awaiting information on whether executives will
be required to attend, and Sands remained in Britain, a person
close to the situation said who did not want to be named because
of not being authorized to speak about the matter.
New York state does not formally require a hearing before
revoking a bank's operating license, and regulators said that
the session planned for Wednesday is a courtesy to allow
Standard Chartered to present its arguments.
If settlement talks fail, Lawsky would undoubtedly have the
case tried before a departmental administrative law judge to
ensure that the bank cannot cite a lack of due process if it
appeals a license revocation, Coffee said. An administrative
judge's decision could then be appealed to higher-ups in the
banking department.
The burden of proof for the banking regulator is relatively
light because it only has to show that Standard Chartered was
contributing to a lack of safety and soundness in the banking
system -- a standard that can be satisfied with a lapse as
simple as bad record-keeping.
For Standard Chartered, on the other hand, the burden of
proof would be high if it tried to appeal any decision against
it. Under Article 78 of New York's civil practice laws, a
defendant has to prove that a regulator's findings were
"arbitrary and capricious," a standard that regulatory cases
involving zoning violations, rescission of medical benefits and
license revocations rarely reach, lawyers said.
