Santander (SAN.MC) and Lloyds Banking Group (LLOY.L) are in an uncomfortable spot. On Sunday, the Financial Times reported that the two lenders banked entities ultimately owned by Iran’s Petrochemical Commercial Company (PCC), subject to U.S. sanctions since 2018. For the European banks sector, it harks back to some seriously unpleasant times.
In the 2010s, banks including Standard Chartered (STAN.L), HSBC(HSBA.L), (0005.HK) and BNP Paribas(BNPP.PA) all got dinged by U.S. authorities for sanctions violations involving Iran, with BNP wearing a $9 billion fine. StanChart, for example, was deemed to have knowingly helped clients swerve the controls. With regular news of attacks by Iranian proxies in the Middle East, it’s not a great time for any western financial institution to be linked in any form to the Islamic Republic.
In the latest case, neither Santander nor Lloyds is accused of banking PCC directly, and their direct clients weren’t sanctioned by either the UK or U.S. Rather than mega fines or a revoking of U.S. dollar-clearing rights, that implies their main punishment may be a public airing of potential shortcomings to their “know your customer” procedures. Still, the U.S. constituted a quarter of Santander’s net interest income in 2023, perhaps explaining why its shares dipped 6% on Monday, against a 2% fall for UK-focused Lloyds. That suggests European bank investors’ jitters about Iranian sanctions die hard. (By Aimee Donnellan)
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