Bombay fiasco leads to Standard sackings

STANDARD Chartered said yesterday that 15 heads had rolled among its staff, three in London, after the bank lost pounds 305m last year in a Bombay stock market fraud. But the departures were well below board level, and the bank refused to name those involved.

The Britain-based international bank said that a further six executives had been reprimanded, including one in London, as a result of a financial disaster that held back the group's profits to pounds 202m compared with pounds 205m in 1991. The profit level was maintained only because of a pounds 111m exceptional gain on property disposals. The dividend was unchanged at 20p.

Rodney Galpin, the chairman brought in from the Bank of England five years ago to sort out a previous lending crisis at Standard, said that those who had left the bank in London were in the top 100 of the hierarchy.

He said the frauds arose 'in part through partial breakdowns in the Indian regulatory system and in our own procedures'.

The core of the scandal was that bank officials in India lent money that was used to speculate on the markets. The bank made clear that the executives who lost their jobs in London had gone because they should have identified problems much earlier.

Mr Galpin has already announced his retirement this year, but Standard Chartered said this and other changes at the top had nothing to do with India. The finance director, Richard Stein, and the treasurer, Alan Orsich, are to retire, but will not go until successors have been found.

The surprise scale of the losses, which involved pounds 272m of bad debt provisions in India and pounds 33m of additional costs, did not deter investors from buying the shares, which closed 25p up at 716p. The buying was because analysts' forecasts of profits this year were raised after the bank reported better-than-expected profits in the booming Asia-Pacific region.

Investors were impressed by Standard's determination to pursue pounds 343m worth of claims against international banks such as Citibank, Indian banks, stock market firms in Bombay and private individuals. Standard is also pursuing a dollars 25m insurance claim. More than 40 people have been put full- time on to the task of retrieving lost money.

Mr Galpin said: 'Their purpose is to recover the assets in question no matter how long or arduous the process. Their work has given us a fuller understanding of the systematic exploitation of the financial markets of which Standard Chartered was a victim, as were virtually all other major domestic and international banks in India.'

The provisions are 80 per cent of the total exposure of pounds 343m, which has risen since the half-year because of the fall in the pound, payments of pounds 50m from 'reputable institutions' that have not yet been settled, unpaid debts of pounds 28m from two government banks, and a drop in the value of security Standard holds.

In the second half the bank added pounds 160m of provisions. It put pounds 210m of the total debt provisions in a general classification with no tax relief.

Malcolm Williamson, the chief executive, said: 'There is no reason to believe that the Indian situation is other than a unique and isolated event. We have looked around the group to ensure we haven't any other Indias.'

An official report this week exposed serious flaws at the Bombay stock exchange, charging that the 118-year-old market is run as a private club for the benefit of a few brokers.

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