That an American regulator had accused the bank of breaching financial sanctions against Iran was a bolt from a blue. It was Monday and there were just minutes of trading left in London when the report, which claimed that the bank had helped Iranian clients avoid US sanctions in 60,000 transactions worth $250bn (£160bn), landed.
For several years Standard Chartered, a bank which had pulled through the financial crisis with a remarkably squeaky clean reputation, had been telling shareholders in its annual reports that it was 'in discussions' with American regulators about 'historic' sanction breaches. But the nature of the allegations made by the state of New York's department of financial services (DFS) were extraordinary.
Despite the tiny trading window, the bank's shares lost 6% of their value on Monday, and by Tuesday morning were in freefall, losing nearly a quarter of their value at one stage, as investors ditched the stock amid fears that the bank could lose its crucial banking licence in New York.
It is the latest sorry chapter in what has been a bad year for London's Square Mile, which is still digesting the record fine meted out to Barclays for attempting to rig Libor and the fulsome apology from HSBC, which admitted helping Mexican drug barons launder money.
Just a week ago Standard Chartered had boasted it was too 'boring' for scandals and if evidence were needed that Sands, Standard's group chief executive, and his top managers were unaware of the ambitious New York regulator Benjamin Lawsky was preparing to land, it lay in the fact that it took them an agonising eight hours to respond. Standard Chartered insisted that 99.9% of its transactions had been lawful and apologised that just under 300, worth a total of $14m, had breached the rules.
Meanwhile investors used that time to pore over the report and it didn't look pretty, not least the tough talk attributed to a senior Standard Chartered executive who gave a New York colleague worried about sanctions busting, memorably short shrift: 'You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians ?'
It didn't take them long to figure out that the diatribe was supposed to have been uttered by Richard Meddings, now the bank's highly regarded finance director. The bank insists that the quotation is inaccurate.
By Tuesday, Sands was on an aircraft back to London, leaving his holiday with his in-laws and returning to the bank's head office to begin the fightback that is crucial not just to savage his own reputation but to help restore the battered fortunes of the City itself.
In New York, where the bank's chairman, Sir John Peace, had flown to meet the bank's lawyers, the episode is held up as yet another example of the City of London's rotten core. 'It seems to be that every big trading disaster happens in London', US congresswoman Carolyn Maloney told the house financial services committee as it investigated JP Morgan's massive London losses earlier this summer.
Ironically, until the 2008 banking crisis, London was being held up by US politicians as a model of financial dynamism. 'Go back to 2005, 2006 and London was the envy of New York', said Peter Henning, Wayne State University law professor. London had lighter regulation and the Financial Services Authority (FSA) was regarded as 'toothless', a trait which Henning said was admired by Wall Street bankers.
Meanwhile, Michael Bloomberg, New York's mayor, and New York senator Charles Schumer were warning that the city was being 'stifled by stringent regulations' brought in after the Enron scandal.
As Henning pointed out, much of the – admitted and alleged – misconduct at Barclays, HSBC and Standard Chartered happened during this envied period of 'light-touch' regulation. 'Well now I think we are probably seeing the consequences', he added.
With the City's regulatory framework being tightened by the coalition government, which is disbanding the FSA and handing control of bank oversight to the Bank of England, there is concern in London that the US politicians are being opportunistic.
As well as the DFS, Standard Chartered is in discussions with four other agencies, including the treasury department's office of foreign assets control, but it seems that Lawsky broke ranks without informing the other agencies .
Labour MP John Mann, no friend of the banking set, feared 'an increasing anti-British bias by US regulators and politicians aimed at shifting financial markets from London to New York'.
Even Bank of England governor Sir Mervyn King waded in to say that the UK authorities hoped the various US regulatory bodies would work together while chancellor George Osborne sought assurances from US treasury secretary Tim Geithner that Standard Chartered would be treated fairly, given that US regulators usually work on settlements together.
'There's an election coming and Wall Street versus Main Street is very much going to be part of the debate', said James Cox, Duke University law professor. 'It's far safer for a politician to pick on some foreign bank than it is to pick on Citigroup'.
Washington is on holiday now, but before setting off for their summer homes, the politicians started preparations for what could be an autumn of British bank-bashing. Both the senate banking committee and the house financial services committee are looking into Libor. Barclays former boss Bob Diamond, who quit in the wake of the interest-rate rigging scandal, could be called to testify.
Lawsky's DFS does not take holidays and Standard Chartered has been summoned to a hearing at 10am in New York on Wednesday to explain why it should be allowed to keep its banking licence. Speculation was rife this weekend that the hearing could be postponed to allow the US regulators to work together to try and complete a joint settlement. Sands and the bank's lawyers will spend the weekend poring over the allegations, which they insist contain numerous factual inaccuracies.
Last week the measured Sands admitted the accusations had been 'very damaging … we are going to have to work hard to restore the damage'. At stake is not only his reputation but that of Meddings, the bank, and arguably the entire City.
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image: © Antonio Morales GarcÃa