The stand-out quote in the New York financial regulator’s attack on Standard Chartered is the description of an unnamed banker allegedly railing at “f—ing Americans” who “tell us, the rest of the world, that we’re not going to deal with Iranians”. This charmless F-bomb will rankle domestically, but may resonate further afield.
The U.S. approach to international finance is “our market, our rules”. That’s understandable. But effectively the United States sets the global standard, since few big banks can avoid selling to Americans, hiring them or trading in their currency.
Lately, the U.S. has been making greater use of its economic leverage. The Volcker Rule on financial services will crimp the activities of non-U.S. banks with a U.S. presence. New tax rules, known as FATCA, are designed to get non-US institutions to share information with U.S. regulators, without any respect for local bank secrecy laws. And American sanctions against Iran cast a wide net, including Standard Chartered’s dollar-denominated business with the Islamic Republic.
Americans often see their international reach as right and just. Others see it as arbitrary meddling. Up to now, though, the debate is academic. What the economic superpower wants, it still gets.
That could change, if there is enough opposition. The Americans should take note of the EU’s effort to impose an extraterritorial airline carbon levy. Even though Brussels represents a market with a larger GDP than the United States, it is likely to yield to opposition from an alliance of seventeen countries, including the United States and China.
When the StanChart exec allegedly let rip in 2006, defying the United States seemed far-fetched. Now, China and Russia openly discuss a world where the United States doesn’t set the rules. In direct response to dollar dominance, China is trying to make the yuan global enough to allow greenback-free international trade. Big banks, including StanChart, are enthusiastic.
Critics of the U.S. way should be careful what they wish for. As future dominant superpowers, China and India may also want to govern beyond their borders. But for now, StanChart’s anonymous banker isn’t the only one feeling frustrated.