Standard Chartered's share price, which lost close to a fifth of its value in early trading Tuesday after news of U.S. regulators' allegations that it helped Iran launder up to $250 billion broke, may not be the only victim of the accusations.
London's reputation as a global financial center has come under attack repeatedly in recent months, as one after another of its most famous financial institutions had to admit to underhand dealings and accept fines.
As Barclays, Royal Bank of Scotland (RBS), HSBC and Lloyds reported their various troubles, Standard Chartered, with its emerging markets focus and solemn promise to "balance its ambition with its conscience" in a recent marketing campaign, looked like a beacon of fair dealing and profitability.
The damning statement from the New York Department of Financial Services (NY DFS) claimed that Standard Chartered had illegally earned "hundreds of millions of dollars in fees" for hiding transactions from Iran worth close to $250 billion since 2001. Worries that this could lead, not just to a hefty fine, but even to its U.S. banking licence being revoked, sent its share price into freefall in Hong Kong and London.
In comparison, when Barclays announced its fine over manipulation of the London interbank offered rate (Libor - click here for an explanation), its share price dropped by around 16 percent.
Standard Chartered has vigorously denied the allegations and said the statement does not present "a full and accurate picture of the facts." Just $14 million worth of transactions are suspect, the bank said.
Standard Chartered is facing a fine of up to $1.5 billion, according to Cormac Leach, UK bank analyst at Liberium, who pointed out that HSBC had recently made a $700 million provision for fines related to "weak anti-money laundering controls," rather than the deliberate fraud which the NY DFS has alleged against Standard Chartered.
Nomura downgraded the bank from buy to neutral. Banking analysts at the Japanese bank wrote in a research note: "On fundamental equity analysis, Standard Chartered remains our preferred UK bank, but in face of this unquantifiable legal risk, we would rather remain cautious until some of this uncertainty is mitigated."
There was indignation in the London market at supposed high-handedness from the U.S regulator.
Sean Corrigan, chief investment officer of Diapason Commodities Management, spoke of "American legal buccaneering" from the NY DFS.
"The American authorities never go after an American bank, they always bully somebody abroad. U.S. banks are closer to Washington and the political action committees there," he told CNBC's "Squawk Box Europe" Tuesday.
"The American judicial system is so politicized. This is usually some guy climbing the greasy pole of politics, and it's easier for them to pick on a foreign institution that does business in America than on an American institution."
"Diplomatically, there is no counterweight to bear against the American political might. That's not to say the American system is immune from oversight, but these high-profile cases always seem to go outside the country," he added.
Wachovia, part of U.S. banking giant Wells Fargo, paid a hefty fine in 2010 for helping to move money for Mexican drug smugglers.
"I fear that we have another Eliot Spitzer on our hands who's looking for a bit of fame and glory," Chris Wheeler, banking analyst at Mediobanca, told CNBC. He recommended buying Standard Chartered on the dip in its share price.
"This is one of the most solid management teams in the sector. There are always risks working in developing markets. I am concerned that we're in a situation where it's something that is going to damage the bank and could just be down to individuals."
Another argument is that there are more likely to be faults in London purely because of its size and importance. The city has grown in importance in recent years following the introduction of the Sarbanes-Oxley rules in the U.S., and partly because of its geographical importance and location in the time zone between the U.S. and fast-growing markets in Asia.
"London is the global financial center of banking, and therefore if there are issues in the banking sector, they are more likely to be in London," Mark Boleat, chairman of the policy and resources committee of the City of London, told CNBC.com.
"There is nothing special to London in what's happened in recent months, issues like the Libor scandal seem to have affected different financial centers. London is still a very strong financial center but there are issues which need to be dealt with at the moment."
Written by Catherine Boyle, CNBC. Twitter: @catboyle01
More From CNBC