LONDON: The market value of Standard Chartered tumbled $17 billion yesterday after New York's regulator threatened to tear up its state banking licence for allegedly hiding $250bn in transactions tied to Iran.

The New York State Department of Financial Services (DFS) slammed the London-based but Asia-focused bank as a "rogue institution" that "schemed" with Tehran - subject to US sanctions over its nuclear programme - and hid 60,000 transactions to generate hundreds of millions of dollars in fees over nearly 10 years.

The White House said the Treasury Department is in contact with New York authorities as bank chief executive Peter Sands scrambled back from vacation. The bank held conference calls to plan its defence and try to limit the damage.

Shares were down 16.6 per cent at £12.26, taking their losses to 24pc since the news surfaced just before Monday's close. They had earlier slumped £10.92, their lowest for three years.

The bank, which has been in talks with US authorities since early 2010 over the matter, had exposed the US banking system to terrorists, drug traffickers and corrupt states, DFS said.

It described how bank officials had debated whether to continue Iran dealings. In October 2006, the top official for business in the Americas, whom DFS did not name, warned in a "panicked message" that the dealings could cause "catastrophic reputational damage" and "serious criminal liability".

A group executive director in London shot back and his reply showed "obvious contempt for US banking regulations", DFS added.

The bank said it "does not believe the DFS order presents a full and accurate picture of the facts".

The loss of licence will be a blow for the bank, cutting off direct access to the US bank market. It processes $190bn every day for global clients.

David Proctor, who worked for the bank from 1999 to 2006 and had the Iran business briefly reported to him, said rules were unclear.

"In May 2006, global banks in Iran were trying to adjust to increased attention from the US. The key question was to try and understand what counted as a U-turn transaction."

The US imposed sanctions in 1979, but until November 2008 US banks could process some transactions for Iranian banks or individuals provided they were initiated offshore by non-Iranian foreign banks and are on the way to other non-Iranian foreign banks, known as "U-turns".

The bank said it shared with US agencies an analysis that showed it "did comply" with regulations and put the value of Iran transactions that did not follow regulations at less than $14 million.