In early morning trade, the lender's share price dived 15.70 percent to 1,239.17 pence on London's FTSE 100 index of top shares, which was down 0.1 percent overall.

New York regulators have branded Standard Chartered a "rogue" institution" and threatened it with fines and the suspension of its licence.

The Department of Financial Services (DFS) said the London-based giant systematically disguised foreign exchange deals with Iran that potentially opened the US banking system to terrorists and criminals.

However, Standard Chartered said it "strongly rejects ... the portrayal of facts as set out" by the DFS.

The news marks the latest blow to Britain's banking sector after US lawmakers last month accused London-based HSBC of failing to apply anti-laundering rules, thereby benefiting Iran, terrorists and drug dealers.

Concerns are also mounting over the state of Britain's financial sector following the notorious Libor rate-rigging affair which rocked Barclays bank.

Just one week ago, emerging markets bank Standard Chartered had unveiled record first-half net profits and spoke of the "disarray of our competitors."

Earnings after taxation rallied 12 percent to $2.81 billion in the six months to June, compared with the year-earlier period.

"There is some irony that, a few days after describing its approach as 'boring' at its interim results, Standard Chartered should become embroiled in yet another potential banking scandal," said Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers.

"The allegations serve to add more risk to an already beleaguered sector," he added.