A $10bn fine may exceed this year’s earnings for BNP Paribas, estimated at €5.64bn ($7.6bn) by analysts. It would also represent more than three times the combined fines paid by HSBC Holdings, Standard Chartered and ING Groep in 2012 for sanctions violations.
Bloomberg, Reuters/Paris
BNP Paribas, France’s biggest bank, may secure a more favourable settlement with the US for alleged sanctions violations, French Finance Minister Michel Sapin said.
“I think we’ve progressed toward fairer penalties” which won’t overly burden the bank’s future and its lending abilities, Sapin said on Europe 1 radio and i-Tele yesterday. BNP shouldn’t be prevented from financing the French economy, he said.
Benjamin Lawsky, New York’s top banking regulator, has been said to seek more than $10bn in fines, a guilty plea and the suspension of BNP’s dollar-clearing operations to settle the probe into its dealings in countries including Iran and Sudan. As the world’s reserve currency, dollars are used internationally in trades of goods ranging from oil to airliners.
A $10bn fine may exceed this year’s earnings for France’s biggest bank, estimated at €5.64bn ($7.6bn) by analysts. It would also represent more than three times the combined fines paid by HSBC Holdings, Standard Chartered and ING Groep in 2012 for sanctions violations.
French President Francois Hollande and his finance and foreign ministers have said that such a fine may increase opposition to a free trade agreement being negotiated between the US and the European Union.
A suspension of BNP Paribas’s right to clear dollar trades might disrupt markets and hamper lending at a time when the ECB is trying to get more funding to the economy, Bank of France governor Christian Noyer has also said.
The threat to suspend dollar clearing is “something that can put in danger the good functioning of the international financial system because BNP Paribas is a big player in this area,” Noyer said on BFM television on June 11. “I hope if there are sanctions in this area, they are limited in a way that is not dangerous.”
BNP Paribas said on June 12 that co-Chief Operating Officer Georges Chodron de Courcel is stepping down, becoming the first senior exectutive to leave as US regulators sought to punish the bank. Lawsky had pressed for the dismissal of Chodron de Courcel, 64, along with about 12 other BNP employees as part of the settlement, a person familiar with the matter said this month.
Meanwhile, BNP Paribas was warned in 2006 by a high-ranking US Treasury official and in three reports by legal experts that it risked being penalised for breaking US sanctions, according to Le Monde newspaper.
Since France’s biggest bank flagged the risk of a big fine in February this year, sources close to the affair have said it ignored early warnings of the risks it faced. They pointed out that the alleged offending transactions being investigated by US authorities continued until 2009.
The French newspaper’s report, written as talks accelerate towards a possible $10bn fine and other penalties, said Stuart Levey, then the US Treasury Under Secretary for Terrorism and Financial Intelligence, made a visit to Paris in September 2006.
The paper, drawing on the findings of its own investigation, said Levey met the bank’s top officials, including Baudoin Prot, who has since become chairman, in its boardroom.
Levey was there not to talk about the legal risks, but to warn the bank to be vigilant, citing the names of a number of blacklisted Iranian banks, the Le Monde report said.
US President George Bush had called Iran part of an “Axis of Evil” and wanted European banks to stop working there. Levey took the same “clear” message to other European banks, Le Monde reported.
A second set of warnings also came in 2006, the report said, this time from legal experts, after ABN Amro was fined $40mn for breaking sanctions against Iran and Libya in January of that year.
Until that point, lawyers Cleary Gottlieb had assured BNP Paribas it was not at risk as long as it operated outside US territory, Le Monde said. However the ABN Amro fine was a first — covering transactions done outside the US. After it, Cleary Gottlieb changed its advice to say there was a risk in certain cases. Two other expert reports commissioned by the bank came to a similar conclusion.
BNP Paribas was not immediately available to comment on the Le Monde report.
The bank has said publicly only that it is in discussions with US authorities about “certain US dollar payments involving countries, persons and entities that could have been subject to economic sanctions”.
It has set aside $1.1bn for the fine but told shareholders it could be far higher than that. Last month it also said it had improved control processes to ensure such mistakes did not occur again.
The suggestion that Prot had a personal warning from the US Treasury puts a new focus of attention on him after the bank announced the departure of de Courcel on Thursday.
US authorities — five of them in all including the New York financial regulator — are investigating whether BNP evaded US sanctions between 2002 and 2009. Sources familiar with the matter say they are trying to establish whether the bank stripped out identifying information from wire transfers so they could pass through the US financial system without raising red flags.