US to slap record $8.9-B fine on BNP Paribas

NEW YORK – French bank BNP Paribas has agreed to pay US authorities a $8.9 billion fine to avoid being tried in court for dealing with US-blacklisted countries, sources close to the matter told AFP.

The deal ends months of haggling which saw French President Francois Hollande pressing his US counterpart Barack Obama to intervene and lighten the punishment.

Agreement on the record fine, approved by the bank’s board of directors at a special weekend meeting in Paris, is due to be announced Monday after markets close at the New York Stock Exchange around 4:00 pm (2000 GMT).

The US Justice Department and New York banking regulator Benjamin Lawsky will make separate announcements, another source said, also speaking on condition of anonymity.

BNP declined requests for a public comment.

At least $2 billion of the fine will go to Lawsky, who is temporarily suspending parts of BNP’s dollar-handling business in the United States — key to any major bank’s US operations — for all of 2015.

Sources said the suspension would take place progressively since BNP has operations underway.

BNP, France’s largest bank, has until December 31 to find a bank that agrees to make dollar payments on its behalf.

The deal forces BNP to plead guilty to the bank’s deals from 2002 to 2009 with countries that Washington has blacklisted like Cuba, Iran and Sudan.

The investigation probed more than $100 billion of transactions, finding that $30 billion of that amount were concealed in order to skirt the sanctions.

Too tough on BNP?

BNP has a strong enough capital base to handle the penalty, but the size of the fine and the temporary suspension of parts of its dollar-handling business — key to any major bank’s US operations — will mean a significant hit on its earnings.

BNP chief executive Jean-Laurent Bonnafe reportedly wrote to employees on Friday conceding the bank will be “punished severely,” but stressing that “this difficulty … will not impact our roadmap.”

US authorities have already forced BNP to dismiss three senior officials allegedly linked to the sanctions violations, including its chief operating officer.

Lower bank officials could also be fired as part of the settlement.

Sources say the settlement could include a year-long suspension of the bank’s dollar clearing for oil and gas trading activities in Switzerland, Singapore and France, and suspension of dollar clearing on behalf of other banks and some clients.

That would likely be a blow to the bank’s bottom line. In 2013 BNP reported total profits of 4.83 billion euros ($6.59 billion) on revenues of 38.8 billion euros. It has already set aside $1.1 billion to cover losses from the case.

BNP has been largely quiet about the allegations and potential penalties during months of negotiations.

Critics have accused Washington of being especially tough with foreign banks, and BNP in particular, while treating US banking transgressions more lightly.

In punishing US banks for financial crisis-related violations, negotiated fines have run into the billions but none has had to plead guilty, an act which could lead to the loss of a banking license.

In 2012 Dutch bank ING paid a relatively paltry $619 million financial crisis, and Britain’s Standard Chartered $670 million. HSBC, which was also accused of complicity in money laundering, paid $1.9 billion.

None were forced to plead guilty or halt certain banking operations.

But US authorities have become much tougher on banks that are less cooperative in investigations.

‘Negative consequences’

In May, Credit Suisse pleaded guilty to helping Americans evade taxes and was fined $2.6 billion, over three times the $780 million fine US authorities imposed on fellow Swiss bank UBS for the same charges in 2009.

Analysts say the size of the BNP fine relates to the size of the business it did with Sudan and Iran, several times larger than that handled by ING and Standard Chartered.

The BNP controversy has been a thorn in US-France relations. French officials warned in early June that it could cause problems for the huge transatlantic trade treaty under negotiation between the European Union and the United States.

“Evidently… this risks having negative consequences,” Foreign Minister Laurent Fabius ominously warned.

Hollande also raised the issue with Obama during a dinner in Paris.

Fabius said that Hollande had told Obama the case is “very important for Europe and for France,” saying if BNP is weakened it would “create a very negative interference in Europe and its economy.”

But even before the dinner, Obama had signaled he would stay out of a legal issue.

“The rule of law is not determined by political expediency,” he said.

source: business.inquirer.net

French banks turn corner after turbulent year

PARIS–French banks are back in the good graces of investors after turning in surprisingly strong quarterly results that appear to show they have put the worst of the eurozone crisis behind them.

Top French bank BNP Paribas turned in a 4.7 percent drop in earnings to 1.76 billion euros for the April to June period, a much smaller fall than had been expected by the market.



Meanwhile Credit Agricole reported that its second-quarter profits soared 60 percent to 1.39 billion euros and Societe Generale also largely beat expectations at 955 million euros.

“They are good results in general for the three banks” even if the asset sales and write downs they undertook last year to react to the eurozone crisis made for difficult comparisons, said Gabriella Serres, an analyst at Aurel BGC brokerage.

The price of shares in BNP Paribas has risen by 3.4 percent since the reporting season began two weeks ago, while Credit Agricole’s shares rose by 12.4 percent, and Societe Generale’s shot up by 17.4 percent.

Meanwhile the overall CAC 40 index has risen by 2.7 percent.

“Whether you look at the direction of the results or capital base, the results held up pretty well, especially in comparison with the rest of Europe,” said Cyril Meilland, a bank analyst at Kepler Cheuvreux brokerage.

Between maintaining new capital adequacy requirements, markets roiled by the eurozone crisis and economic slowdown, French banks have been under pressure to trim their sails.

In 2012 Credit Agricole sold at a loss its Greek unit Emporiki and parted with its brokerage Cheuvreux. Societe Generale also offloaded its Greek unit, Geniki, and sold its stake in US asset manager TCW.

The three banks also scaled back their corporate and investment bank operations, and reduced their holdings of risky stocks and bonds.

At the same time they launched cost-cutting programs: 900 million euros over three years at Societe Generale, 650 million euros over three years at Credit Agricole and BNP is aiming for 2.0 billion euros over four years.

The results for the first half of this year thus looked favorable compared with outcomes for the same period last year, when the banks were forced to book exceptional charges.

But with business activity by these banks holding steady, or even growing, despite the recession in France, investors were pleased.

The banks also managed to keep under control their provisions for loans that risk not being be repaid, another closely watched figure by investors in tough economic times.

“The good news of the quarter is the level of provisions, because instead of what one could expected with the economy doing a bit worse, we have seen quite a few units post provisions lower than in the first quarter, which is very reassuring” said Meilland.

He said the improvement was in part due an improvement in the economic outlook, but also to the way banks had managed their balance sheets and loan portfolios since the crisis began.

But Serres said that although the banks had made progress on reducing costs, they still have some way to go with reducing risky loans and improving revenues.

And the IMF in its latest report on France, released this past week, warned that “low bank profitability remains a risk factor” to the country’s economy.

It added that “the French financial system would need to adapt further to prudential requirements, notably in regard to bank funding structures, which continue to rely heavily on wholesale funding.”

source: business.inquirer.net