DoJ to Unveil Nearly $9B BNP Fine
The U.S. Justice Department is expected to announce on Monday a settlement with BNP Paribas <BNPP.PA> involving a record fine of nearly $9 billion over alleged U.S. sanctions violations by France’s biggest bank, sources familiar with the matter said.
The penalties, which the sources said may also include a temporary ban on some dollar-clearing business, could hit BNP's dividend payout, regulatory capital ratios and its investment banking targets, analysts say.
BNP is expected to plead guilty to a criminal charge in Manhattan Federal Court on Monday and the U.S. Justice Department is planning a news conference in Washington to announce a deal the same day, sources said.
However the lender is expected to retain its banking license from the New York state banking regulator, after negotiations which, according to sources close to the matter, at one point raised the prospect of an even bigger fine up to $16 billion.
"I want to say it clearly here: we will receive a heavy penalty," BNP Chief Executive Officer Jean-Laurent Bonnafe told staff in an internal message sent on June 27 and seen by Reuters.
"However, the difficulties that we are currently experiencing must not affect our plans for the future."
The bank has not commented publicly on the case since it warned shareholders on May 14 that the fine could be stiffer than the $1.1 billion for which it originally provisioned.
A BNP spokeswoman declined to comment. Shares in the group were 0.6 percent higher at 49.660 euros in early Paris trade.
U.S. authorities are examining whether BNP evaded U.S. sanctions relating primarily to Sudan between 2002 and 2009, sources have said.
A $9 billion fine, not far short of BNP's entire 2013 pretax income of about 8.2 billion euros ($11.2 billion), would be the largest penalty paid by a European bank to date for violations of sanctions imposed by the Office of Foreign Assets Control, Morgan Stanley analysts said.
BNP has only said publicly that it is in discussions with U.S. authorities about "certain U.S. dollar payments involving countries, persons and entities that could have been subject to economic sanctions". Last month it said it had improved control processes to ensure mistakes did not occur again.
FAIR AND PROPORTIONATE
French President Francois Hollande has appealed to his counterpart Barack Obama to ensure any penalty is fair and does not have repercussions for Europe's economy. Obama has replied that it is purely a matter for the judiciary.
European Union internal market commissioner Michel Barnier said it was normal that any breach of rules be punished.
"That's exactly what we do over here if a U.S. company does not respect European rules," Barnier, a French national, told France Info radio, noting 2013 penalties imposed by EU antitrust regulators on Microsoft <MSFT.O> for breaking competition rules.
The investigation of BNP operations has turned up billions of dollars of transfers involving the bank that specifically violated U.S. sanctions, one source has said.
Bonnafe inherited a bank that emerged relatively unscathed from the economic crisis and sought to raise revenue outside its traditional European markets, just as tougher financial regulation made banking a less profitable business.
The New York State Department of Financial Services, headed by Benjamin Lawsky, proposed the suspension of dollar-clearing operations as one condition for not revoking the license, Reuters reported last month.
BNP is likely to be suspended from converting foreign currencies to dollars on behalf of clients for some businesses for as long as a year, sources have told Reuters. A source familiar with the matter said on Sunday this would mainly involve oil and gas financing.
Two sources said on Sunday the ban would not go into effect for another six months in order to let the bank and clients arrange other plans.
One source said the settlement would include about a dozen employees leaving the bank and disciplinary action for others.
Shares in BNP have fallen 17 percent since it first said it would make provisions for the fine in mid-February, on concerns the penalties could be big enough to restrict its dividends and drag its capital ratio to below 10 percent - a level seen as key to staying out of the danger zone under tighter post-financial crisis guidelines.