Bank fine triggers French-US spat

France’s biggest bank, BNP Paribas, has become the subject of a transatlantic row. It could be fined around $10bn by the US authorities as the price for violating sanctions against states on America’s blacklist, such as Iran and Sudan.

It is also likely to be temporarily banned from clearing US dollar transactions. Early this week France’s foreign minister, Laurent Fabius, called the fine disproportionate and “completely unreasonable”. He suggested that the affair would damage talks to agree a transatlantic trade pact. Such a pact would be the biggest regional trade deal ever struck.

What the commentators said

You can see why the French might think the fine a bit harsh, said The Economist’s Schumpeter blog. The “whopping” sum will greatly exceed the €1.1bn that the bank said in February it had set aside for the sanctions-busting fall-out.

It is worth twice the group’s 2013 net profits of €4.8bn and threatens to drive “a coach and horses through its balance sheet” just before the European Central Bank is to ‘stress test’ the continent’s major lenders.

BNP may now have to raise more capital by issuing shares, and also withhold a dividend. Note too that so far the top fine for sanctions violations at a non-US bank was HSBC’s $1.9bn two years ago.

But that’s exactly the point, said James Moore in The Independent. The other fines were piddling – a mere six weeks’ earnings, in HSBC’s case. This one will actually hurt as it will have a demonstrable impact on the business.

“It will get the attention of the other banks.” So perhaps it’s not so unreasonable at all. The French would be on stronger ground if they pointed out to the US authorities that these big fines “do seem to be concentrated solely on European banks”.

That charge may not stick, said Alex Brummer in the Daily Mail. JP Morgan, the bank closest to the US administration, has also been hit hard.

But this is a sobering reminder of how badly banks have behaved in the past few years. Worldwide, they racked up fines and provisions related to dodgy practices totalling $250bn between 2008 and 2012. Sympathy, as ever, will be in short supply.

Merryn

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