BNP and Barclays misbehave

Another week, another couple of banks in the spotlight for misbehaving. BNP Paribas will pay a fine of $8.9bn, a banking record, for concealing billions in transactions with Sudan, Iran and Cuba. Meanwhile, a US regulator has accused Barclays of “fraud and deceit”.

The charges relate to one of the bank’s private trading platforms, or ‘dark pools’. These developed from the need to allow institutions to trade large blocks of shares without unsettling the market.

Barclays allegedly told clients that there were far fewer aggressive, high-frequency traders operating in this opaque market than there actually were. It also tended to route clients’ trades to its own dark pool, despite a promise not to prioritise it, in order to make more money.

What the commentators said

In the case of Barclays, the slide in the shares after the news shows the market has priced in a settlement of around $3bn, said Lex in the FT. The biggest worry, however, “is how recently this all happened”. “Antony Jenkins has been chief executive for two years, preaching clean living all the while.” But the bank has allegedly been deceiving investors as recently as April.

It’s hardly surprising the message isn’t getting through, said Alex Brummer in the Daily Mail. As continual scandals show, banks’ “bonus-driven culture is so deeply ingrained that it is hard to eradicate. Easy profits outweigh moral responsibility.”

But when it comes to punishing miscreants, according to Reynolds Holding on Breakingviews, Uncle Sam seems to be picking on the foreigners.

A recent study by the University of Virginia School of Law shows that between 2001 and 2010 US criminal fines were on average five times higher for European firms than for American ones.

Yet it’s hard to feel sorry for BNP Paribas, said Nils Pratley in The Guardian. US investigators cite $30bn of illicit deals, a staggering number, far higher than in other cases.

“Paying a fine of 30 cents in the dollar for every dodgy transaction doesn’t seem over the top.” The US had also made it clear it would enforce financial sanctions. In any case, the fine is a tad less than last year’s profits. BNP can afford it.

Merryn

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