Bank fine triggers French-US spat

published 5 June 2014

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

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.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

https://cdn.mos.cms.futurecdn.net/flexiimages/mw70aro6gl1676370748.jpg

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

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 pointedout to the US authorities that these big fines "do seem to be concentrated solely on European banks".

That chargemay 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.

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.