BNP and US cross the ‘T’s and dot the ‘I’s
The transatlantic negotiations between BNP Paribas and US authorities over the French bank’s alleged sanctions violations have reached the final stages.
With both sides in agreement on the broad outlines of a settlement, the talks between US officials at a range of agencies including the Department of Justice and top BNP executives are now zeroing in on the fine print.
US authorities are pushing for the issues to be resolved before Americans break for the Independence Day weekend on July 4, according to people familiar with the talks.
The French bank seems to be playing for time. One person close to the Paris-based lender joked darkly that it would be ideal if the settlement was announced on July 14 – Bastille day – when most of France is on holiday.
Whenever it does emerge, the details of the settlement are expected to make embarrassing reading for France’s biggest bank by assets and market value.
Even French government officials privately acknowledge the seriousness of BNP’s errors, particularly over its dealings with Sudan, despite the bank having committed no crime under European or French law.
“As one of the biggest banks in global trade finance, BNP should have been aware that they had to be careful,” said a French regulatory official. “They should have stopped doing business with Sudan. They made a huge mistake and they have to pay for it.”
One sticking point is over the wording of the statement of facts that will be published by US authorities as part of a settlement. The bank is trying to avoid a direct link being asserted between its financing of much of Sudan’s oil trade and the violent actions of the Sudanese army in the Darfur region.
In particular, the bank wants to avoid the settlement mentioning the “genocide” accusations levelled at the government of Sudanese President Omar al-Bashir, people close to the negotiations said. It is also pushing back against any suggestion by US authorities that the bank’s oil financing deals helped the government of Sudan to buy weapons.
The International Criminal Court has indicted Mr Bashir for alleged war crimes, including genocide, over violence in Darfur, in the southwestern corner of Sudan.
Senior BNP executives concede that even if these elements are excluded from a statement of facts there is little to stop Eric Holder, US attorney-general, from talking about them when he publicly announces a settlement. They concede privately that this is likely to besmirch the bank’s reputation both internationally and in France, and which could impact on its business.
Paris officials are worried by the scale of the fine facing BNP for violating US sanctions on dealing with Iran and Cuba, as well as Sudan, which now looks likely to be $8bn-$9bn. But their biggest concern is the prospect of BNP being barred for a period from dollar clearing – and having to plead guilty.
Michel Sapin, the French finance minister, has lobbied Mr Holder and Jack Lew, the US Treasury secretary. Last month, Christian Noyer, head of the Banque de France, travelled to New York to speak to US regulators and prosecutors.
Arnaud Montebourg, the economy and industry minister, complained in a TV interview that US laws allowing prosecution of actions by foreign companies beyond US territory gave it an unfair edge in the global “economic war”.
Officials and bank executives offer little defence of BNP. Although they say the Cuban transactions were relatively small, involving money being taken out of the country, not inward financing.
Paris is angry over what the officials call the “crazily disproportionate” scale of the likely punishment. They say it could not only damage BNP permanently, but also have a wider systemic effect on France and Europe by driving international customers away and reducing the ability of banks to lend to the struggling economy.
In retaliation, ministers have made clear there would be an impact on the transatlantic trade partnership talks that US President Barack Obama is keen to bring to fruition next year. There is little public enthusiasm for the talks in France, so throwing a spanner in the works would not cost President François Hollande much politically.
“You can’t have an improvement in trade between two countries if one side behaves like this,” a senior government official said.
He said Paris would also take the issue to the Financial Stability Board, the international body set up under the G20 to monitor the global financial system.
Beyond that, officials say France would support efforts to persuade bank clients to carry out international trade and finance transactions in the euro instead of the dollar.
They acknowledge this is not something that will change quickly, but Paris believes there could be a boomerang effect on the US if it is seen to be over-aggressively pursuing extraterritorial cases against banks such as BNP.
“In the longer term, the Chinese want to make the renminbi an international currency and the Russians also want to move more transactions away from the dollar. You could see a change in equilibrium. Not very quickly, of course, but maybe over 10 years,” said the regulatory official.