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France slams US over possible US$10bn-plus fine against BNP Paribas

Published:Wednesday | June 4, 2014 | 12:00 AM

By Michael Stothard in Paris

The French government has hit out against the prospect of a US$10bn-plus fine by US authorities for BNP Paribas , calling the figure "unreasonable" and saying it could have consequences for bilateral trade talks.

Laurent Fabius, France's foreign minister, said such a large fine for alleged US sanctions violations by the country's largest bank by market capitalisation would be an "unfair and unilateral decision" with "serious consequences".

"If there is an error or a violation, then it's normal that there is a fine, but the fine has to be proportionate and reasonable," said Mr Fabius in an interview on France 2 television on Tuesday. "These figures are unreasonable."

This follows weeks of behind-the-scenes lobbying by the French government, with officials pleading with the US that too large a fine and a suspension of dollar trading could have a serious impact on the European banking sector and the French economy.

Mr Fabius's comments are the first from the government on "l'affaire BNP Paribas" following a public outcry over the weekend at the scale of the potential fine after unconfirmed reports on Friday that it could be more than US$10bn.

"These figures could have a negative impact and BNP could see its funds hit, and that means less loans especially for French firms," he said, adding that the US decision could impact the EU-US trade negotiations.

It comes two days before Barack Obama, the US president, is due in France to hold bilateral talks with Fran├žois Hollande, France's president.

Mr Hollande is under local pressure to do more to defend the bank and in particular to push the issue with Mr Obama when they meet this week to mark the 70th anniversary of the D-day landings.

Christian Noyer, the governor of the Bank of France, visited New York last week to argue on behalf of BNP and to warn that such a big fine could have serious effects on the banking sector.

Mr Noyer was not there to contest a sanction, according to French officials, but to make it clear that such a large sanction could damage the European banking sector and reduce the amount that BNP would be able to lend to the French economy.

A suspension of dollar clearing would be "dangerous because BNP could lose a lot of clients" and it could have a "huge impact on the bank", said the official, who could not say if the pleas had any impact.

Mr Noyer was accompanied by the new French banking regulator Edouard Fernandez-Bollo, who has been the head of the French prudential and control body ACPR since the beginning of this year.

Michel Sapin, the French finance minister, has also taken up the issue with his American counterpart Jacob Lew, according to people close to the talks, but the prosecutors appear resolute in their desire to push for a large fine.

The investigation by US authorities focuses on whether BNP violated US sanctions and anti-money laundering rules between 2002 and 2009 by disguising transactions in US dollars with countries including Iran, Sudan and Cuba.

A fine as high as US$10bn would represent one of the largest penalties ever sought by the US Department of Justice against a bank in a criminal case, and could see the bank lose its right to clear dollar transactions for a time.

A US$10bn fine would likely leave BNP with a core Tier one capital ratio still above the 9 per cent required by regulators under Basel III rules but below the 10 per cent mark that has recently been demanded by investors.

The bank would likely consider paying out its dividend in scrip form or raising extra capital, according to analysts. A significant concern is the long-term impact on the business if BNP was banned from dollar clearing, even for a short time.

(c) 2014 The Financial Times Limited