New York and Paris - BNP Paribas won a reprieve during final talks to settle a criminal probe into US sanctions violations, giving the bank six months to prepare for a ban on handling certain dollar transactions, according to a person with direct knowledge of the matter.
US authorities had rebuffed a last-ditch push by the bank to slash an $8.9 billion (R94.1bn) penalty, two other people said, asking not to be identified because the talks were private.
The year-long ban on dollar clearing could affect specific business lines, such as oil and gas transactions, and certain offices, such as Geneva, where the alleged illegal transactions took place, a person familiar with the terms said last week.
BNP, France’s largest bank, was poised to plead guilty yesterday in a Manhattan federal court, ending years of investigation by accepting a record penalty for violating US sanctions against blacklisted nations, people familiar with the case have said.
The talks with US state and federal authorities had drawn warnings from French officials against levying disproportionate fines that could harm their nation’s economy and Europe’s banking system.
BNP, suspected of hiding about $30bn in transactions, was due to plead guilty to conspiring to violate the International Emergency Economic Powers Act, a person familiar with discussions said last week.
Bertrand Cizeau, a spokesman at BNP, declined to comment on the final terms.
BNP shares have slumped 13 percent this year and closed at a more than nine-month low on Thursday last week.
Banks transfer money around the world for clients trading goods, making investments and paying suppliers. While the business of moving money is not a significant revenue source for banks, it is an essential service clients rely on to conduct business globally.
Temporarily restricting its ability to handle transactions in dollars would present BNP with administrative costs and could test the willingness of clients to remain with the bank. A targeted year-long ban could cost BNP $40 million or less, Jean-Pierre Lambert, a Keefe, Bruyette & Woods analyst in London, said in a report last week. That estimate was based on all wire transfers going through the US and would come down significantly under a narrower restriction.
US authorities were not ruling out the possibility of charging individuals in the future, one of the sources said. Doing so would probably require additional investigation, such as pushing for more evidence from overseas, the person said.
The probes are being conducted by the Justice Department, US attorney Preet Bharara, Manhattan district attorney Cyrus Vance Jr and Benjamin Lawsky, the superintendent of New York state’s Department of Financial Services. They involved alleged violations of sanctions against Sudan, Iran and Cuba, mostly dating from 2002 to 2009, with some continuing until 2011, another person familiar with the matter has said.
Spokesmen for the department, Bharara, Vance and Lawsky declined to comment.
BNP chief executive Jean-Laurent Bonnafe told employees in a letter last week that the bank’s negotiations would conclude “very soon”, according to a report on the website of French broadcaster i-Tele.
“I want to say clearly: we will be sanctioned heavily,” wrote Bonnafe, 52, adding that “dysfunctions happened and mistakes were made”, according to i-Tele. Carine Lauru, a bank spokeswoman, declined to comment on the report.
The fine would reduce BNP’s Basel 3 common equity tier 1 ratio, a key measure of financial strength, to 9.5 percent from 10.6 percent at the end of March, Alain Tchibozo at Mediobanca Securities said in a note yesterday. – Bloomberg