The board of France’s BNP Paribas met at the weekend to approve
a record US$8.9bn settlement with US authorities
to settle allegations that it violated sanctions, according to reports.
Individuals ‘familiar with the matter’ indicated that in addition to the fine for allegedly concealing some US$30bn of transactions for clients in Sudan, Iran and Cuba to dodge economic sanctions imposed by the US, the bank is due to submit a guilty plea.
In return, BNP is believed to have negotiated a concession with US authorities who will hold off from imposing a suspension of up to one year on the bank’s ability to clear US dollar transactions, a vital element of its international wholesale banking activity.
BNP is reported to have won a stay of execution on the suspension, delaying its start for about six months. That gives it until January 2015 to make alternative arrangements for its clients to maintain their access to US dollar financing.
The suspension will apply to BNP’s businesses deemed directly responsible for the alleged sanctions violations, including its oil and gas financing units in Paris, Geneva and Singapore, as well as clearing for other banks. According to reports, the bank had been discussing such a delay for some time but had been unclear authorities would grant it until as recently as last week.
BNP has been in talks with rival banks about its clients using their dollar clearing services to avert a complete loss of business in the areas affected as clients switched to rival banks.
The US$8.9bn fine is slightly lower than earlier estimates that the figure could be upwards of US$10bn, but is still more than four times the US$1.9bn paid by HSBC two years ago to settle similar sanctions busting allegations.
Around half of the fine will be shared between Manhattan’s district attorney and New York state’s Department of Financial Services, with the other half shared between the Department of Justice (DoJ) and the Office of Foreign Assets Control.
Late last week, BNP’s chief executive (CEO) Jean-Laurent Bonnafé wrote to staff to prepare them for the announcement. “I want to say it clearly: we will be fined heavily,” he told employees, according to French news channel i-Tele.
He added that the “difficulties that we are experiencing must not alter our course”. Nonetheless, the fine has triggered speculation about whether BNP will need to raise capital to strengthen its balance sheet.
As part of the settlement, the bank will also part with more than a dozen employees,
several of whom have already left the bank
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