France steps in over fears of US fine against bank

Posted on Thursday, 06.05.14

France steps in over fears of US fine against bank
BY LORI HINNANT
ASSOCIATED PRESS

PARIS -- A potential multibillion-dollar U.S. fine against France's
largest bank is clouding a dinner Thursday between the French leader and
President Barack Obama — and has the potential to reverberate across
Europe's financial sector.

Investigators in New York and Washington are scrutinizing BNP Paribas'
currency transactions through its New York office for clients in Iran,
Sudan and Cuba in violation of U.S. trade sanctions between 2002 and
2009. Two other French banks are under separate investigations for
similar activities, and the resulting fines could have repercussions on
other companies that do business with those countries as well as the
United States.

BNP recently warned it could face fines "far in excess" of the $1.1
billion it had set aside in response to the American investigation, and
its shares have fallen more than 15 percent since February. As of
Thursday, no amount for the fine had been fixed.

The French government swung into action when reports surfaced that the
total had climbed to $10 billion — more than BNP's total profit for
2013. There are also concerns that BNP might be stripped of its license
to do business in U.S. dollars, which would be a heavy blow for a global
bank.

In France, many see the case as yet another sign of dollar imperialism —
the U.S. using its economic clout and international currency dominance
to force foreign institutions to bend to its law.

The normally reticent governor of the Bank of France has said that BNP
had complied with all European and French laws. But BNP's activities in
the United States are extensive.

The French foreign minister acknowledged that if a bank violated the
law, a punishment is appropriate. But Laurent Fabius warned that any
"disproportionate" punishment could hold up a trans-Atlantic free trade
agreement. His comments were amplified first by the finance minister,
then by the president himself.

Socialist President Francois Hollande, a vocal activist for French
corporations but no fan of the world of finance, said he would bring it
up Thursday at his dinner with Obama.

"It has an impact on the French economy — it has an impact on the
European economy," Hollande told reporters Thursday morning.

The Socialist administration's comments oddly echoed those of the
far-right National Front, which called on the government to protect "the
interests of thousands of French depositers."

Despite an April 7 letter from Hollande to Obama, in which the French
president wrote asking for a more "reasonable" solution, the White House
had tried to stay out of the debate.

"We've made very clear that this is a matter for the Department of
Justice, so at the political level it's not something that we intervene
in. We respect the process that our judicial system undertakes and
that's what we have said to the French and will continue to say," said
Ben Rhodes, Obama's foreign policy adviser.

In two separate similar investigations, authorities are also looking at
Credit Agricole and Societe Generale, according to people involved in
the probes, who spoke on condition of anonymity because they were
ongoing. Together with BNP Paribas, they make up France's top three banks.

The U.S. authorities pursued other big foreign banks for sanctions
violations in two big cases in 2012, against HSBC and Standard
Chartered, both British and with operations in New York.

Standard Chartered paid $340 million in a settlement with New York state
regulators who accused the bank of scheming with the Iranian government
to launder billions of dollars. The bank also paid $327 million to
settle U.S. and New York charges related to currency transactions for
Iranian, Sudanese, Libyan and Burmese entities that were said to be
concealed from regulators.

HSBC, Europe's largest bank, agreed to pay $1.9 billion in a settlement
with U.S. and New York authorities in connection with the transfer of
billions of dollars on behalf of Iran, Cuba, Libya, Sudan and Myanmar.

The U.S. imposes financial sanctions on political enemies to hinder
their access to the global financial system. The goal is to choke off
banks and other sources of capital, limiting their economic growth and
their ability to buy weapons, food and other items available through
global trade. The sanctions affect both U.S. banks and foreign banks
with U.S. operations.

But some criticize American authorities for what they see as a
single-minded focus on European banks, while letting U.S. banks slide.

"It's kind of a worrying trend that the two sides aren't talking to each
other in terms of financial regulation," said Garrett Workman, an
analyst with the Atlantic Council.

Workman said he thought it unlikely that the BNP dispute would scuttle
the a European-American free trade deal, but he said the dispute shows
the two sides need to open the lines of communication over financial
regulation or risk new meltdowns.

"The two sides of the Atlantic are still where 75 percent of the world's
financial transactions take place, so it makes sense that the two sides
should be talking more," he said. "As we saw a few years ago, the entire
global financial market is at the mercy of U.S. and European policy."

---

Associated Press writers Eric Tucker and Marcy Gordon in Washington,
Michael Virtanen in Albany, N.Y., and Nedra Pickler in Brussels contributed.

Follow Lori Hinnant at: https://twitter.com/lhinnant

Source: PARIS: France steps in over fears of US fine against bank -
World Wires - MiamiHerald.com -
http://www.miamiherald.com/2014/06/05/4159523/hollande-wants-to-discuss-bnp.html