During his 2012 campaign, French President François Hollande described the world of finance as “my real enemy.” Now his government is under pressure to defend France’s largest bank, BNP Paribas (BNP:FP), against a potential $10 billion U.S. penalty for its alleged dealings with Iran and other sanctioned countries.
The right-wing National Front, which outpolled France’s two mainstream political parties in May 26 European parliamentary elections, today called on the government to “defend national interests” in the case. In a statement on its website, the National Front accused the U.S. of “racketeering,” in an effort to weaken BNP and aid its U.S. rivals. “We demand that the French government not stay idle,” the statement said.
U.S. authorities are seeking to impose the fine to settle criminal allegations that BNP transferred funds for clients in violation of sanctions against Sudan, Iran, and Cuba, according to people familiar with the investigation. France’s central bank has said the transactions did not violate French or European laws. The U.S. is claiming jurisdiction because the transactions were processed in U.S. dollars.
Reports of the penalty, which would roughly equal BNP’s annual profit, have stirred outrage in France. Writing today in Le Monde, columnist Jean-Baptiste Jacquin said the case illustrated “the imperialism of the dollar.” The center-right newspaper Le Figaro said the U.S. was making an example of BNP to dampen criticism that it had been “lenient with the American banks responsible for the financial crisis.” The magazine L’Express noted that banks involved in money laundering and tax evasion had paid much-lower penalties. “Is the U.S. hitting too hard?” the magazine asked.
French authorities haven’t discussed the case with their U.S. counterparts and view it as a legal matter that must follow its own course, three people familiar with the government’s position told Bloomberg News. Spokesmen for BNP declined to comment.
The investigation of BNP began in 2007 and focused on a unit in Geneva that structured deals to move oil and other commodities around the world, according to people familiar with the case. The head of the Geneva unit recently left the bank, they said. BNP has said it’s cooperating with investigators and taking steps to clean up its operations. A person familiar with the probe told Bloomberg News that BNP was less forthcoming than other banks investigated for sanctions violations, even as it said it was cooperating.
BNP’s leverage in the case is limited, because it risks suspension of its U.S. banking license. The bank has a large corporate and investment banking operation in the U.S. and owns BancWest, which operates retail banks in 20 Western and Midwestern states, according to its U.S. website.
BNP shares slumped as much as 6.1 percent today on news of the potential penalty. While Moody’s ratings service said on May 29 that BNP could “handle a large fine” without denting its credit rating or hurting liquidity, it warned in a note to clients that BNP faced a risk of “client defections and lost revenue.”