European Central Bank Executive Board member Benoit Coeure said BNP Paribas SA (BNP)’s potential $10 billion fine shows issues in the global monetary system that need to be dealt with separately from the case itself.
“The international financial system is one in which a certain number of transactions are done in dollars and fall under American law,” Coeure said today on France Inter radio. “It’s a systemic problem for which we need to understand the consequences. Our role is to do that over and above this particular case.”
The remarks are the first from the central bank of the 18-nation euro area on the legal questions faced by one of the region’s largest banks. U.S. authorities are seeking penalties to settle allegations that BNP transferred funds for clients in violation of American sanctions against Sudan, Iran and Cuba. French President Francois Hollande raised the matter with President Barack Obama earlier this week.
Coeure emphasized when contacted that the Frankfurt-based ECB is not currently the banking supervisor for BNP Paribas and that he did not want to address the French bank’s case directly.
Still, the Group of 20 nations and the International Monetary Fund should consider the issue of U.S. regulator reach when related to international dollar transactions, as well as the implications for the global monetary system of the rise of the euro and China’s yuan, also know as the renminbi, he said.
“The international monetary system, the international financial system, function with a currency that has a predominate role, which is the dollar,” Coeure said. “That will evolve, notably with the growing strength of the big emerging countries. We’re going towards a multipolar monetary world in which the Chinese renminbi, or the euro, or other currencies will play a comparable role to the dollar.”
For now, the U.S. dollar’s position exists and rules must be followed, according to the central banker.
“Today the current state of the world is that the dollar is the reserve currency and the rules are known by everyone,” Coeure said.
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