BNP Coaches Bankers How to Ease Client Fretting on FinesFabio Benedetti-Valentini
BNP Paribas SA is telling clients that it’s making every effort to ensure their business won’t be disrupted if the bank’s U.S. dollar-clearing operations are halted under a settlement of alleged sanctions violations.
According to an internal memo dated June 2 and seen by Bloomberg News, bankers should tell clients that the U.S. “is still clearly a strategic market” for France’s largest bank and “BNP Paribas is doing everything it can to guarantee that impending decisions won’t have a negative impact on our clients and counterparties and won’t hinder their business activities.”
U.S. authorities are seeking as much as $10 billion to settle allegations that BNP Paribas transferred funds for clients in violation of sanctions against countries including Sudan and Iran, a person with knowledge of the probe has said. Prosecutors are also pressuring the bank to plead guilty and its dollar-clearing business may also be temporarily suspended.
The three-page “elements of oral communication” lays out a script of nine questions and answers to help executives and corporate bankers to answer questions clients may have about the investigation.
The probe will “by no means” change BNP Paribas’s universal-bank role in providing a range of services to clients around the world, according to the memo. The U.S. accounts for 14 percent of its lending, making it the second-largest market after France.
Carine Lauru, a BNP Paribas spokeswoman in Paris, declined to comment on the memo.
Chief Executive Officer Jean-Laurent Bonnafe said last month at the annual shareholder meeting that the transactions occurred between 2002 and 2009. The operations under review were part of BNP Paribas’s corporate banking activities dealing with “treasury and financing,” the memo said.
Corporate bankers should reiterate to clients that as of the end of March, its core Tier 1 ratio was 10.6 percent. The bank had “very large” liquidity reserves of 264 billion euros ($359 billion), “which have been regularly replenished,” according to the memo. The ratio is a key measure of financial strength that measures its ability to absorb losses.
BNP Paribas is “one of the world’s most solid banks,” the memo said. The bank “is capable of overcoming challenges and learning the lessons to adapt and thus emerge stronger.”
A $10 billion fine could more than wipe out this year’s earnings for BNP Paribas, estimated at 5.64 billion euros ($7.7 billion) by analysts. It would also represent more than three times the combined fines paid by HSBC Holdings Plc, Standard Chartered Plc and ING Groep NV in 2012 for sanctions violations.
BNP Paribas reminded its employees not to comment on “the rumors that are published.” The bank handed the results of its internal investigation to U.S. authorities in December and there’s “a lot of uncertainty over the penalties that may come,” according to the memo.
BNP Paribas has set aside $1.1 billion to cover the investigation.