Hollande Pledges to Confront Obama on Potential BNP Fine

French President Francois Hollande said he will confront U.S. President Barack Obama over a potential $10 billion fine against BNP Paribas SA, France’s biggest bank, for violating American trade sanctions.

“I don’t know if he wants to talk about it, but I will talk about it,” Hollande told reporters today on a visit to Warsaw, Poland. Obama and Hollande meet today in Brussels at a gathering of Group of Seven leaders, though Hollande said he will save the BNP discussion for his bilateral dinner with the U.S. president tomorrow in a Paris restaurant.

Hollande’s pledge to raise the issue with Obama signals his administration’s growing frustration. The French president had already sent a letter to Obama in early April complaining about the penalties the bank might face. Since then, potential fines have escalated to levels Foreign Minister Laurent Fabius described yesterday as unreasonable.

Hollande’s April 7 letter to Obama was sent to prepare for a phone conversation between the two leaders that happened a few days later, an official in Hollande’s office said.

In both exchanges, Hollande stressed the “disproportionate” penalties being considered and the “threats to the financial system” a giant fine could pose. Hollande said that France and BNP would work with U.S. regulators, the official added.

BNP rose for the first time in five days in Paris trading, climbing 1.2 percent to 51.50 euros. The stock has declined 9 percent in 2014.

D-Day Discord

The flap over BNP adds an element of discord to Obama’s visit to France, which will continue on June 6 to mark the 70th anniversary of D-Day. A fine of the size the U.S. is said to be seeking would reduce BNP’s capital and could curb its lending, especially to French companies, Fabius said in comments to France 2 Television yesterday.

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. Prosecutors are also pressuring the company to plead guilty, people familiar with the probe have said. The bank’s dollar-clearing business may also be temporarily suspended, people said.

Standard & Poor’s said today it may lower BNP’s long-term credit rating, currently A+, depending on the outcome of the investigation. The rating company cited the possible impact on the bank’s capitalization and disruption to some of its banking activities.

Earnings Wipeout

A $10 billion fine could more than wipe out this year’s earnings for BNP, 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.

Bank of France Governor Christian Noyer, speaking on May 23, said that U.S. jurisprudence on such matters has changed in recent years and that BNP has complied with all European and French laws.

Hollande said that the U.S. justice system, like that of France, is independent and that BNP Paribas itself, not the French government, is handling talks with U.S. authorities for now. Still, the French administration has a role in ensuring that the nation’s biggest bank is treated fairly, he said.

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