BNP Said to Reduce Commodity-Trade Finance to Trafigura

BNP Paribas SA, the French bank that paid a record fine two months ago for breaking U.S. sanctions, is cutting commodity-trade finance to Trafigura Beheer BV, according to two people with knowledge of the matter.

Executives at Trafigura, the world’s second-largest metals trader, contacted other banks to discuss BNP Paribas’s withdrawal, said the people, who asked not to be identified because they’re not authorized to speak about it. The Trafigura executives said the move is part of a broader exit from the business by France’s biggest lender, according to one of the people.

BNP Paribas agreed to pay an $8.97 billion fine in June and pleaded guilty to processing banned transactions involving Sudan, Iran and Cuba. Many of the sanctions violations centered on its commodity-trade finance operations in Geneva and Paris. Lending by the bank helps Trafigura, the third-largest independent oil trader after Vitol Group and Glencore Plc, and other companies to move commodities from coal to chemicals.

No commodity-trading firms were named in BNP Paribas’s settlement with U.S. authorities.

Paul Griffin, a London-based spokesman at BNP Paribas, declined to comment by phone. Victoria Dix, a Geneva-based spokeswoman at Trafigura, also declined to comment.

Scaling Back

BNP Paribas, a pioneer in commodity-trade finance, has been scaling back its loans to traders since 2012. Since that time, about 30 executives at its energy and commodities finance units have resigned, gone on leave, been fired or relocated, three people with knowledge of the staffing said in May.

Switzerland is the world’s biggest center for commodity-trade finance, according to industry lobby group, the Geneva Trade and Shipping Association. French banks are leaders in the business, which generated 1.5 trillion Swiss francs ($1.6 trillion) of financing in Switzerland in 2011, the Swiss Bankers Association said in a March 2013 report.

In addition to providing trade finance, BNP Paribas’s Swiss unit was a bookrunner on $3.32 billion of three-year and $1.41 billion of 12-month loans signed in March to refinance Amsterdam-based Trafigura’s debt, according to data compiled by Bloomberg.

Trafigura, which has offices in 58 countries from China to Angola, according to its website, has total debt of 9.84 billion euros ($12.7 billion), the data shows. The company sought $1.3 billion of loans in July.

Hiring Bankers

As BNP Paribas has scaled back commodity-trade finance, some bankers have left to join trading houses including Trafigura and Mercuria Energy Group Ltd. Christophe Salmon joined Trafigura as chief financial officer for Europe, the Middle East and Africa in 2012 after more than a decade at the bank’s commodity trade finance division.

In the settlement with the U.S., BNP Paribas admitted it processed almost $9 billion in banned transactions from 2004 to 2012 with the majority made on behalf of sanctioned entities in Sudan. Illicit transactions also included dealings with a Dubai-based oil company that was a front for an Iranian petroleum firm.

As part of BNP Paribas’s settlement agreement, 13 executives were required to leave the bank including Georges Chodron de Courcel, former co-chief operating officer and chairman of the Swiss unit, as well as Dominique Remy, former head of structured finance. The bank was also barred from U.S. dollar-clearing operations for one year for its oil and gas commodity finance business.

“The group has learned lessons from these events and is implementing a major reinforcement of its internal control,” BNP Paribas Chief Executive Officer Jean-Laurent Bonnafe said on July 31.

Before it's here, it's on the Bloomberg Terminal.