Yesterday, BNP Paribas and U.S. prosecutors finally settled after months of negotiations over the bankâ€™s â€śTour de Fraud.â€ť BNP will pay an $8.9 billion fine â€” the largest the U.S. has ever levied against a foreign bank â€” fire or discipline over 50 employees (many of whom had already left the bank or â€śretiredâ€ť), andÂ plead guiltyÂ to criminal charges that it violated U.S. sanctions by providing dollar-clearing services in Iran, Sudan, and Cuba. The bank will be barred from conducting certain dollar-clearing operations for a year, starting in January 2015, and from clearing transactions for other outside banks in New York and London for two years. TheÂ WSJÂ has a good summary of what that means for the bank and its clients.
Lars Machenil, BNPâ€™s CFO, says the fine will not significantly hamper the bankâ€™s ability to provide services or pay out the expected dividends to shareholders. BNPâ€™s share price, which has fallen about 15% since news of a possible penalty first broke in February, rose about 4% today, closing at $51.33.Â George HayÂ at Breakingviews thinks the bankâ€™s finances seem okay:
Factoring in net income likely to be generated by BNP by the end of this year, and $1.1 billion already provisioned against the U.S. fine, the bank could still muster a 10.1 percent core Tier 1 ratio under Basel III rules, even if it pays a dividend. If it scraps dividends altogether, the ratio would jump to 10.5 percent. That’s still higher than where peers like SociĂ©tĂ© GĂ©nĂ©rale are now.
But this is still going to hurt. The Financial Timesâ€™Â LexÂ thinks that the year-long suspension could lead to an unusual amount of trouble for BNP Paribas in a way that other fined banks havenâ€™t seen. It will force some clients to move their assets â€”Â assets that may not come back to BNP after the year is over.Â The EconomistÂ says that even aside from the bankâ€™s money troubles, BNPâ€™s reputation has been scuttled by its decision to do business with some of the worldâ€™s most brutal regimes. While U.S. regulators often prefer to hand out â€śpunishments that don’t do any harm,â€ť saysÂ Matt Levine, â€ťthis punishment actually sounds reasonable: If BNP did a lot of sanctions violating in your Geneva office and your oil financing business, why not make it stop using dollars in those businesses for a while?â€ť
French politicians, of course, are not pleased, accusing the U.S. of being unreasonable. President Francois HollandeÂ askedÂ President Obama to go easy on BNP when the two met for D-Day anniversary celebrations last month.Â Walter Kielholz,the chairman of reinsurance group Swiss Re, says European bankers and investors are tired of being pushed around by American regulators.Â Mohamed El-ErianÂ questions whether cases like this can give the impression of a political vendetta against foreign banks, and thus â€śincrease uncertainty, discourage banks from funding productive long-term investments, and fuel anti-globalization and isolation â€” all of which hampers and distorts extending credit to small- and medium-sized firms that are major drivers of employment and innovation.â€ť
The one thing that probably wonâ€™t be changing at BNP: its chairman, Baudoin Prot (he served as CEO from 2003-2011). For all the fallout, Prot isnâ€™t likely to leave (or lose) his job anytime soon, saysÂ Pierre BrianconÂ at Breakingviews, but he absolutely should. â€śThat Protâ€™s resignation was not sought by U.S. investigators is irrelevant: decency is not something one should be forced into,â€ť writes Briancon. â€”Â Jordan Fraade
On to todayâ€™s links:
Stuff Weâ€™re Not Linking To
There is a thing called the “Good Country Index,” and Ireland has won it – Business Insider