France, trying to minimise US penalties against BNP Paribas on charges of breaking sanctions, said on Tuesday that a reported $10 billion fine was excessive and warned it could damage trans-Atlantic trade talks.
The remarks from French Foreign Minister Laurent Fabius ramp up French concern at the size, manner and likely effects of the expected fine that could be imposed on the French bank.
The New York Times newspaper reported that the governor of the Bank of France, Christian Noyer, had visited top US officials on the case in New York last week to warn that such a fine, equivalent to 7.4 billion euros ($10.1 billion), could have grave effects on the financial system.
President Francois Hollande has also recently raised concerns about a plea deal with the White House, the paper wrote.
He will discuss the issue with US President Barack Obama at a dinner on Thursday, a day before attending ceremonies to mark the 70th anniversary of the D-Day landings of Allied troops in Normandy, French diplomats told AFP.
Fabius, commenting on charges that BNP Paribas broke sanctions against Iran, Sudan and Cuba, said in a television interview that the figure sought by the United States was not justified.
“If there was a fault, then it is normal that there be a sanction, but the sanction has to be proportionate and reasonable. These figures are not reasonable,” he said.
France would defend the bank, he said, adding that the dispute “raises a very, very big problem”.
“Meanwhile, we are in the process of discussing a trans-Atlantic partnership with the United States.
“This trade partnership can be established only on a basis of reciprocity. But here, we would have the example of an unjust and unilateral decision.”
Finance Minister Michel Sapin warned France was “ready to react firmly to protect its fundamental interests”, if the US failed to be fair in the BNP Paribas case.
“If all American authorities — five are looking into this case — do not treat BNP Paribas fairly, France will react firmly to protect its fundamental interests,” he said in an interview with Les Echos financial paper.
“We are not defending a bank that has admitted to something reprehensible,” he said. But he added: “We must protect the stability of France’s financial system to make sure that it can properly finance the economy.”
“What [BNP Paribas] has done is not reprehensible in France or Europe. But US law is being applied.”
Shares in the bank initially rallied on the news the French government lent official support. They closed down 0.33 percent at 50.91 euros, while the Paris market was down 0.27 percent overall.
Fabius was referring to the fifth round of negotiations on a free-trade agreement between the European Union and the United States which was held in Washington on May 19.
“One cannot consider that reciprocity must be the rule if, at the same time, there is a decision like this,” said Fabius.
“Furthermore, when one looks at the role of Paribas, which is the leading European bank, the figures mentioned, which are absolutely unreasonable, could have a considerable negative knock-on effect.”
– Major repercussions –
Noyer, who also sits on the policy-making body of the European Central Bank, met state and federal prosecutors in New York, the New York Times reported, citing people close to the matter.
Noyer stressed the case could have major repercussions both for BNP Paribas, the biggest French bank by capitalisation, and the global economy.
On May 23, Noyer told a press conference that the transactions between 2002 and 2009 targeted by the US authorities had been in line with French and European regulations, and United Nations rules.
Noyer said that the US interpretation of embargo rules had changed in the second half of the last decade to put all dollar transactions under US rules even if carried out by a non-US entity.
French officials are concerned that as part of a guilty plea, the bank might be forced to suspend a core business operation in New York, which could erode BNP Paribas’ bottom line, the Times wrote.
It appears likely that the bank might be banned for a limited period from carrying out transactions in dollars, which could drive away part of its international client base.
Noyer was accompanied by the new French banking regulator Edouard Fernandez-Bollo, who has been the head of the French prudential and control body ACPR since the beginning of this year.
BNP Paribas has put aside $1.1 billion to meet the costs of the dispute, but has warned that the fine could be far higher.