BNP Paribas board approves record $8.9B settlement

BNP Paribas has secured a partial concession on the eve of a record $8.9 billion settlement over alleged sanction violations that US authorities are expected to announce on Monday.

The board of France's biggest bank by market capitalisation met over the weekend to give final approval to the settlement, people familiar with the matter said. On top of the fine for allegedly concealing about $30 billion of transactions for clients in Sudan, Iran and Cuba to dodge Washington's economic sanctions, the bank is due to submit a guilty plea.

However, the people said BNP had negotiated a concession with US authorities who plan to impose a rare suspension for as much as a year on its ability to clear US dollar transactions, which is crucial for its international wholesale banking activity.

The bank has won a stay of execution on the suspension, delaying its start for about six months. That gives it until January 2015 to make alternative arrangements for its clients to maintain their access to US dollar financing.

The suspension will apply to the businesses deemed directly responsible for the alleged sanctions violations, including its oil and gas financing units in Paris, Geneva and Singapore, as well as clearing for other banks. The bank had been discussing such a delay for some time but had been unclear authorities would grant it until as recently as last week.

BNP has been in talks with rival banks about its clients using their dollar clearing services to avert a complete loss of business in the areas affected as clients switched to rival banks.

BNP was once one of the world's biggest financiers of oil and gas transactions. But it has scaled back the business since the financial crisis, so the partial suspension of dollar clearing will have a muted impact on the overall group, according to one person close to the bank.

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Roughly half of the fine will be shared between Manhattan's district attorney and New York state's Department of Financial Services, with the other half shared between the Department of Justice and the Office of Foreign Assets Control.

On Friday, BNP's chief executive Jean-Laurent Bonnafé wrote to staff preparing them for what he described as a "heavy" fine. "I want to say it clearly: we will be fined heavily," Mr Bonnafé said, according to French news channel i-Tele.

He added that the "difficulties that we are experiencing must not alter our course". Nonetheless, BNP still faces a record fine – more than four times the $1.9bn paid by HSBC two years ago – which has triggered speculation about whether the French bank will need to raise capital to strengthen its balance sheet.

As part of the settlement, BNP will also part with more than a dozen employees, several of whom have already left the bank.


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