France has gathered support to challenge U.S. regulators imposing heavy penalties on foreign banks at a G-20 meeting of world leaders later this year after the record $8.9 billion fine levied on BNP Paribas last month.
Berlin, London and Rome have backed Paris in its push to have its concerns about so-called US extraterritoriality discussed when leaders of the world's top 20 economies meet in Brisbane in Australia in November, according to French and other European officials.
President François Hollande's socialist government lobbied US authorities hard to limit the sanctions on BNP, which was also given a one-year ban on clearing some dollar transactions when it pleaded guilty to processing billions of dollars of transactions for groups in Sudan, Iran and Cuba in violation of U.S. sanctions.
French officials did not dispute BNP's wrongdoing but have questioned the scale of the punishment and the principle of the U.S. extending its legal reach over all foreign banks that deal in dollars. BNP had broken no French or European law.
"There should be co-ordination between regulators, as there should not be multiple jeopardy," agreed one senior European official, who confirmed that there had been "informal discussions" about putting the issue of bank fines on the G-20 agenda.
"It is an issue, but we have to be careful not to go into an area of saying 'it is too much and we have got to lay off these guys'," said the official, who added that the G-20 could discuss how to bring more "proportionality" to bank fines.
French finance minister Michel Sapin sought support for France's stance in recent meetings with Wolfgang Schäuble and Pier Carlo Padoan, his German and Italian counterparts, according to French officials. There was a "positive reception", one said.
Among European banks also facing U.S. action for sanctions busting are Deutsche Bank and Commerzbank, although neither is expected to be hit as hard as BNP. France's Société Générale and Italy's UniCredit are also under scrutiny.
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In Berlin, officials said Germany had agreed to back Paris, saying it supported a common EU approach to the U.S. over extraterritorial jurisdiction. Berlin sees that a union-wide approach to Washington is more likely to bear fruit than case-by-case discussions.
The U.S. Treasury declined to comment on specific enforcement actions but repeated the government's stance that financial institutions are not above the law.
"The U.S. government enforces its laws with respect to all financial institutions operating in the United States or transacting with U.S. banks, whether they are U.S.-based or foreign," a Treasury spokesperson said. "If foreign banks operate here, they need to abide by U.S. law, just as U.S. banks operating overseas must abide by the laws where they operate."
Top regulators have been raising concerns about the impact of the long procession of fines on their efforts to strengthen banks' finances. Andrew Bailey, the head of the UK's Prudential Regulation Authority, warned in July that the large fines coming from the U.S. and other big jurisdictions were making a "considerable dent" in banks' efforts to rebuild capital.
BNP reported a record €4.32 billion loss in the second quarter as a result of the U.S. fine, although it said strong underlying performance allowed it to maintain its core tier-one capital ratio – a key measure of a bank's financial strength – above the 10 percent level demanded by the markets.