France goes into battle with US over BNP Paribas fine

French government has expressed its anger at reports the US authorities are planning to slap a $10bn fine on one of its major banks

Economics Editor

The French government has expressed its anger at reports the US authorities are planning to slap a $10bn fine on one of its major banks, escalating a transatlantic row that now threatens to sour this week's 70th anniversary commemoration of the D-Day landings.

Laurent Fabius, France's foreign minister, said the mooted fine on BNP Paribas as a punishment for allegedly violating American trade sanctions by the US justice department would not be “reasonable” and could imperil a landmark free trade deal between America and Europe.

The Élysée Palace confirmed that François Hollande will raise the matter with Barack Obama when the American President visits Normandy this week for the commemoration of the Second World War turning point. The French President is reported to have telephoned the White House to raise his concerns and French officials are said to have already pressed the State Department and the US Treasury on the subject in private.

“The fine has to be proportionate and reasonable. These figures are not reasonable” said Mr Fabius on French television. He added that such a penalty would be “an example of a unilateral and unjust decision” and “a serious and grave problem”, which could jeopardise the transatlantic trade partnership currently being negotiated between the EU and the US.

Mr Fabius also noted that a fine of that size, which would represent one of the largest regulatory financial penalties ever imposed on a financial institution and a sum more than twice the size of BNP's profits last year, would reduce the bank's capital buffer and crimp lending to the French economy.

HSBC was fined $1.97bn in 2012 for laundering money for Mexican drug cartels through its American outlets. The same year Standard Chartered was fined $667m for breaking US sanctions on trading with Iran. Credit Suisse last month pleaded guilty to helping Americans evade income taxes and agreed to pay a $2.6bn fine.

BNP stands accused of doing business with entities associated with sanctioned countries including Iran, Sudan and Cuba and of stripping information from wire transfers so they would not be detected by American regulators. In April the bank said it had provisioned just $1.1bn for any fines arising from regulatory violations.

BNP's share price has shed some 10 per cent this year. Today it closed down 0.33 per cent at €50.91.

Coincidentally, the European Securities and Markets Authority (ESMA) censured the American credit rating agency Standard & Poor's for accidentally announcing in 2011 that France's credit rating had been downgraded.

This represents the first time that the Paris-based European Union watchdog has publicly reprimanded a firm since being given the power to regulate EU credit rating agencies in 2012. ESMA did not, however, impose a financial penalty.

The agency said that the episode, in which subscribers were sent an email titled “France (Republic of) (Unsolicited Ratings): Downgrade” was a result of “control failures” by the agency. S&P did, in fact, strip France of its AAA credit rating the following year.

Restricted lending: Banks get tough

Royal Bank of Scotland has followed Lloyds Banking Group’s move in introducing caps on the amount of cash it will lend to high-value mortgage borrowers.

It said from later this month it will restrict RBS and NatWest customers applying for £500,000 or more to a loan of four times their income.

The bank said the move – which matches Lloyds’ decision last month and is set to be followed by the other big lenders – will affect 2.6 per cent of its London mortgage lending and just 0.5 per cent of lending outside the capital.

A spokesperson for RBS and NatWest said: “We are focused on looking after the interests of our customers and ensuring that they only take on mortgage lending that they can afford.”

Simon Read

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