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BNP Paribas to pay record $8.9 billion fine

BNP Paribas to pay record $8.9 billion fine

French bank BNP Paribas has been fined $8.9 billion after it admitted helping clients to breach global sanctions.

French banking giant BNP Paribas has agreed a huge settlement that will see it pay a record $8.9 billion (£5.2 billion) fine, after it admitted helping clients to violate economic sanctions.

The bank has acknowledged widespread wrongdoing which saw the bank disguising transactions for clients in Sudan, Iran and Cuba, even though those countries are subject to sanctions. Prosecutors said that executives in some of the most senior levels of the bank had been aware of the practice, but it continued from 2004 to as late as 2012.

 

As well as the fine, BNP Paribas will also be suspended from conducting any dollar-clearing transactions for a year from the start of 2015 – a six-month reprieve to prepare for the suspension that was supposedly bought with the bank’s guilty plea.

The bank has confirmed it will clear US dollars through a third party institution.

It is clear the damage will be felt throughout the bank, since the company has already said that as a result of its internal review, several managers and employees have already sanctioned and some have left the group. According to the Financial Times, some will be demoted while others might see pay and bonuses cut.

Perhaps it is surprising that the bank is still fairly confident in its prospects. Excluding the effects of the fine, chief executive Jean-Laurent Bonnafe says the bank is set to record “strong” results for this quarter.

 

More than anything, it seems the bank is relieved to have the case finished so it can move on: an internal letter from the chief executive to employees reported by Reuters said the ruling would be “good news”, allowing the bank the “put behind us these occurrences”.

Shareholders appear to share the sentiment, since the bank’s stocks have actually risen since the ruling was announced – though that hasn’t reversed the 16 per cent loss suffered since February.

Yet perhaps the real damage to BNP Paribas will be reputational rather than financial. Since trust is an important part of how banks cultivate their core business, the knock-on effects may be felt in the long term.


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