Forget the 70th anniversary of the Normandy landings and the elaborate preparations to celebrate later this week the liberation of France by its allies. Forget “Lafayette, nous sommes ici”, which General John Pershing is supposed to have said when the American Expeditionary Force showed up for what remained of the first world war, saluting the Frenchman who fought at George Washington’s side. Relations between France and America are bad and getting worse.
For that thank the whopping fine that American authorities are thought to be about to levy on BNP Paribas’s American arm for allegedly processing transactions with countries on America’s black list, such as Sudan and Iran. The precise amount of the fines, and the conditions attached to them, is still a matter of conjecture and probably negotiation. But whether or not the total fine tops $10 billion, as the Wall Street Journal reported possible last week, it will greatly exceed the €1.1 billion ($1.5 billion) that the bank said in February it had set aside to manage the sanctions-busting fall-out. Worse, it threatens to drive a coach and horses through its balance-sheet, just as the European Central Bank is about to assess eurozone banks’ robustness in an effort to flush out the bad news and boost bank lending to the “real” economy. BNP Paribas is France’s largest and Europe’s second-largest bank.
Unsurprisingly, the va et vient of top French financial figures crossing the Atlantic has been frenetic in recent weeks. Now the matter has become overtly political. Laurent Fabius, France’s foreign minister, did not hide his irritation when he said on France 2 television today that the fine was “unreasonable”. On Thursday evening the D-Day festivities will provide an opportunity for men with whom bucks are supposed to stop to speak about the matter face to face. Presidents Barack Obama and François Hollande are to have dinner together on Thursday, though other acrimonious subjects—France’s determination to carry on with defence sales to Russia, America’s still-remembered reluctance to intervene in Syria—will not be lacking.
Many in France, and probably elsewhere in Europe, are beginning to think that America lets its own banks off rather lightly (though JPMorgan Chase might disagree) and cracks down on foreign ones instead to appease voters’ visceral dislike of finance. American rules often differ from European ones (they do on sanctions), criminalising behaviour that would be legal in a bank’s home country. The Front National, for one, has publicly backed BNP Paribas, urging the government to “defend and protect the interests of millions of French depositors”. Such views are not confined to the far-right.
Calmer heads, Mr Fabius among them, agree that banks doing business in America should abide by American laws. But punishment for infringing them cannot be capricious: it should be roughly proportionate to the harm caused, plus an extra slug for deterrence.
The most handed over by any of the clutch of non-US banks already fined for sanctions-busting was HSBC’s $1.9 billion in 2012. BNP is looking at paying a fine several times that amount, as well as pleading guilty to a felony (as Crédit Suisse had to do when it paid a $2.6 billion fine in May for helping Americans escape US taxes) and losing, presumably temporarily, the ability to clear dollar transactions for its customers, which means losing the customers. Against all that the heads that will have to roll in New York and the official gumshoe sitting watchfully at the heart of the bank’s operations there are mere bagatelles. – The Economist
