BNP Falls as U.S. Probe Said to Cost More Than $5 Billion


BNP Paribas SA (BNP), France’s largest bank, fell to a seven-month low in Paris on concern U.S. authorities will seek more than $5 billion from the lender to settle a probe into alleged violations of U.S. sanctions.

The stock fell as much as 3 percent to the lowest since Oct. 1, and was down 1.8 percent at 50.73 euros as of 9:45 a.m. local time.

The amount sought in the probe of the lender’s dealings with countries including Iran and Sudan has escalated, and now far exceeds the $2.6 billion that Credit Suisse AG (CSGN) agreed to pay in a settlement with the U.S. for helping Americans evade taxes. Discussions are continuing and the final number could change, according to a person with knowledge of the matter. Last week, four people said U.S. authorities were asking for at least $3.5 billion to settle the BNP case.

A fine of more than $7 billion would jeopardize BNP’s dividend and could prevent the Paris-based lender from keeping its capital ratio, a measure of financial strength, above 10 percent, according to Alain Tchibozo, an analyst at Mediobanca SpA (MB) who has an outperform recommendation on the stock. Benjamin Lawsky, New York’s Superintendent of Financial Services, has also floated the idea of temporarily banning BNP from transferring money into and out of the U.S.

“The risk is more than the fine, the risk is them losing the right to do some businesses in the U.S.,” Tchibozo said by telephone from London. “If they were to stop running this platform, it would affect their earnings power.”

Guilty Plea

As they did with Credit Suisse, U.S. prosecutors are seeking a guilty plea from BNP, which said last month it may need more than the $1.1 billion it has set aside to settle the case.

The settlement, which would be the largest penalty for sanctions violations, could be announced as soon as next month, said the person, who asked not to be identified because a final decision hasn’t been made.

Negotiations are being spearheaded by Manhattan U.S. Attorney Preet Bharara, while the Credit Suisse case was handled by the U.S. attorney’s office in the Eastern District of Virginia. Working with Bharara are Manhattan District Attorney Cyrus Vance Jr. and the Justice Department’s criminal division in Washington. Benjamin Lawsky, superintendent of New York’s Department of Financial Services, is also involved in the discussions, along with the Federal Reserve and the Treasury Department’s Office of Foreign Assets Control.

Bernard Madoff

Lawsky is considering a deal that would terminate some bank employees and claw back pay in addition to the wire-transfer ban, all intended to punish the BNP Paribas unit seen as responsible for the violations, according to the person familiar with his strategy.

Bharara, who extracted $1.7 billion from JPMorgan Chase & Co. (JPM) in addition to civil penalties over allegations it failed to stop Bernard Madoff’s Ponzi scheme, has long been determined to levy a stiff penalty in a sanctions case, said another person with knowledge of the matter.

Bharara takes a dim view of BNP’s conduct and views previous Justice Department settlements over sanctions violations as not tough enough because they involve state sponsors of terrorism, such as Iran, said the person, who asked not to be identified because the matter is confidential.

Lawsky has also said that penalties haven’t been severe enough in these kinds of cases and told Bloomberg News in March that he intended to name individuals complicit in the BNP case. The New York Times reported the possible settlement amount earlier.

Spokesmen for the Justice Department, BNP Paribas, Bharara and Vance declined to comment.


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