The US Justice Department has BNP Paribas SA (EPA:BNP) (OTCMKTS:BNPQY) in its target zone, seeking the bank to pay a $10 billion fine to put to rest a criminal investigation into charges the French bank violated US sanctions against Iran and other countries for years, the Wall Street Journal is reporting, citing people familiar with the negotiations.
The negotiations are currently focused on the amount of the fine and on the bank potentially losing some of its banking privileges in the US. A conclusion to the talks is expected in weeks. BNP Paribas SA (EPA:BNP) (OTCMKTS:BNPQY) had previously announced that an internal investigation had “considered impermissible under U.S. laws and regulations.”
While the DoJ seeks $10 billion, among the largest penalties imposed on a bank, BNP Paribas is said to be negotiating that number down to $8 billion but the bank has yet to present this number to the DoJ, the report said. BNP has been underestimating the cost of this case from day one. In February they set aside $1 billion to settle charges. Fast forward two months and BNP Paribas warned analysts. “
Blocking BNP Paribas from transactions could “destabilize” firm
Another area under discussion is the ability of the bank to transfer money in and out of the US, which the DoJ is seeking to block. Under the DoJ’s terms, BNP Paribas SA (EPA:BNP) (OTCMKTS:BNPQY) would be temporarily blocked from facilitating money transfers for a period of time that is unclear. This has emerged as a key point of contention recently, as New York’s Department of Financial Services Director Benjamin Lawsky is said to be a a supporter of the transfer ban. The transfer ban could paralyze many aspects of the bank’s far-reaching business units, including its investment bank, a corporate-finance unit and a trade-finance operation that execute transactions in dollars. BNP executives have warned that Wall Street and BNP Paribas’ trading partners could potentially destabilize the bank.
Little impact on bank stocks following DoJ investigations
With the tail wind of forcing Credit Suisse Group AG (ADR) (NYSE:CS) to admit to conspiring to aid in tax evasion, where the stock market reaction was muted, DoJ is emboldened to go after the foreign banks without the same degree of concern regarding the impact on the stock price. When DoJ was engaged in criminal negotiations with JPMorgan Chase & Co. (NYSE:JPM) this past 2013, for example, had little negative impact on the stock price.