France's Hollande seeks to widen BNP fine debate

[June 05, 2014]  By Yann Le Guernigou and Julien Ponthus

PARIS/BRUSSELS (Reuters) - French President Francois Hollande sought to widen the basis of his fight against a possible $10 billion U.S. fine facing bank BNP Paribas ahead of a meeting with Barack Obama on Thursday, warning of "consequences across the euro zone".

Hollande was speaking to reporters after a G7 summit in Brussels late on Wednesday, and ahead of a dinner with the U.S. president after Thursday's D-Day 70th anniversary ceremonies.

He has already said he will raise with Obama the issue of what he has called a "disproportionate" fine facing France's biggest listed bank, confirming that he wrote the White House a letter on the subject in April, and discussed it by telephone.

Sources have said U.S. authorities are seeking a $10 billion penalty for alleged breach of U.S. sanctions via money transfers involving countries including Iran, Sudan and Syria.

Hollande said he accepted that the U.S. justice system was independent but "at the same time we have a relationship between the United States and France, a partnership, and nothing should be allowed to compromise that."

Asked whether the BNP Paribas affair could affect trade talks between the two countries, he said: "We are engaged in other discussions and we expect reciprocity and respect." He added that the affair "could have economic and financial consequences across the euro zone".

Late on Wednesday, U.S. Secretary of State John Kerry said the case and any penalty were a matter for the justice system. However, speaking on a visit to Beirut, he told reporters: "We obviously want whatever it is to be fair and to reflect an appropriateness to whatever it is that is alleged to have taken place."

WIDER IMPACT?

Concern is growing at a European level about the scale of U.S. fines such as the one BNP Paribas may face. The affair comes after Credit Suisse pleaded guilty earlier this year to helping Americans evade taxes and agreed to pay $2.5 billion.

Hollande's comments about a wider euro zone impact follow the intervention of European Banking Authority (EBA) chairman Andrea Enria on Wednesday.

Enria told Reuters the rising penalties faced by some lenders had become a concern generally for regulators, and should be factored into this year's "stress test" of banks' financial health.

"The point of conduct risks, and of the impact of these fines and penalties ... on a bank's capital position, is a concern," Enria said.

BNP has declined to comment on any details of discussions but has said it is in talks with U.S. authorities about "certain U.S. dollar payments involving countries, persons and entities that could have been subject to economic sanctions".

It has set aside $1.1 billion for a fine, but told shareholders it could be far higher than that. It has also said it has improved control processes to ensure such mistakes do not occur again.

French Finance Minister Michel Sapin also weighed in on the subject on Thursday. "Paying for the past would seem to be legitimate, but paying for the future would seem illegitimate," he told reporters.

Responding to questions about whether he was talking about the risk that BNP Paribas could face a loss of its U.S. banking license, he added: "This is about all aspects (of the case)... There are other aspects in particular that touch on the bank's ability to work in a certain place or to act in a certain currency which, if they are excessive, would be unfair."

(Reporting by Yann le Guernigou and Ingrid Melander in Paris and Julien Ponthus in Brussels; Writing by Andrew Callus)

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