An eventual settlement is likely to be closer to $2 billion, and
also will likely involve a guilty plea, a person familiar with the
The person declined to say whether the bank itself or one of its
units would be required to plead guilty to criminal charges. A plea
at the parent company level could more severely constrain the bank's
ability to do business in the United States.
A settlement could come in the next month, the person, who spoke on
condition of anonymity, said.
The warning from France's biggest bank comes as the global banking
industry faces mounting legal woes due to investigations into a
string of alleged misdeeds, including fixing benchmark interest
rates and manipulating foreign-exchange markets.
A big U.S. fine could have ramifications for BNP beyond the
immediate financial hit, as the bank is targeting expansion in North
America as a key plank of a new strategy to raise revenue and
profits outside traditional European markets.
"There is uncertainty with respect to the amount and the nature of
penalties the U.S. will impose," Chief Financial Officer Lars
Machenil told Reuters Insider television. "It's not impossible that
the fine is far in excess of the ($1.1 billion) provision."
Asked if the fine could reach $2 or $3 billion, BNP's Machenil told
Reuters Insider: "There is nothing more to say."
Machenil told analysts on a conference call that the bank had
already set aside around 2.7 billion euros ($3.73 billion) for
litigation costs, including the specific $1.1 billion provision.
His comments came after BNP posted a higher-than-expected 5.2
percent rise in first-quarter net income.
Shares in the bank were down 3.8 percent at 53.80 euros by 1434 GMT,
having fallen as low as 53.55 euros, not far from their lowest of
the year so far. The European banking sector <.SX7P> was down 0.8
U.S. federal prosecutors are considering criminal charges against
BNP for doing business with countries subject to U.S. sanctions,
such as Iran, Sudan and Cuba, a second person with knowledge of the
matter has said. The New York Times first reported the potential
Regulators may consider suspending the bank's ability to conduct
dollar clearing in New York — the process by which transactions are
quickly settled and cleared within the banking system — and are
looking at possible penalties for individual employees, the person
[to top of second column]
The head of the New York Department of Financial Services, which is
investigating BNP over sanctions violations, said last month his
office is, in general, considering penalties including banning
certain banks from dollar clearing transactions for specific time
periods, but declined to name specific banks. <id:nL2N0MG16N>
BNP declined to comment. The bank has said it wants North America to
account for 12 percent of revenue by 2016, up from 10 percent in
2013, and wants to improve cross-selling between its U.S. investment
bank and retail bank unit BancWest.
"The risk is that some form of operational sanction may undermine
the bank's ability to meet these targets," analyst Jean-Pierre
Lambert at brokerage Keefe, Bruyette & Woods said.
"There does not seem to be a serious likelihood that BNP will lose
its banking license outright, but there may be consequences for its
current activities if its ability to clear U.S. dollar transactions
is limited," Lambert said.
Past U.S. settlements have ensnared rivals such as Standard
Chartered <STAN.L>, which agreed in 2012 to pay $327 million to
resolve allegations that it violated U.S. sanctions against Iran,
Sudan, Burma and Libya. The bank was separately fined $340 million
by New York's banking regulator over Iranian sanctions.
Meanwhile BNP's results showed the effects of its full takeover of
Belgian subsidiary Fortis last year, which helped offset writedowns
on assets exposed to the Ukraine crisis and rising loan losses in
The bank has a robust capital base relative to peers, with a core
Tier 1 ratio of 10.6 percent at end-March. Machenil said BNP has
"excess capital" but would not use this to buy back shares at their
($1 = 0.7237 euros)
(Additional reporting by Supriya Kurane in Bangalore; Editing by
Erica Billingham; editing by Andrew Hay)
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