France Seethes Over US Potential $10 Billion Fine On BNP Paribas; Threatens Trade Talks

Tom Burroughes

5 June 2014

In a move signalling anger over what is seen as heavy-handed punishments, France is threatening to disrupt transatlantic trade talks if the US fines Paris-listed BNP Paribas with more than $10 billion for alleged sanctions breaches, the Financial Times reports.

BNP Paribas, which has a large wealth management operation – one of the biggest in the eurozone – is also France’s biggest bank, so its plight carries political risk.

In recent days, the media has reported that the firm faces a heavy fine for allegedly breaching sanctions against Iran, Sudan and Cuba. Although the bank has declined to comment to this publication on the matter, the bank said in its latest results report that it was preparing to book a cost far in excess of the $1.1 billion provision it set aside last year to cover litigation costs linked to sanctions issues.

Speaking about the prospect of such a big fine, Laurent Fabius, foreign minister, said: "This poses a very, very big problem”. It is, the FT said, the first public comment by the French government about the matter.

“We are in talks with the US for a transatlantic partnership,” Fabius was quoted saying. “This trade partnership can only be established on a basis of reciprocity . . . One cannot imagine that reciprocity can be the rule if at the same time there is a decision of this type.” Such a “unilateral” punishment would be “completely unreasonable”, he added.

The report said France is among those pressing for financial services to be included in the trade talks, which would amount to the biggest regional trade agreement ever struck.

That France – one of the world’s largest economies and a large investor into the US – is bridling at such a fine may suggest that countries are becoming impatient with what might be seen as regulatory bullying by the US, although in defence the US would argue that sanctions against countries such as Iran must be taken seriously, given fears expressed by many nations about Iran’s nuclear ambitions, for example.

The threat to disrupt trade talks by the French may carry weight. According to the French-American Chamber of Commerce website, France is among the top five foreign investors in the US. More than 4,600 French firms do business in the US, which the website says account for over 650,000 jobs. In 2012, almost 200 new investment projects in the US were started by French firms. French exports to the US rose 12.8 per cent in 2012.