IN ONE OF his blogs a few weeks back – well before talk that BNP Paribas would be fined US$10bn dollars for breaking US sanctions – my old chum Heinz Geyer of Temple Associates, himself a former Goldman man, didn’t pull his punches.
“The US ‘authorities’ (if you can name them as such as the country becomes more and more ruled by out-of-control lobbies and zealots) prepare another drive-by shooting aimed at a foreign bank,” he wrote.
“This time it is the turn of French BNP Paribas. The ‘crime’ was that the bank supposedly conducted business with a peaceful country as that is the only way one can describe Iran … So it is with growing anger that one watches the spectacle of a useless Eurocracy that drowns Europe in more and more intrusive and expensive regulation but is afraid (incapable? lazy?) to put a serious warning shot in the direction of the United States demanding that the extra-territorial reach of its ‘laws’ be stopped immediately. Europe – or at least its citizens – have no quarrel with Iran and do no longer want to support unaccountable lobbies and the policies they have imposed on the US government.”
Although I don’t agree with Heinz on quite how peace-loving Iran is, he does make a perfectly valid point.
In my own piece for this publication titled “Meep, meep”, I likened the relationship between US regulators and foreign banks to the one between the Road Runner and Wyle E. Coyote. If the latter ever caught the former and ate him, the story would be over.
There is no doubt that fines and supplementary punishment meted out should be painful but never quite enough to threaten the existence of the institution in question. The figures and possible sanctions being bandied about in the case of BNP, now that they are out in the open, might not quite break the bank’s back but they certainly could come close.
Talk is of a fine of US$10bn along with restriction on BNP Paribas’s ability to clear US dollars. BNP Paribas’s market cap is around €63.4bn which equates to US$86.3bn. Thus the fine would be equivalent to around an eighth of the total value of the company at its current share price of €51. Net income for the 12 months leading up to March 31 was €4.916bn which is about US$6.7bn.
What gives US regulators the right to help themselves to the best part of a year and a half of net income?
THAT THE BANK offended against US sanction rules is not, it seems, in dispute and it is also clear that permission to operate in the US is subject to adhering to those rules. But what gives US regulators the right to help themselves to the best part of a year and a half of net income?
By taking out that cash, America also deprives sovereign France of the legitimate tax revenue which those earnings would have generated for the Tresor – and which it truly cannot currently afford to do without. Paris in not in a position to forgo that income and therefore it must stand up and defend BNP Paribas against the transatlantic onslaught.
I speak passable French and worked for BNP Paribas for eight largely happy (though financially pretty unrewarding) years. I enjoy nothing more than seeing the French being given a thoroughly good hiding on the rugby pitch but in the case of this fine I have to express my doubts.
My distaste for the high-handed manner in which the US has gone about combating its budget deficit at the expense of non-US entities, both financial and non-financial, has been growing and I am very much hoping that President Hollande and his politically shrewd and experienced foreign minister, Laurent Fabius, will not take this lying down.
IT IS, IN my opinion, not just about BNP Paribas but about the very principle of how far America’s sovereignty should stretch. The muppets in Brussels keep telling us that the EU is a bigger, more populous and more valuable trading entity than even the US but when it comes to facing Uncle Sam over who can trade with whom, and why, the lion proves to be no more than a mouse in disguise.
Some 2,500 years ago the Greek poet Pindar wrote “war is sweet to those who have never experienced it” but if something of a trade war were to erupt in defence of BNP Paribas and its shareholders (who are the ones who will innocently pay for something they knew nothing of – and, by the way, that includes me), then so be it.
Not that we foreigners are entirely alone. The SEC fined Bank of America for misleading its shareholders over details of the acquisition of Merrill Lynch. Thus we, the shareholders – once again myself included – were asked to pony up for having been misled by the management of our own company. How stupid is that? Yet nobody seemed to object as the authorities make it clear that fighting back only results in even stiffer penalties.
Heinz is, by jingo, not alone in his growing frustration with the US. I recently read a note which observed that one failed amateurish attempt at triggering a shoe bomb and we all take our off our footwear before getting on a plane. Thirty-odd school shootings since Columbine and the gun laws remain unchanged. US investment banks nearly brought the global financial system to total collapse through their aggressive securitisation of America’s own junk loans but BNP Paribas gets fined $10bn for doing business with people the State Department doesn’t like. Some kind of justice, eh?