BNP Paribas nears $8.9bn settlement with US

Executives at BNP Paribas are finalising the details of a record $8.9bn out-of-court settlement with US authorities over alleged sanctions breaches by France’s biggest bank in time for an expected announcement on Monday.

As well as the fine, BNP is expected to submit a rare guilty plea and dismiss more than a dozen employees, several of whom have already left the bank, people familiar with the matter said.

It would be a record fine for US sanctions breaches – outstripping the $1.9bn paid by HSBC two years ago – and has triggered speculation about whether BNP will need to raise capital to strengthen its balance sheet.

The bank is being investigated for allegedly concealing tens of billions of dollars’ worth of transactions for clients in Sudan, Iran and Cuba to dodge Washington’s economic sanctions against those countries.

US authorities are also expected to suspend temporarily the ability of some parts of the bank to clear US dollar transactions for up to a year – a crucial element for much of its international wholesale banking activity. This restriction is expected to affect its oil and gas financing arm, where much of the alleged misconduct took place, as well as clearing for other banks.

The fine will be split between Manhattan’s district attorney, New York state’s Department of Financial Services, the Department of Justice and the Office of Foreign Assets Control.

The announcement by US authorities is expected to come late on Monday afternoon after the US markets have closed, according to one person close to the bank, following a similar timetable to Credit Suisse’s $2.6bn fine and guilty plea for helping Americans evade US taxes last month.

BNP is expected to issue bonds and cut its dividend in reaction to the settlement, although people close to the Paris-based lender said it was premature to speculate that this would happen as early as next week. The bank declined to comment.

One complication for BNP, one of the people said, is that Credit Suisse’s US banking licence was not held by the entity that submitted a guilty plea, while BNP’s licence is held by the same part of the group that US authorities want to plead guilty.

French government officials said that, after making little progress with their lobbying of the US over the past two months, they were leaving the issue in the hands of BNP to hammer out a final deal with the US authorities over the weekend.

BNP has been lobbying to be allowed to clear through other banks to avert a complete loss of business in the areas affected. It has a New York banking licence that allows it to clear US dollar payments through the Clearing House Interbank Payments System, a New York-based system known as “Chips”. It is also a member of Fedwire, the second payment transfer system for large transactions in the US, which is run and owned by the Federal Reserve.

One reason DoJ officials have sought a harsher penalty for BNP than for other banks that have settled similar investigations – such as HSBC and ING – is that the bank cleared far more transactions that were subject to sanctions, people familiar with the matter said.

The DoJ and Ofac believe BNP handled about $30bn of transactions with countries under US sanctions, while the DFS puts the figure at $100bn, the people said.

US officials are also angered that while BNP handled most of the transactions with the sanction-hit countries between 2002 and 2009, some of the activity continued even after it was told to stop and the investigations had started, according to the people.

They say BNP also dragged its feet in handing over the names of the executives directly responsible for the alleged misconduct in an attempt to avoid them being prosecuted by US authorities.

The most senior victim of the investigation so far is Georges Chodron de Courcel, BNP’s veteran chief operating officer and chairman of its Swiss subsidiary, who last month announced his retirement after the DFS demanded that he leave the bank as part of a settlement.