US Fines BNP Paribas nearly $9 Billion..

[SirFozzie]

Well, it's good to see them drop the heavy end of a hammer on a bank (and requiring BNP Paribas to use other companies to do Dollar transactions for a year is a SECOND huge drop of the heavy end of the hammer), but I wonder if the same would've happened if say it had been Bank of America..

http://dealbook.nytimes.com/2014/06/...pe=blogs&_r=1&

[sterlingice]

I'm curious about the subtext of this story. I just don't know much at all right now and haven't looked into it.

Were US banks pressuring to get some good prosecution of an international bank?
Why did they plead guilty?
Ultimately, does prosecuting foreign banks with likely more stringent rules than local banks deter business substantially?

SI

[SirFozzie]

What happened here is that several banks (US and Overseas) were doing business with folks on the banned list (Mostly from Sudan and Iran).

Since the trades have to clear through the US to happen in dollars, the embargoes/sanctions applied and the transactions would be disallowed.

What BNP Paribas and others were doing was removing information from these transfers (and in some cases, falsifying information), to allow the transfer to go through without being blocked. The legal and ethics teams at BNP raised concerns multiple times about this, and were told basically to mind their own beeswax.

Now, multiple banks did this, but BNP was singled out as the worst in the lot. So, the banking regulators stepped in and said "Hey, you're breaking the law."

The proposed sanctions were

A) A ten billion dollar fine.
B) Requiring BNP fire bankers in the overseas subsidiaries that oversaw the falsified transactions.
C) A long term ban on doing trades involving dollars (in the international economy, the dollar is the base currency, being restricted from trading in dollars would basically cripple any bank.)

The combined sanctions were heavy enough that it caused the stock to go down fairly significantly, as it raised concerns about the bank's ability to be a going concern moving forward.

At the time this was announced about a month ago, this raised significant concern that the US was overly throwing their financial might around.. the right wing parties in France (BNP's home) and elsewhere considered it a massive intrusion to their countries sovereignty.

As it turns out, they accepted just about all the sanctions (and a guilty plea) to avoid being locked out of the US market. They will have to clear certain transactions from overseas through another financial provider for one year. Nine Billion Dollars is a record fine of a foreign bank. (previously the record was 2.6 billion)

[SirFozzie]

And looking over the top ten fines levied against banks in the US (prior to today), it's not a surprise what name keeps popping up.. How is BoA still a going concern after some of these?

1. $25 billion: Wells Fargo, JPMorgan Chase, Citigroup, Bank of America, Ally Financial

In February 2012, the banks collectively agreed to pay this amount - $20 billion in various forms of relief for home-loan borrowers and $5 billion in penalties and contributions to a cash fund for unfairly foreclosed homes -- to avoid prosecution over abuses.

2. $13 billion: JPMorgan Chase The bank, Wall Street's former poster child, paid in November 2013 to resolve a series of US and state lawsuits over the sale of toxic mortgage-backed securities.

3. $11.6 billion: Bank of America One of the rare big US banks whose headquarters is not in New York, the North Carolina-based Bank of America also paid the biggest penalty for the subprime mortgage crisis. In January 2013, BofA paid this fine to settle claims that it sold US government-controlled mortgage finance giant Fannie Mae hundreds of billions of dollars' worth of dud home loans.

4. $9.5 billion: Bank of America On March 26 this year, the bank, America's second-largest lender in assets, agreed to pay $9.5 billion to settle litigation by the Federal Housing Finance Agency over mortgage securities sold to Fannie Mae and fellow agency Freddie Mac.

5. $8.5 billion: Bank of America In June 2011 the bank agreed to compensate a group of investors who said they lost money on mortgage-backed securities bought before the financial crisis.

6. $2.6 billion: Credit Suisse In May 2014 the bank pleaded guilty to helping rich Americans lie to avoid paying taxes.

7. $1.9 billion: HSBC The British bank agreed to pay up in December 2012 to avoid prosecution for complicity in money laundering.

8. $1.7 billion: JPMorgan Chase In January the bank agreed to cough up to resolve charges its lax oversight enabled Bernard Madoff to build up the massive Ponzi scheme that bilked investors of billions.

9. $1.5 billion: UBS In December 2012 the Swiss bank paid out to put an end to legal proceedings linked to the alleged fixing of the inter-bank Libor interest rate.

10. $1.0 billion: Rabobank The Dutch bank paid just over $1.0 billion in October 2013 also for proceedings over the alleged Libor rate rigging.

The article also mentions that BoA is on the hook for another $12-17 Billion and Citigroup possibly another 10 Billion.

[sterlingice]

Just to use BoA as an example:

BAC Income Statement | Bank of America Corporation Com Stock - Yahoo! Finance

They took in over $100B in revenue last year and a profit of $10B, even after their accountants got done with it. So, yeah, an $11.6B fine is just not much to them, particularly if it was for screwing people out of more money.

SI

[gstelmack]

BofA is on that list because they bought Countrywide, which went under in part thanks to all that fraud. BofA bought the business along with all the penalties that were coming to Countrywide.