BNP Paribas shareholders heavily penalized by an arrogant US extraterritorial enforcement against the confused management of the French bank in its arrogant race for multi-business banking concentration.
A BNP Paribas shareholder wrote Proxinvest: “I think the bank’s Board and Managing Directors:
- were negligent in respect of internal control as the Board never ceased to say “we are in compliance with the laws of all countries where we operate”
- did poorly negotiate with the U.S. authorities continuing to conceal the scale of operations in breach. “
Why BNP Paribas, a French bank active since 1970 in the USA, exposed itself to violate the US embargo against Cuba, Sudan and Iran in oil trading transactions of its Swiss subsidiary with these countries ?
While France did not share the U.S. desire to ban these countries, the French BNP Paribas acted in breach with a U.S. citizen’s duties using theirFrench Citizen freedom but, in the long term, they acted as negligent bank managers .
This case confirms the perversity of the universal banking model with its dependency of banks vis-à-vis their state guardianship as if BNP PARIBAS could not pay the final fine, the French taxpayer would be obliged to take the bill and pay. But no worry, only naive bank shareholders will have to loose as the final fine will be precisely calculated.
The banking group knew its problem with the U.S. authorities and acted “in accordance with the laws of each country in which it operated.” His defense is casuistic: “I was as a French banking entity operating in the United States, but the operations of my Swiss subsidiaries with the Iranians or Cubans were perfectly legal under Swiss or French rules and did not have to comply with U.S. law. ”
The U.S. authorities, who had long known this breach and the disclaimer of parent companies vis-à-vis their 100% subsidiaries, will easily charge the bank. This American imperialism is certainly irritating, but it has its own logic, while the position of BNP Paribas is just confused.
Once again, the case demonstrates the confusion of the universal banking model : ” To do, here and everywhere, everything and its opposite with the guarantee of the taxpayer.” Remind here that the Glass Steagall Act of 1933, which spun off the banks, also had an important component of geographic limitation of the activity of each bank in only one U.S. state…
The internationalization of trade has led our universal banks to seek dollar deposits to finance the global trade of our major firms: a healthy ambition which exposed the bank to the U.S. diktat, it should have played another card instead of the simplistic primary race for size, that of the European integration and Euro. Over time, the cost of hedging dollar Iranian or other contracts would have lead customers to prefer contracts and deposits in Euro.
Our “big banks” have preferred to play with the larger American interests and, as always, to hide under the carpet the many conflict of interest …
And, finally, they lead the defense and illustration of this perverse model, and as JP Morgan, Barclays, Deutsche Bank all our universal banks subsidized by the ECB, far frome being exemplary, have foolishly took their fingers in the regulatory gear …
It belongs to the shareholders to question the “sustainability” of our banks model !
Pierre-Henri LEROY
6 June 2014
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