BNP warns U.S. fine may 'far exceed' $1.1 billion provision

Wed Apr 30, 2014 11:54am EDT
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By Lionel Laurent and Matthias Blamont and Aruna Viswanatha

PARIS/WASHINGTON (Reuters) - French bank BNP Paribas (BNPP.PA: Quote) has warned it might be hit with a fine far in excess of the $1.1 billion that it set aside last year to cover litigation costs linked to potential breaches of U.S. sanctions on countries including Iran.

An eventual settlement is likely to be closer to $2 billion, and also will likely involve a guilty plea, a person familiar with the matter said.

The person declined to say whether the bank itself or one of its units would be required to plead guilty to criminal charges. A plea at the parent company level could more severely constrain the bank's ability to do business in the United States.

A settlement could come in the next month, the person, who spoke on condition of anonymity, said.

The warning from France's biggest bank comes as the global banking industry faces mounting legal woes due to investigations into a string of alleged misdeeds, including fixing benchmark interest rates and manipulating foreign-exchange markets.

A big U.S. fine could have ramifications for BNP beyond the immediate financial hit, as the bank is targeting expansion in North America as a key plank of a new strategy to raise revenue and profits outside traditional European markets.

"There is uncertainty with respect to the amount and the nature of penalties the U.S. will impose," Chief Financial Officer Lars Machenil told Reuters Insider television. "It's not impossible that the fine is far in excess of the ($1.1 billion) provision."

Asked if the fine could reach $2 or $3 billion, BNP's Machenil told Reuters Insider: "There is nothing more to say."   Continued...

French BNP Paribas bank logo is seen at their presentation of their 2010 annual results in Paris February 17, 2011. REUTERS/Charles Platiau