Exclusive: BNP asks other banks for help as dollar clearing ban nears

Mon Oct 6, 2014 7:25pm EDT
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By Karen Freifeld, Dmitry Zhdannikov and Ron Bousso

LONDON/NEW YORK (Reuters) - BNP Paribas has asked at least three banks to help it clear certain energy transactions in U.S. dollars next year to make sure it can keep its energy trade finance division operating after a ban imposed for violating U.S. sanctions, sources said.

The French bank made the requests to JP Morgan Chase and Co (JPM.N: Quote), Bank of America Merrill Lynch (BAC.N: Quote) and Citi (C.N: Quote) in July and August, according to sources who asked not to be named because talks are confidential.

Four sources with banks and trading houses in Europe and the United States said JP Morgan decided against accepting the request but other sources said talks were still going on.

"Discussions are ongoing and the process is moving forward in a constructive way," a source close to negotiations said.

BNP Paribas, JPMorgan, BAML and Citi declined to comment.

BNP's request to other banks is legally permissible.

However, experts say banks may be reluctant to clear for BNP Paribas because they could be opening themselves up to risk or the perception of risk which could hurt their reputations. One said BNP Paribas may be reluctant to give up as much info as the other bank needs to be comfortable processing transactions, for fear of losing clients.

A New York banking regulator suspended the French bank from clearing transactions in energy trade finance for the whole of 2015 as part of a punishment for violating U.S. sanctions against Sudan, Cuba and Iran. The suspension also included financial penalties of nearly $9 billion.   Continued...

A BNP Paribas sign is pictured on a building of the bank in Geneva July 1, 2014.   REUTERS/Pierre Albouy