France stepped up its defense of BNP Paribas bank against a possible huge fine for U.S. sanctions busting before the two countries' leaders meet on Thursday, invoking wider economic concerns and linking the row to trade talks.
The affair - in which sources have said U.S. authorities are seeking penalties for the French lender including a fine that may top $10 billion - "could have economic and financial consequences across the euro zone," President Francois Hollande told reporters after a G7 summit in Brussels on Wednesday.
Hollande is due to meet President Barack Obama for dinner on Thursday evening before ceremonies marking the 70th anniversary of the World War Two D-Day landings in northern France. Hollande has already said he will raise the issue of what he has called a "disproportionate" fine facing France's biggest listed bank BNPP.PA.
Hollande wrote to the White House on the subject in April, and has also discussed it by telephone.
Sources have said U.S. authorities are seeking a $10 billion penalty for the alleged breach of U.S. sanctions via money transfers involving countries including Iran, Sudan and Syria.
Hollande said he accepted that the U.S. justice system was independent but "at the same time we have a relationship between the United States and France, a partnership, and nothing should be allowed to compromise that".
French Finance Minister Michel Sapin weighed in on Thursday, telling Le Monde newspaper: "This could affect the ongoing talks on the free-trade treaty."
Obama has made progress on reducing trade barriers between the United States and European Union a policy priority. French attempts to politicize the issue have had a cool reception from U.S. officials so far.
Late on Wednesday, U.S. Secretary of State John Kerry said the case and any penalty were a matter for the justice system, but he added: "We obviously want whatever it is to be fair and to reflect an appropriateness to whatever it is that is alleged to have taken place."
WIDER IMPACT?
Concern is growing at a European level about the scale of U.S. fines such as the one BNP Paribas may face. Credit Suisse CSGN.VX already pleaded guilty earlier this year to helping Americans evade taxes and agreed to pay $2.5 billion.
The head of the group of euro zone finance ministers, Jeroen Dijsselbloem, also criticized the size of such penalties on Thursday.
"If you look at the fines the U.S. is putting on banks, a debate that is going on as we speak, I think that would certainly create a lot of nervousness," said Dijsselbloem, who is Eurogroup president.
"Those fines are over-excessive, I think they are much too high and they are not healthy at all," he said in London. (Full Story)
Hollande's comments about a wider euro zone impact follow the intervention of European Banking Authority (EBA) chairman Andrea Enria on Wednesday.
Enria told Reuters the rising penalties faced by some lenders had become a concern generally for regulators, and should be factored into this year's "stress test" of banks' financial health.
"The point of conduct risks, and of the impact of these fines and penalties ... on a bank's capital position, is a concern," Enria said.
BNP has declined to comment on any details of discussions but has said it is in talks with U.S. authorities about "certain U.S. dollar payments involving countries, persons and entities that could have been subject to economic sanctions".
The bank has set aside $1.1 billion for a fine, but told shareholders the penalty could be far higher than that. It has also said it has improved control processes to ensure such mistakes do not occur again.
Sapin also confirmed reports that BNP had fired some staff in connection with the payments. BNP also declined to comment on that subject.
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