New Articles | BNP Paribas

Here we go again

Another blow for France’s beleaguered bank

|PARIS

By M.S.

JUST months after paying a $9 billion fine to the American authorities for violating sanctions against Cuba, Iran and Sudan, BNP Paribas is back in the gunsights. France’s national financial prosecutor is looking into allegations that senior figures at the bank had inside knowledge of the possible size of the eventual settlement when they sold almost 290,000 shares in 2013. Baudoin Prot (pictured), BNP’s chairman, is due to leave at the start of December; Michel Pebereau, his predecessor, is still on the bank’s board; and Philippe Bordenave, one of three chief operating officers, is a key member of the management team.

The development was first bruited by Le Canard enchaîné, a weekly newspaper known for its investigatory cut and thrust. Agence France Presse, a newswire service, said on November 18th that an unidentified source had confirmed it. The bank declines to comment, and indeed had not been informed of any such investigation by November 19th. If the prosecutor decides that there is merit in the allegations an investigating judge will be appointed to look into them further; if not, they will be dropped.

The allegations are not without their curious aspects. The first is that BNP’s wrangle with American regulators and prosecutors was no secret. BNP first revealed the existence of the probe in 2009 and commented on it in each subsequent annual report. From 2012 these comments loomed larger. The second is that directors’ share disposals are also public knowledge. All transactions during 2013 were revealed in the bank’s annual report for that year. Some share sales represented the last chance for the officials named to exercise ten-year stock options granted them in 2003, rather than opportunistic selling. The average price at which the shares were sold, reportedly between €44 ($55) and €49 apiece, is not far off yesterday’s closing price of just over €48.

The story is nonetheless a blow for BNP, which must have thought that the future was looking brighter after a long dark patch. In spite of being hit in June with the biggest settlement ever imposed by America on a foreign bank, BNP's underlying business is still in fine fettle. In its most recent quarterly results, the bank reported that it had generated €1.5 billion in net profits in the three months ending September. Its balance sheet also got solid marks in the European Central Bank’s Asset Quality Review, the results of which were revealed in October. The moral of it all? In finance it never does to underestimate long-tail risk.