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What next for BNP and banking?

Tuesday, July 01, 2014 - 02:26

July 1 - Swiss regulators say they're investigating BNP Paribas' Swiss arm as the fallout continues from the French bank's violation of US sanctions. Ivor Bennett asks whether its $9 billion dollar fine leaves the Europe's banking sector in better, or worse, shape.

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UPSOT (English) GEORGES DIRANI, GENERAL COUNSEL, BNP PARIBAS, SAYING: "I swear that BNP Paribas pleads guilty to the crime..." For BNP Paribas, the saga is finally over. Monday's guilty plea ends months of discussion and lands the bank a nine billion dollar fine. Although those are the headlines, the bigger problem could be the ban on dollar transactions, says CMC Markets' Michael Hewson. SOUNDBITE (English) MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "I think the biggest question there is its clients - if they leave BNP Paribas will they actually come back? So I certainly think in the context of its US business, I think there is a risk that we could actually see lower revenues in the longer term." At the moment 80 percent of world trade is conducted in dollars. But this is the first time the US has used that dominance to punish a bank breaking its sanctions. Brian Caplen, editor of industry magazine The Banker, says that could undermine the dollar's role. SOUNDBITE (English) BRIAN CAPLEN, EDITOR, THE BANKER, SAYING: "If you look at the BNP Paribas case you're talking about trades being done by non-US counterparties. They're not illegal under French law but the point is they're being done in dollars. So when they're cleared in New York that's how it comes under US jurisdiction. So if we now transfer it and say 'ok well from now on we're going to do them in euros, or in renminbi, or in rubles', that takes them out of US jurisdiction altogether." Individuals could also face consequences. A former financier of the year, the bank's current chairman Baudouin Prot was CEO at the time of the offences. Reuters breakingviews Pierre Briancon says he has to go. SOUNDBITE (English) PIERRE BRIANCON, REUTERS BREAKINGVIEWS, SAYING: "If the CEO at the time who either didn't know about it, which is almost even worse than participating in it, does not take responsibility, I mean it voids the concept of criminal responsibility." From fixing benchmark interest rates, to manipulating forex markets - this is the latest in a string of scandals facing the banking industry. And it's not even the first this week. British bank Barclays accused of deceiving investors in its dark pool trading venue. SOUNDBITE (English) MICHAEL HEWSON, MARKET ANALYST, CMC MARKETS, SAYING: "Barclay's dark pool investigation could actually throw up some other cockroaches that can crawl out from under a stone and start winking at you. Every time we get one of these banking scandals, the temptation really is to think well that's it, let's draw a line under it and move on. And then suddenly we get something like this." The markets 'though are happy for now. BNP shares rising on early trading as investors hope the chapter is finally closed.

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What next for BNP and banking?

Tuesday, July 01, 2014 - 02:26