The past week was marked by two contrasting bank fines.
Goldman Sachs was fined $800,000 by US authorities for share
trades it executed through its dark pool but the US bank did
not admit to the charges.
The next day BNP Paribas was fined $9bn for breaking US
sanctions, an allegation the French bank fully accepted and
apologised for. It was a record fine for a criminal case
against a bank.
Other large banks are expected to follow as the US Justice
Department seeks to send a clear message to financial
But the size of the BNP fine is frankly eye-watering and
raises questions about the commercial viability of the
world’s fourth largest bank.
BNP Paribas’ future in the US is also thrown
into doubt because the justice department has banned the firm
from clearing in the US for one year starting on January 1
This has left BNP scratching around for a rival to handle
that business for them, not a great position for the firm as it
now has to come to terms with not only the fine but the
prospect of its US business disappearing for one year and maybe
never coming back.
The BNP fine is only the latest action by US authorities
against international banks.
HSBC was fined $1.9 billion and apologised in December 2012
for money laundering on behalf of shady Mexicans and
Barclays, which has had its fair share of trouble in recent
years, recently hired a top Wall Street law firm to help defend
it against another US dark pool lawsuit that will likely result
in a far larger fine than that imposed on Goldman.
The European firms will never say as much but they could be
forgiven for feeling they have been singled out for
US and European regulators have not exactly seen eye-to-eye
Europe has become increasingly frustrated with the
insistence by its US counterparts that non-US firms must comply
with the tough US Dodd-Frank Act, a position the US has
maintained despite the fact that some European firms have
flatly refused to trade in the US since the act became law.
A breakthrough seemed to have been made in February when the
Commodity Futures Trading Commission and the European
Commission agreed equivalence for European trading platforms
that would allow them to trade in the US without complying with
Some five months later not one European firm has taken them
up on the offer and their celebrated "Path Forward" again seems
to have lost its way.
There are also conflicting messages coming out of
Washington. The House Agricultural Committee, which controls
the CFTC, signed off legislation in April to restrict the
futures regulator’s ability to grant no-action
relief letters to non-US firms.
The CFTC has in the past year been criticised widely for
deferring decisions by issuing the last minute extension
letters and the HAC was seen to be stepping in to bring its
charge in hand.
But three months later the no-action relief letters are
coming faster than ever, leaving non-US firms confused where
The CFTC has issued in the past weeks alone no-action
letters to the Korea Exchange, an Australian broker, five
Canadian banks and all non-US swap dealers.
The regulatory inconsistency between the US and European
regimes is not news but the size of the BNP can only have
increased further the tension between the regions.