French bank BNP Paribas SA (OTCMKTS:BNPQY) warned Wednesday that it may have to pay much more to cover sanctions-busting fines in the U.S. than the $1.1 billion it set aside last year to cover the matter.
BNP Paribas faces criminal charges from U.S. federal prosecutors for allegedly doing business with countries subject to U.S. sanctions, such as Iran, Sudan and Cuba, a person with knowledge of the matter told Reuters.
The warning from Paribas comes as other global banks face mounting legal woes following investigations into a string of alleged misdeeds, including fixing benchmark interest rates and manipulating foreign-exchange markets. JP Morgan Chase & Co. (NYSE:JPM) agreed to pay $13 billion in 2013 over mortgage-related charges, while HSBC Holdings Plc (NYSE:HSBC) agreed to pay $1.9 billion to settle a multiyear U.S. criminal probe into money-laundering lapses.
"There is uncertainty with respect to the amount and the nature of penalties the U.S. will impose," Lars Machenil, chief financial officer of Paribas, France's largest bank, told Reuters. "It's not impossible that the fine is far in excess of the ($1.1 billion) provision."
Credit Suisse Group AG (NYSE:CS) also faces criminal charges. The Switzerland bank has been the subject of a U.S. criminal probe since 2011 into whether it helped Americans evade taxes, Bloomberg reported, citing sources.
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Representatives for both BNP Paribas and Credit Suisse have declined to comment on the probes, the reports said. BNP Paribas ADRs trade on the over-the-counter market in the U.S.
The U.S. may also prohibit Paribas from conducting dollar clearing in New York, a process which helps to settle and clear transactions quickly. Individual employees also face penalties, Reuters reported.
"The risk is that some form of operational sanction may undermine the bank's ability to meet these targets," Keefe, Bruyette & Woods analyst Jean-Pierre Lambert said, according to Reuters. "There does not seem to be a serious likelihood that BNP will lose its banking license outright, but there may be consequences for its current activities if its ability to clear U.S. dollar transactions is limited."
BNP Paribas said its net income rose 5.2 percent to 1.67 billion euros ($2.31 billion) in the first quarter.