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BNP Paribas Bank in Paris
Image: picture-alliance/dpa

BNP shares plunge after threat of high fine

May 30, 2014

France’s largest bank set aside just over a billion dollars in case it gets fined after a probe in the US. Turns out that might not be enough - by a long shot.

https://p.dw.com/p/1C9Wp

BNP Paribas shares dropped by as much as 6 percent on Friday, following a report in the Wall Street Journal that the bank faced a $10 billion fine in the United States.

BNP is France's largest bank and is being investigated by the US Justice Department for allegations it evaded US sanctions against Iran and other countries.

The fall in share prices reflected concerns that the fine, double what the bank had been reporting earlier, might be high enough to force BNP to raise capital or restrict dividends.

It whacked almost $5 billion off the bank's share value and takes the bank's loss to 18 percent since February 13.

Hardly prepared

That is when BNP announced it was setting aside 1.1 billion euros to help cover a potential fine as part of a total provision for the litigation of 2.7 billion euros. So the bank is hardly prepared for a fine of the magnitude in the Wall Street Journal article.

Some analysts believe a $10 billion fine could cut BNP's capital ratio to under 10 percent, which potentially would put it near limits prohibited under new EU banking regulations.

Stress test for European banks

The Wall Street Journal wrote that the final settlement could be less than $10 billion, but anything even approaching that would be among the largest penalties imposed on a bank.

kpc/cjc (Reuters, dpa)