A report from The Wall Street Journal this weekend said that French bank BNP Paribas is nearing a settlement with U.S. prosecutors that will prevent the bank from transacting in U.S. dollars.
The deal is also expected to include a fine of $US8 to $US9 billion dollars and an admission of guilt from the bank.
The settlement is related to findings by investigators that the bank hid $US30 billion of financial transactions that violated U.S. sanctions.
Last week, NPR’s “Planet Money” podcast discussed the settlement facing BNP Paribas, and other recent bank settlements, on an episode titled “How To Punish A Bank.”
“Planet Money’s” Zoe Chace and David Kestenbaum laid out just what it would mean for BNP Paribas to be disallowed from transacting in U.S. dollars, or “dollar clearing.”
From “Planet Money”:
Kestenbaum: The bank would be banned from something called “dollar clearing.” Basically when U.S. dollars get sent electronically from one place to another, they have to go through this clearing house in New York. All the biggest banks are members, and BNP would be thrown out of the club.
Chace: That is a big deal, because sending dollars around the world is what big banks do. I talked to this one banker as Wells Fargo, he does this all the time. Recently he had a French wine exporter who wanted to buy oak for his oak barrels from Chile. That transaction, it turns out, is all done in U.S. dollars. Those dollars go through New York City.
Chace also cites Bloomberg’s Matt Levine, who says that the real problem with punishing banks is that regulators are trying to regulate a thing, but banks don’t have feelings and don’t experience shame or guilt.
Levine adds that the most effective way to punish a bad bank would be to send bankers to jail.
But as Chace notes, that option hasn’t been tried — yet.
The entire episode can be heard here.
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