BNP Paribas has said a €190mn fraud charge linked to receivables financing in its global markets division is linked to “new entries” with “low collateralisation”.
The Paris-headquartered lender made a €190mn “cost of risk” charge in relation to a specific credit event in its Q3 earnings report published on October 28.
Group chief financial officer Lars Machenil told analysts on an earnings call that the incident relates to a file in its global markets division and is “to be considered as a fraud case”, according to a transcript.
Asked for more details on the case, Machenil said: “Generically, it’s the evolution that in the current environment the new entries that we have seen, which… have low collateralisation.”
Machenil said the bank doesn’t “give names” but that it “is not the usual suspect”. He added the case “should not be considered to be recurring”.
He also said the incident “has nothing to do with the private credit environment”, which has been thrust into the spotlight after the bankruptcy of US-based First Brands Group, a heavy user of off-balance sheet instruments including receivables finance.
Meanwhile, the disclosure follows a US court verdict earlier this month that BNP Paribas was guilty of helping fund the atrocities of the Sudanese government under former dictator, Omar al-Bashir.
As part of the lender’s business dealings in Sudan, it issued letters of credit for Sudan’s oil exports after the country was sanctioned by the US in 1997 – conduct that contributed to a US$8.9bn settlement with the US Department of Justice in 2014.
The Manhattan court ordered BNP Paribas should pay just over US$20mn in damages to three Sudanese refugees, who alleged they were persecuted and tortured by al-Bashir’s government during its genocidal campaign in Darfur between 2002 and 2008.
Shares in BNP Paribas slumped after the New York jury’s verdict because many more plaintiffs are expected to come forward, which lawyers claim could leave the bank with billions of dollars in liability.
BNP Paribas said the verdict “was legally and factually erroneous” and may have been “tainted by fraud” due to alleged misconduct by the plaintiffs’ lawyers. The lender said in an October 28 statement the decision will be overturned on appeal.
BNP Paribas has been contacted for comment.
Additional reporting by Jacob Atkins.
