Negotiations between Commerzbank and U.S. authorities for allegedly violating trade sanctions against Iran are coming to a costly conclusion. According to the Bloomberg and Reuters news agencies, the bank is preparing for a fine of around $650 million (€502 million).
Both reports were based on anonymous sources. Citing ongoing settlement negotiations, the bank said it would not comment. Earlier this summer, news leaked that Commerzbank could be penalized between $500 million (€386 million) and $800 million (€618 million) in return for U.S. authorities ending their investigation.
The negotiations are complicated because a jumble of jurisdictions are involved. They include the Justice and Treasury departments, the Federal Reserve Board, the Manhattan district attorney’s office and New York bank regulator, Benjamin Lawsky, who alone is said to be demanding about $300 million (€231 million) in penalties. The bank is accused of doing business with the Iranian state shipping line, Irisl, between 2002 and 2007 in violation of U.S. sanctions.
Investors reacted with relief to the possible settlement. Commerzbank stock rose 5.6 percent on the news on Friday and took top spot on the DAX index of leading German companies. Some market players expected a stiffer penalty. “$650 million is at the bottom end of what was feared,” said Guido Hoymann, an analyst for Metzler Bank. “Many haven’t forgotten the shock over BNP Paribas’ huge fine.”
Earlier this summer, the French bank was slapped with a record $8.9 billion fine for violating sanctions. Unlike BNP, however, the German bank probably wouldn’t have to admit to criminal charges, according to the New York Times.
Besides Commerzbank, a number of other European banks are still in negotiations with U.S. authorities over violating trade sanctions on Iran.
How strongly the fine will burden Commerzbank’s earnings is not clear. At the end of 2013, the bank had set aside €934 million, or about $1.21 billion, to cover legal risks. According to financial circles, about one-third of that was earmarked for the expected Iran fine. The bank’s semi-annual report, however, said it included further reserves for litigation risks in the first half-year. Sources say the gap between the impending fine and provisions taken for legal risks has largely been closed in the meantime.
Besides Commerzbank, a number of other European banks are still in negotiations with U.S. authorities over violating trade sanctions. They include Germany’s largest, Deutsche Bank, and the Unicredit subsidiary, HypoVereinsbank (HVB). Commerzbank, however, is likely to be the first German institution to settle in coming weeks.
The U.S. crackdown has long been a political sore spot. In August, a European Union diplomat reported France and Germany had placed the matter on the European agenda. The goal is to send a concerted political message to Washington at the G20 meeting of central banking leaders in Brisbane, Australia: Don’t overstep the mark in setting fines against foreign institutions.
This article was translated by David Andersen and edited by Greg Ring. The author can be reached at: firstname.lastname@example.org