2018 Registration document and annual fi nancial report - BNP PARIBAS248
4 CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2018
4
Notes to the fi nancial statements
8.b CONTINGENT LIABILITIES: LEGAL PROCEEDINGS AND ARBITRATION
BNP Paribas (the Bank ) is party as a defendant in various claims, disputes and legal proceedings (including investigations by judicial or supervisory authorities) in a number of jurisdictions arising in the ordinary course of its business activities, including inter alia in connection with its activities as market counterparty, lender, employer, investor and taxpayer. While the Bank cannot predict the ultimate outcome of all pending and threatened legal and regulatory proceedings, the Bank reasonably believes that they are either without legal merit, can be successfully defended or that the outcome of these actions is not expected to result in a signifi cant loss for the Bank.
The Bank and certain of its subsidiaries are defendants in several actions pending before the United States Bankruptcy Court Southern District of New York brought by the Trustee appointed for the liquidation of Bernard L. Madoff Investment Securities LLC ( BLMIS ). These actions, known generally as clawback claims , are similar to those brought by the BLMIS Trustee against numerous institutions, and seek recovery of amounts allegedly received by the BNP Paribas entities from BLMIS or indirectly through BLMIS-related feeder funds in which BNP Paribas entities held interests. The BLMIS Trustee claims in these actions that the amounts which BNP Paribas entities received are avoidable and recoverable under the US Bankruptcy Code and New York state law. In the aggregate, the amount initially sought to be recovered in these actions approximated USD 1.3 billion. BNP Paribas has substantial and credible defenses to these actions and is defending against them vigorously.
In two decisions dated 22 November 2016 and 3 October 2018, the Bankruptcy Court rejected most of the claims brought by the BLMIS Trustee against BNP Paribas entities. An appeal is ongoing as to the 22 November 2016 decision. Oral argument was heard by the Court of Appeals for the Second Circuit on 16 November 2018. The 3 October 2018 decision will be subject to appeal at the conclusion of that suit.
Various litigations and investigations are ongoing relating to the restructuring of the Fortis group, now Ageas, of which BNP Paribas Fortis is no longer part, and to events having occurred before BNP Paribas Fortis became part of the BNP Paribas Group. Among these are litigations brought by shareholders groups in The Netherlands and Belgium against Ageas and, among others, against BNP Paribas Fortis, in relation to its role as global coordinator of Fortis (now Ageas) s capital increase in October 2007 to partly fi nance its acquisition of ABN Amro Bank N.V.. These shareholders groups mainly allege that there has been a breach in fi nancial communication, regarding, inter alia, the disclosure on the exposure to subprime mortgages. On 13 July 2018, the Amsterdam Court of Appeal has declared binding a settlement between Ageas and representatives of certain shareholders groups who held shares between 28 February 2007 and 14 October 2008. On 21 December 2018, Ageas indicated that it waived its right to terminate the settlement.
BNP Paribas Fortis is one of the releasees under the Ageas Settlement. This means that each eligible shareholder which has not opted out will
be deemed to have fully released BNP Paribas Fortis from any claim regarding the events during this time. Litigation was also brought in Belgium by minority shareholders of Fortis against the Société fédérale de Participations et d Investissement, Ageas and BNP Paribas seeking (amongst other things) damages from BNP Paribas as restitution for part of the BNP Paribas Fortis shares that were contributed to BNP Paribas in 2009, on the ground that the transfer of these shares was null and void. On 29 April 2016 the Brussels Commercial court decided to stay the proceedings until the resolution of the pending Fortis criminal proceeding in Belgium. BNP Paribas does not have tangible elements to assess the duration of such suspension.
Like many other fi nancial institutions in the banking, investment, mutual funds and brokerage sectors, the Bank has received or may receive requests for information from supervisory, governmental or self-regulated agencies. The Bank responds to such requests, and cooperates with the relevant authorities and regulators and seeks to address and remedy any issues they may raise.
Regulatory and law enforcement authorities in multiple jurisdictions are conducting investigations or making inquiries of a number of fi nancial institutions regarding trading on the foreign exchange markets. The Bank has been cooperating with the investigations and inquiries and has reponded to the information requests. Regarding the United States, on 24 May 2017, the New York Department of Financial Services ( DFS ) announced that it had fi ned the Bank USD 350 million as part of a consent order for violations of New York banking law arising out of the Bank s global foreign exchange business. On 17 July 2017 the Board of Governors of the Federal Reserve System ( FED ) announced that it had fi ned the Bank and certain of its US subsidiaries USD 246 million as part of a consent order for unsafe and unsound practices in the foreign exchange market. Under these respective consent orders, the Bank has also agreed to improve its internal policies and controls relating to its foreign exchange business and to certain designated market activities, with regard to the FED order. On 25 January 2018, BNP Paribas USA Inc. accepted to plead guilty in front of the US District Court for the Southern District of New York to a single violation of the Sherman Antitrust Act. On 30 May 2018, the court imposed the sentence, as jointly recommended in the plea agreement between BNP Paribas USA Inc. and the Department of Justice ( DOJ ), consisting of (1) a fi ne of USD 90 million; (2) no probation, and (3) no order of restitution. In reaching the plea agreement with BNP Paribas USA Inc., the DOJ has noted the Bank s substantial efforts relating to compliance and remediation to address and prevent the re-occurrence through its compliance and remediation program of the issues arising from its FX trading business. On 29 August 2018, the US Commodity Futures Trading Commission ( CFTC ) announced the imposition of a civil penalty of USD 90 million on and paid by BNP Paribas Securities Corp. as part of a consent order following an investigation in connection with the USD ISDAFIX benchmark. The fi ndings of the order were neither admitted nor denied by BNP Paribas Securities Corp. which, the CFTC noted in its order, had engaged in signifi cant remedial action [ ] independent of the Commission s investigation .
