Only a few days ago, Eliane Houlette was an unknown quantity. Now, in financial circles at least, she is almost a household name. Last week, it emerged that France’s new chief prosecutor for financial crime had launched a preliminary inquiry into suspected insider trading at BNP Paribas, targeting, among others, current and former bosses: ex-chairman Michel Pébereau, outgoing chairman Baudouin Prot and chief operating officer Philippe Bordenave, reports The Financial Times.
To many foreign observers, this will simply have seemed like another tale of banking scandal. Investigations by US and UK regulators into market manipulation, mis-selling and general misbehaviour have become commonplace.
But, in France, Ms Houlette’s investigation is significant – and a big departure from the norm. Back in June, as US regulators were preparing a record $8.9bn penalty for BNP Paribas over sanctions abuses, French president François Hollande had intervened to call the planned fine “disproportionate”. Gérard Rameix, chairman of the AMF markets watchdog, said the US authorities’ toughening stance towards BNP was “very difficult to appreciate and to follow”. The French establishment has a tradition of sticking together.
And few private sector French institutions are as much a part of the establishment as BNP. Mr Pébereau, who remains the bank’s “honorary president” even after his retirement three years ago, had a long and successful career as a civil servant before moving into banking.
Amid the financial crisis, he was a close adviser to President Nicolas Sarkozy and the Treasury.
It is too early to tell whether there is any substance in Ms Houlette’s probe – some people close to the bank have dismissed it as groundless, given that the share sales that appear to be under investigation were publicly disclosed and undertaken a long time before the bank knew the scale of the stock price sensitive US fine.
Critics say this is merely an ambitious French official driven to make a mark by the muscle flexing of foreign peers – Martin Wheatley at the UK’s Financial Conduct Authority and Benjamin Lawsky at the New York Department of Financial Services.
Nevertheless, the very existence of Ms Houlette’s initiative is a significant illustration of how BNP’s standing in France has dwindled. Such a probe, without any obviously incriminating upfront evidence, would have been unthinkable just 12 months ago.
For BNP, it is another humbling episode after its US fines and the apparent crisis of confidence at its low-key but traditionally confident investment banking operation. Last week, the unit’s new boss, Yann Gérardin, unveiled a restructuring programme that moved power away from the underperforming fixed-income unit. This move is in line with broader trends in the market but the rapid rejig still adds to the impression that BNP is rattled.
Earlier in the year, BNP’s prospects had looked so different. The European Central Bank’s stress test on eurozone lenders was expected to give BNP a clean bill of health (which it did), freeing the bank up to pounce on rivals shown by the test to be weak but strategically interesting (which it didn’t).
Big banks in Italy (Monte dei Paschi di Siena) and Germany (Commerzbank) are obvious takeover targets, but BNP may now lack the chutzpah. It was damaged not only financially by the US sanctions affair, but reputationally, too – a hit that has been compounded by news of Ms Houlette’s insider trading investigation.
With its establishment credentials unravelling, BNP may find it tougher to muster political support for a big cross-border deal – no matter how strong its core business.