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I wonder why there isn't more resistance against the exorbitant fines the US charges European banks every year. These fines have become a significant business r

by Hermel 11y ago

I wonder why there isn't more resistance against the exorbitant fines the US charges European banks every year. These fines have become a significant business risk and should be regulated in free trade agreements, just like subsidies are limited in such agreements. For many European banks, the US business is a money drain, i.e. it costs them more than they get from it. However, they cannot escape US regulation and legal exposure as long as they want to have the ability to trade US dollars. In the end, this is a hidden tax the US charges on all banks world wide, just because it is powerful enough to do so.

Kristine1975 11y ago
Maybe the banks should simply stop committing crimes.
- CodingGuy 11y ago
  They can't - they are banks!
- vetinari 11y ago
  These are not crimes where the banks are headquartered and from where they are doing the business. Maybe US should not project their legislation on foreign subjects? They didn't vote for anyone who created that legislation anyway.
- pizza234 11y ago
  It really depends on how big the bank is. If a bank is really big, like HSBC, it can't/won't be penally prosecuted in real world, so the rational choice [1] is actually to keep committing crimes, and settle the ones where they're caught. On the scale of such bank, even fines which would be astronomical from the perspective of a normal citizen, are peanuts (so to speak) for a large bank. [1] = in a logical, not moral, sense.
- cm2187 11y ago
  The problem is size. It is statistically impossible to employ 300,000 people and not have one dishonest employee. But the standard for banks is now a zero tolerance policy with multi-billions fines for any breach. It is a game they cannot win.
JetSetWilly 11y ago
US Regulators fine all banks in the US that they catch flagrantly breaking the law. They don't just fine European banks - have a look at how much they have fined the likes of JPMorgan or BoA over the last few years. Likewise, regulators in Europe dish out fines a-plenty. The FSA certainly did over the LIBOR scandal recently. European banks could mitigate risk in the US by trading legally or by ceasing trading there at all. If they really think they can't trade legally then their business is not welcome.
- ivanca 11y ago
  ...but you forgot a little detail, the US saves each of its banks if they get any close to becoming bankrupt. They don't save foreign banks if the same happens, at all.
  - JetSetWilly 11y ago
    Entirely false. Foreign banks received plenty of US bailout funds for their US activities. See for example: http://www.newstatesman.com/2010/12/financial-british-money-fed http://www.newstatesman.com/2010/12/financial-british-money-... - british banks alone took 640 billion in aid from the fed. Multinationals just don't work like that.
    - _Codemonkeyism 11y ago
      With foreign banks you mean British banks based on the linked article? The "british banks alone" gives the wrong direction based on your source.
- deleted 11y ago
  [deleted]
- zmb_ 11y ago
  It's not the regulators, it's the prosecutors in New York, who have jurisdiction over the European banks since USD transactions are cleared there. The problem is that banks absolutely cannot afford to risk going to court, since losing a case could mean losing their ability to deal in USD, which would be the end for them. That means that the banks must settle any case brought by the prosecutors. The prosecutors in New York have used this leverage to squeeze billions in settlements from the European banks. The "justice"system has basically turned into what amounts to a protection racket.
Tepix 11y ago
There appear to be two reasons why Deutsche Bank got the highest penalties: a) They were among the worst offenders b) They tried to get rid of the lawsuits quickly.
cturner 11y ago
> they cannot escape US regulation and legal exposure as > long as they want to have the ability to trade US dollars You don't need to be in the US to trade USD. FX is more lightly regulated than almost all other asset classes. For most of the cold war there was a strong trade in USD based out of London-based banks that had no US presence. https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar
- cm2187 11y ago
  But you still need a bank that can clear USD payments to trade FX.
  - cturner 11y ago
    Doesn't need to be a bank. You go to a shopfront FX dealer in Vientiane or Tehran or St Petersburg and deposit or withdraw USD against local currency (or anything else that's liquid). In the most basic trades, possession is settlement. Much of the third world has significant trade in USD, including countries that the US doesn't regard well. In Panama, the USD is a defacto national currency, a choice the crowd has arrived at due to convenience. You can get an armoured van and deliver packs of physical notes. You can use contracts to get more complicated arrangements, including where you have USD on paper but backed by an alternative currency. You can do balance sheet adjustments by contract. You can be a dutch firm ordering agricultural goods from Kenya, and do your leg of the transaction by delivering USD. The banks in the middle might exchange physical USD to make it happen, without any of them being regulated by the US at the time. But - probably - they'll just organise the deal in terms of USD using holdings of other currencies or commodities or contract-agreed offsets that are convenient to them.
    - cm2187 11y ago
      If you do a transaction with physical cash, yes you don't need a bank. But if you do any large transaction it will not be in physical cash, and the clearing has to go through a US approved bank. Foreign banks that cannot clear USD use other banks behind the scene.
cm2187 11y ago
At this stage these fines can be called "taxes", a 100% tax rate.

by Hermel 11y ago

Kristine1975 11y ago

Maybe the banks should simply stop committing crimes.

CodingGuy 11y ago
They can't - they are banks!
vetinari 11y ago
These are not crimes where the banks are headquartered and from where they are doing the business. Maybe US should not project their legislation on foreign subjects? They didn't vote for anyone who created that legislation anyway.
pizza234 11y ago
It really depends on how big the bank is. If a bank is really big, like HSBC, it can't/won't be penally prosecuted in real world, so the rational choice [1] is actually to keep committing crimes, and settle the ones where they're caught. On the scale of such bank, even fines which would be astronomical from the perspective of a normal citizen, are peanuts (so to speak) for a large bank. [1] = in a logical, not moral, sense.
cm2187 11y ago
The problem is size. It is statistically impossible to employ 300,000 people and not have one dishonest employee. But the standard for banks is now a zero tolerance policy with multi-billions fines for any breach. It is a game they cannot win.

JetSetWilly 11y ago

US Regulators fine all banks in the US that they catch flagrantly breaking the law. They don't just fine European banks - have a look at how much they have fined the likes of JPMorgan or BoA over the last few years. Likewise, regulators in Europe dish out fines a-plenty. The FSA certainly did over the LIBOR scandal recently. European banks could mitigate risk in the US by trading legally or by ceasing trading there at all. If they really think they can't trade legally then their business is not welcome.

ivanca 11y ago
...but you forgot a little detail, the US saves each of its banks if they get any close to becoming bankrupt. They don't save foreign banks if the same happens, at all.
- JetSetWilly 11y ago
  Entirely false. Foreign banks received plenty of US bailout funds for their US activities. See for example: http://www.newstatesman.com/2010/12/financial-british-money-fed http://www.newstatesman.com/2010/12/financial-british-money-... - british banks alone took 640 billion in aid from the fed. Multinationals just don't work like that.
  - _Codemonkeyism 11y ago
    With foreign banks you mean British banks based on the linked article? The "british banks alone" gives the wrong direction based on your source.
deleted 11y ago
[deleted]
zmb_ 11y ago
It's not the regulators, it's the prosecutors in New York, who have jurisdiction over the European banks since USD transactions are cleared there. The problem is that banks absolutely cannot afford to risk going to court, since losing a case could mean losing their ability to deal in USD, which would be the end for them. That means that the banks must settle any case brought by the prosecutors. The prosecutors in New York have used this leverage to squeeze billions in settlements from the European banks. The "justice"system has basically turned into what amounts to a protection racket.

Tepix 11y ago

There appear to be two reasons why Deutsche Bank got the highest penalties: a) They were among the worst offenders b) They tried to get rid of the lawsuits quickly.

cturner 11y ago

> they cannot escape US regulation and legal exposure as > long as they want to have the ability to trade US dollars You don't need to be in the US to trade USD. FX is more lightly regulated than almost all other asset classes. For most of the cold war there was a strong trade in USD based out of London-based banks that had no US presence. https://en.wikipedia.org/wiki/Eurodollar https://en.wikipedia.org/wiki/Eurodollar

cm2187 11y ago
But you still need a bank that can clear USD payments to trade FX.
- cturner 11y ago
  Doesn't need to be a bank. You go to a shopfront FX dealer in Vientiane or Tehran or St Petersburg and deposit or withdraw USD against local currency (or anything else that's liquid). In the most basic trades, possession is settlement. Much of the third world has significant trade in USD, including countries that the US doesn't regard well. In Panama, the USD is a defacto national currency, a choice the crowd has arrived at due to convenience. You can get an armoured van and deliver packs of physical notes. You can use contracts to get more complicated arrangements, including where you have USD on paper but backed by an alternative currency. You can do balance sheet adjustments by contract. You can be a dutch firm ordering agricultural goods from Kenya, and do your leg of the transaction by delivering USD. The banks in the middle might exchange physical USD to make it happen, without any of them being regulated by the US at the time. But - probably - they'll just organise the deal in terms of USD using holdings of other currencies or commodities or contract-agreed offsets that are convenient to them.
  - cm2187 11y ago
    If you do a transaction with physical cash, yes you don't need a bank. But if you do any large transaction it will not be in physical cash, and the clearing has to go through a US approved bank. Foreign banks that cannot clear USD use other banks behind the scene.

cm2187 11y ago

At this stage these fines can be called "taxes", a 100% tax rate.