The Financial Stability Board keeps a list of banks that are too big to fail. Société Générale, France’s third largest bank by assets, has been on that list for years. On June 4, 2018, it agreed to pay $1.34 billion to U.S. authorities. The settlement covers two distinct sets of allegations: manipulation of the London Interbank Offered Rate, or LIBOR, and bribery of Libyan officials.
The bank did not admit wrongdoing. That is standard in large settlements. What is less standard is the sum. $1.34 billion is not a rounding error for a bank with $1.813 trillion in total assets, but it is also not trivial. It is a specific number that regulators arrived at after investigating two separate lines of misconduct.
LIBOR manipulation is not a victimless crime. The rate underpins trillions of dollars in loans, mortgages, and derivatives. When a bank rigs it, the effects ripple through the global financial system. Société Générale is not the first bank to be caught. It will not be the last. But the U.S. authorities’ findings in this case pointed to evidence of wrongdoing that they deemed serious enough to warrant a penalty of this size.
The bribery allegations involve Libya. The bank was accused of paying bribes to Libyan officials to secure business. Libya, after the fall of Gaddafi, was a chaotic place. Western banks competed for access and deals. Some crossed lines. Société Générale, according to the regulators, was among them.
The bank is directly supervised by the European Central Bank. It has been designated a Significant Institution since European Banking Supervision took effect in late 2014. That means the ECB watches its risk management, its capital levels, its compliance systems. Yet the misconduct that led to this settlement occurred under that supervision, or at least partly within its timeframe. That raises questions about what the supervisors saw and when they saw it.
Société Générale has a long history. It was founded in 1864. It was one of the Trois Vieilles, the “Old Three” of French commercial banking, alongside BNP Paribas and Crédit Lyonnais. That history now includes a $1.34 billion blot. The bank’s defense is not publicly known. The report of the settlement does not describe what Société Générale argued in its own defense. It only notes that the bank did not admit wrongdoing.
The settlement resolves the claims. That is the language used. It resolves them without admission, without a trial, without a public airing of the evidence. The public gets the number. The bank gets to move on. Whether the regulators got everything they could have is a separate question.
For a systemically important bank, a fine of this magnitude is a cost of doing business. It is not existential. Société Générale will continue to operate, continue to be supervised by the ECB, continue to be listed by the Financial Stability Board as a bank whose failure would pose a risk to the global financial system. The settlement does not change that.
What it does change is the record. The bank’s history, dating back to 1864, now includes a specific entry: June 4, 2018, $1.34 billion, LIBOR and Libya. That is the fact that will be cited in future reports, future analyses, future comparisons. It is a data point. It is a significant one.
