Societe Generale Group SCGLY has agreed to resolve charges related to manipulation of LIBOR and a Libyan bribery scheme with the U.S. and the French authorities. This major French bank will be paying approximately $1.3 billion (in aggregate) to the U.S. Department of Justice (“DOJ”), the U.S. Commodity Futures Trading Commission (“CFTC”) and the French Parquet National Financier (“PNF”).
Settlement Details & Financial Impact
Of the total penalty amount, $585 million pertains to the charges of bribing Libyan officials to win government investments. This amount will be equally divided between the DOJ and the PNF.
The remaining fine of $750 million relates to the allegations for rigging LIBOR rate. Of this, the DOJ will get $275 million and the CFTC $450 million.
Additionally, Societe Generale has entered into a three-year deferred prosecution agreement (DPA) with the DOJ related to LIBOR rigging allegation. Nonetheless, no independent compliance monitor has been assigned in relation to these settlements. Other than Societe Generale, several global banks including JPMorgan JPM, Barclays BCS, Deutsche Bank and Citigroup C have signed DPAs as part of settlement agreement for similar matter.
SGA Societe Generale Acceptance, N.V., the bank’s subsidiary, has agreed to plead guilty for violating the U.S. laws over the Libyan matter. Further, as part of the settlement deal, Societe Generale remains committed to have the French Anti-corruption Agency evaluate the quality and effectiveness of the anti-corruption actions it implemented for a two-year period.
Despite paying such a huge amount as fine, Societe Generale’s financials are not expected to be adversely impacted as it had already taken provisions for the litigation charges. Also, the settlement will not have any impact on services offered by the company.
Allegations (In Brief)
Per the allegations by the DOJ, Societe Generale paid more than $90 million in bribes to high-level Libyan government officials through a broker for securing 14 investments from Libyan state-owned financial entities. This led the bank to win $3.7 billion worth of deals and reap more than 500 million in profits between 2004 and 2009.
Additionally, it manipulated LIBOR by submitting false rates between 2010 and 2012. The DOJ, further, ascertained, that this LIBOR manipulation scheme was “ordered by senior executives” of the company.
Road Ahead
In a statement, Societe Generale said that it “has already taken extensive steps in recent years to strengthen its overall compliance and control framework, which is intended to meet the highest industry standards of compliance and ethics.”
Notably, the bank still has litigation provisions of nearly €1.2 billion remaining. So, chances of taking further provisions for resolving other pending legal matters are less.
Societe Generale, in connection with the LIBOR matter, continues to defend civil charges in the United States and also will respond to information requests from other regulatory authorities, including the New York Department of Financial Services.
The stock has lost 17.2% in the past year against the industry’s rise of 3.1%.
Currently, Societe Generale carries a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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