BNP Paribas SA has suspended new commodity trade finance deals while it reviews its involvement in the business in Europe, Middle East and Africa, according to people familiar with the matter.
BNP Paribas, through the Geneva office of what was then Paribas, pioneered the use of letters of credit to finance oil trading in the 1970s, working with Marc Rich among others. As the business of financing commodity traders grew, the bank was for many years the leading lender to the industry, accounting for as much as half of some trading houses’ bank lines. In recent years, it has been a diminished presence, but trading executives estimate that it still ranks among the top 10 providers of financing to the industry.
The bank has been shrinking its commodity trade finance business since 2014, when it was fined $8.9 billion for violating U.S. sanctions. No matter what option it pursues now, it’s planning to substantially retrench from the business, the people said.
BNP’s move follows a pullback by Societe General SA. SocGen is closing its trade commodity finance unit in Singapore following the collapse of Hin Leong Trading (Pte) Ltd. The bank will handle large Asian commodities trading clients from Hong Kong, according to people familiar with the matter, and cut ties with smaller firms.
— With assistance by Alfred Cang
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