After the French government's refusal to sign up and pay a $575m penalty in connection with claims that Credit Lyonnais broke US banking laws by acquiring Executuve Life and its junk-bond portfolio in the early 1990s, the final bill to settle the affair could end up in the billions of dollars and Credit Lyonnais may even lose its US banking license.
In the last two months, talks have been continuing between the French government and US prosecutors and it was thought that a deal was in the offing. All that now looks history. The talking appears over and the matter looks more likely to now end up in court. And a French government spokesman has said: 'We are not afraid of a trial'.
And an innocent by-stander in all this, who could pay dearly, is Credit Agricole, the bank that acquired Credit Lyonnais earlier this year. There are fears that bank investors may bail out and sell shares if the matter went to trial. And, as the US end of Credit Lyonnais's investment banking division unit accounts for up to 15% of revenues, the loss of the US banking license could be no small matter.
Although there is still time to settle, the clock is now truly ticking. Those on the outside wonder if the French government is just playing hard-ball or simply playing the fool.