Citibank agreed to pay charges of $425 million to settle civil charges in its attempt to manipulate financial benchmarks in a range between 2007 and 2012, according to a federal regulator.
The U.S. Commodity Futures Trading Commission stated that Citigroup’s consumer banking arm attempted to increase trading profits by manipulating and falsified reports towards the U.S. Dollar International Swaps and Derivatives Association Fix – a global benchmark for interest rate products.
According to the CFTC, Citibank and two of a Japanese affiliates attempts to manipulate the London Interbank Offered Rate as well, which is well-known as Libor. In addition, the Euroyen Tokyo Interbank Offered Rate benchmarks was also in their list of attempted manipulation.
In multiple world currencies, the benchmarks are used to set rates on mortgages for trillions of dollars, including credit cards and loans.
Conversely, Citibank was fined with misleading reporting of U.S. dollar Libor "to avoid generating negative media attention and to protect its reputation" amid the financial crisis from the spring of 2008 until the summer of 2009, the CFTC stated.
As it is considered that several European banks had later agreed to pay charges for the alleged Libor-related manipulation, Citibank is regarded as the first bank based in U.S. to range a similar settlement.
The CFTC stated that Citibank is obliged to pay fines of $250 million to settle the ISDAfix charges, while the bank and its Japanese affiliates will pay charges of $175 million to resolve the Libor-related manipulation.
"As evident by todays actions, the CFTCs vigilance includes holding a financial institution, like Citi, responsible each time it acts to undermine a benchmark for its personal profit or benefit," Aitan Goelman, the federal regulators enforcement director said.
The settlement took into account Citibank’s decision to self-regard the yen Libor allegations, and the bank’s "evolving nature" of collaboration towards the ISDAFix charges, Goelman said.
Citibank, which neither denied nor admitted the accusations, characterized the agreements as a essential step to resolve earlier investigations.
"In addition to adopting industry-wide reforms related to participation in benchmark rates, Citi has made substantial investments in its systems, controls and monitoring processes to better guard against inappropriate behavior," the bank said.
"Our greatest priority is to ensure that we conduct business in keeping with the highest ethical standards," the bank added.
Citibank, along with its affiliates attempted to engage in Libor manipulation despite of being aware that the CFTC was investigating the U.S. dollar Libor submissions of the bank. During the daily process, the submissions are made in which the representatives of major bank from London disclose what they anticipate to pay for short-term loans from each other in different monetary currencies.