Citibank to pay $425M to settle CFTC benchmark charges
Citibank agreed to pay $425 million in fines to settle civil charges it attempted to manipulate financial benchmarks between 2007 and 2012, a federal regulator said Wednesday.
The consumer banking arm of Citigroup (C) "on multiple occasions" tried to boost trading profits by attempting to manipulate and make false reports about the U.S. Dollar International Swaps and Derivatives Association Fix, a global benchmark for interest rate products, the U.S. Commodity Futures Trading Commission said.
Citibank and two Japanese affiliates also attempted to manipulate the London Interbank Offered Rate popularly known as Libor, as well as the Euroyen Tokyo Interbank Offered Rate benchmarks, the CFTC said. The benchmarks in multiple world currencies are used to set rates on trillions of dollars in mortgages, credit cards and loans.
Separately, Citibank was charged with false reporting of U.S. dollar Libor "to avoid generating negative media attention and to protect its reputation" during the financial crisis from the spring of 2008 through the summer of 2009, the CFTC said.
Although several European banks had previously agreed to pay fines for alleged Libor-related manipulation, Citibank is the first U.S.-based bank to reach a similar settlement.
Citibank will pay $250 million to settle the ISDAfix charges, while the bank and its Japanese affiliates will pay $175 million to resolve the Libor-related allegations, the CFTC said.
"As evident by today's actions, the CFTC's 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 regulator's enforcement director, said in a statement announcing the charges and settlements.
The agreements took into account Citibank's decision to self-report the yen Libor misconduct, and the bank's "evolving nature" of cooperation regarding the ISDAFix allegations, Goelman said.
Citibank, which neither admitted nor denied the allegations, characterized the settlements as a significant step in resolving older 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."
Citibank and its affiliates allegedly engaged in the attempted Libor manipulation despite knowing that the CFTC was investigating the bank's U.S. dollar Libor submissions. The submissions are made during the daily process in which London-based representatives of major banks disclose what they would expect to pay for short-term loans from each other in various monetary currencies.
Citibank managers did not notify the bank's legal or compliance departments that a senior trader of Japanese yen had talked openly about how he tried to rig the yen Libor rate during his tenure at another bank, the CFTC said.
Citibank electronic communications in June 2010 showed the senior trader messaged "we're the highest foreign bank. So, that's the point, right? the point is the foreign banks will all move in concert with each other and we're the highest one."
Regarding the ISDAfix allegations, the CFTC said Citibank electronic communications showed traders bragged about the attempted manipulation. In March 2008, one trader sent instant messages to other market participants that said "[I] actually push the isdafixing on the days when it's close...surprising[ly] easy to push."
Follow Paste BN reporter Kevin McCoy on Twitter: @kmccoynyc