Bad day for Citi: CFTC doles out $425 million in fines for manipulation of LIBOR and swap rates

US financial regulator CFTC has issued two notices about fairly large fines totaling $425 million being levied against banking giant Citigroup Inc (NYSE:C).

In Notice #1, the CFTC has ordered Citibank, N.A. and Japanese affiliates to pay a $175 million penalty for attempted manipulation of Yen LIBOR and Euroyen TIBOR, and false reporting of Euroyen TIBOR and U.S. Dollar LIBOR.

In Notice #2, Citibank has been ordered to pay $250 million for attempted manipulation and false reporting of U.S. Dollar ISDAFIX benchmark Swap Rates.

cftcwhiteIn the LIBOR case, the CFTC found that a Citigroup Japan entity, by and through the acts of certain of its traders, attempted to manipulate Yen LIBOR on multiple occasions from at least February 2010 through August 2010, and Euroyen TIBOR, at times, from April 2010 through June 2010, to benefit the derivatives trading positions of those traders.

Specifically, a Tokyo-based senior Yen derivatives trader, hired by Citigroup Japan to enhance the bank’s reputation in the Tokyo derivatives market, attempted to manipulate the benchmark fixings by using his contacts at other Yen LIBOR panel banks and at interdealer brokers to influence the Yen LIBOR submissions of other Yen panel banks. In addition, a senior manager who ran Citigroup Japan’s Tokyo interest rates derivatives trading desk pressured Citigroup Japan’s Euroyen TIBOR submitters to adjust their submissions to benefit the Senior Yen Trader’s derivatives trading positions. Citigroup Japan’s Euroyen TIBOR submitters, on a few occasions, took the Senior Yen Manager’s requests into account when making Euroyen TIBOR submissions.

In the swaps rate case, Citibank, by and through certain of its traders, attempted to manipulate and made false reports concerning USD ISDAFIX by skewing the Bank’s USD ISDAFIX submissions, in the Bank’s role as a panel bank in the USD ISDAFIX setting process, in order to benefit the Bank’s trading positions at the expense of its derivatives counterparties. In addition, Citibank, through its traders, bid, offered, and executed trades in targeted interest rate products, including swap spreads and U.S. Treasuries, in a manner designed – including in timing and pricing – to influence the published USD ISDAFIX to benefit the Bank in its derivatives positions, according to the Order.

More on the LIBOR related fine to Citi can be seen here.

More on the swap rates fine to Citi can be seen here.

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