Citibank to pay $425m to settle manipulation charges, no one jailed

The Commodity Futures Trading Commission on Wednesday ordered Citibank to pay $425 million to settle charges including attempted manipulation and false reporting of several key currency-valuation benchmarks.

The regulators said $250 million in the settlement relate to the U.S. Dollar International Swaps and Derivatives Association Fix between January 2007 and January 2012. The USD ISDAFIX is a valuation tool used for dollar-denominated interest-rate swaps of a range of maturities.

They said the remaining $175 million in the settlement includes manipulation charges involving Citigroup Global Markets Japan actions related to yen LIBOR on multiple occasions from at least February 2010 through August 2010 and euroyen TIBOR from April through June 2010.

The regulators said that between the spring of 2008 through the summer of 2009 Citi made “U.S. Dollar submissions on a desire to avoid generating negative media attention and to protect Citi’s reputation in the market.”

The order demands that Citibank “immediately cease and desist from further violations of the Commodity Exchange Act.” The CFTC also said the bank must implement new internal protocols to help ensure the integrity of interest-rate swap benchmarks like the USD ISDAFIX.

“The CFTC’s order demonstrates that we will vigorously continue to investigate any efforts to manipulate financial benchmarks, and we will take action where possible to protect the integrity of these benchmarks,” CFTC enforcement director Aitan Goelman said in a statement.

The agency said Citibank and some of its traders skewed its USD ISDAFIX submissions to benefit the bank’s own “trading positions at the expense of its derivatives counterparties.”

The order also said that 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.”

Citi told CNBC in an email, “These settlements represent a significant step for Citi in resolving its legacy benchmark rate 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 added.

“Our greatest priority is to ensure that we conduct business in keeping with the highest ethical standards. We continue to fully cooperate with pending investigations conducted by other agencies related to benchmark rate submissions,” Citi said.

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