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Citibank Ordered to Pay $100 Million
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Citibank settled with attorneys general in 42 states to pay $100 million after an investigation found that the huge corporation manipulated LIBOR, an interest rate that helps set lending rates all over the world.
The problem: Citibank made millions from its fraudulent conduct.
New York Attorney General Barbara Underwood said, “Our office has zero tolerance for fraudulent or manipulative conduct that undermines our financial markets. Financial institutions have a basic responsibility to play by the rules -- and we will continue to hold those accountable who don't.”
Citibank isn’t the first bank to have been fined in this way. In fact, it’s the third – Barclays and Deutsche Bank were previously fined for influencing the LIBOR rate, with total fines now reaching $420 million.
LIBOR is considered a benchmark rate, and it’s what some of the world’s top banks charge each other for short-term loans. (It stands for Intercontinental Exchange London Interbank Offered Rate.) It’s based on these currencies:
Every business day, there are 35 different LIBOR rates, which fluctuate daily, just like normal interest rates do. The reason it’s so important is that LIBOR’s primary function is to act as a benchmark reference rate for products like government and corporate bonds, student loans, credit cards and mortgage loans. It’s also used for several other financial products, like currency swaps and derivatives.
Because Citibank manipulated the rate, it made millions more than it should have – and in mid-June, Citigroup, Inc. agreed to pay $100 million across those 42 states where attorneys general brought charges.
“Citi has adopted industrywide reforms related to participation in interbank offered rates and other benchmark rates and made substantial investments in its systems, controls and monitoring processes to better guard against inappropriate behavior,” the bank said in an emailed statement.
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