Citibank will pay $425 million to settle benchmark charges

Citibank is paying $425 million in penalties to settle federal civil charges for attemping to manipulate key benchmarks used to set interest rates.

The Commodity Futures Trading Commission (CFTC) on Wednesday announced two settlements with Citibank, a wing of banking giant Citigriup, for trying maximize profits by fixing the financial benchmarks.

{mosads}The CFTC fined Citibank $250 million for trying on multiple occasions from January 2007 through January 2012, to manipulate and make false reports about the U.S. Dollar International Swaps and Derivatives Association Fix (USD ISDAFIX), a global benchmark for interest rate products.

“Citibank is required take specified steps to implement and strengthen its internal controls and procedures, including measures to detect and deter trading potentially intended to manipulate swap rates such as USD ISDAFIX and to ensure the integrity of interest-rate swap benchmarks,” the CFTC said in a statement.

In a separate $175 million penalty, Citibank and two Japanese affiliates were charged for attempting to manipulate the London Interbank Offered Rate (Libor), as well as the Euroyen Tokyo Interbank Offered Rate benchmarks, which are used to set interest rates on consumer loans such as mortgages and credit cards, the CFTC said.

Citi also was charged with false reporting of the 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.

The CFTC said that Citi was engaging in the misconduct even while it was aware that the agency was investigating its Libor submission practices.

“The CFTC remains steadfast in its commitment to ensure the integrity of global benchmarks that are critical to the U.S. and international financial markets,” said Aitan Goelman, CFTC director of enforcement, in a statement.

“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,” Goelman said.

“The terms of this settlement are intended to reflect all aspects of Citibank’s response to the investigation, including the evolving nature of its cooperation.”

This latest settlement is on top the more than $5 billion the CFTC has collected in penalities for manipulation of the Libor and other benchmark rates.