Citibank will pay $100 million for manipulating a key interest rate before and during the Great Recession, costing investors millions of dollars.
The investigation of LIBOR, the daily average interest rate that some banks charge each other to borrow money, was conducted by 42 state attorneys general.
“Financial institutions have a basic responsibility to play by the rules – and we will continue to hold those accountable who don’t,” said New York Attorney General Barbara D. Underwood.
The attorneys general alleged that Citibank misrepresented the integrity of LIBOR to state and non-profit entities by (a) making LIBOR submissions to avoid negative publicity and protect the reputation of the bank; (b) asking Citibank personnel in other units to avoid offering higher rates than Citibank’s LIBOR submissions, and (c) saying that other banks made LIBOR submissions that were inconsistent with their borrowing rates and contributed to inaccurate LIBORs.
As a result of its fraudulent conduct, Citibank made millions when government entities and non-profit organizations entered into swaps and other financial contracts with Citibank without knowing that Citibank and other banks on the LIBOR-setting panel were manipulating LIBOR submissions.
Government and non-profit entities with LIBOR-linked swaps and other investment contracts with Citibank will be notified if they’re eligible to receive a payment from the settlement fund of $95 million. The balance of the fund will be used to pay investigation and other costs.
Citibank is the third of several LIBOR-setting panel banks to resolve claims following investigations by state attorneys general. With the Citibank settlement, the attorneys general have collected $420 million in payments from the three banks, almost all of which will be distributed to government and non-profits entities.
Other states joining New York in the Citibank settlement are Alabama, Alaska, Arizona, Arkansas, California, Colorado, Connecticut, District of Columbia, Delaware, Florida, Georgia, Idaho, Illinois, Indiana, Iowa, Kansas, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New Jersey, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, Tennessee, Utah, Virginia, Washington, West Virginia, and Wisconsin.
