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Citibank Agrees To Pay $100m Fine For LIBOR Rate Manipulation

Citibank, one of the world's largest banks has finally agreed to pay a hefty $100 million fine that will be spread across 42 states in America. This is in connection with Citibank’s manipulation of the London Interbank Offered Rate (LIBOR), which is a global interest rate that impacts a whole host of financial products.

By manipulating the LIBOR rate, customers of Citibank ended up having access to less money since the LIBOR is what most banks use to determine the how much customers can borrow. Citibank carried out its manipulation in two ways.

First, Citibank's higher-ups asked its employees who were in charge of submitting their LIBOR data to lower the amount they were submitting. The aim was to show that the bank was not in financial difficulties and needed to pay a higher interest rate than its competitors.

Second, Citibank's traders and their associates also regularly asked its LIBOR submitters to manipulate their numbers. The manipulation of LIBOR rates took place from 2007 to 2009. All of this information was detailed in the settlement that was released recently. This included emails and text messages that were used as proof of Citibank's manipulations of LIBOR.

According to experts, the result is that a wide variety of institutions throughout the United States ended up being defrauded of millions of dollars. This is why Citibank was fined a total of $100 million. From this amount, $95 million has been reserved for reparations. Anyone who entered into LIBOR-linked investments with Citibank during this time period would be eligible for a part of the settlement. The remaining $5 million has been set aside as legal and investigation fees.

Major Banks Caught Tampering With LIBOR

Citibank is not the first major bank to have been caught tampering with the LIBOR rate. Investigations in recent years has shown that a number of major banks including Standard Chartered Bank, HSBC and Barclays Bank Plc. have all tampered with LIBOR rates to dupe customers and increase their profits illegally.

Investigations have been launched by both UK and UK financial regulators and a number of banks have admitted these malpractices. Barclay's ended up paying out $453 million for fixing LIBOR rates while UBS bank a $1.5 billion fine for bribery and fraud. The manipulation of interest rates has a major effect on investments. Many experts think that this manipulation can be one of the prime reasons for the U.S. mortgage crisis.

Thee investigation into LIBOR manipulation will continue and there are a number of major banks that continue to be under the crosshairs of the authorities.


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