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Finance

Citibank Fined $100 Million for Manipulating Key Global Interest Rate

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David Z. Morris
David Z. Morris
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By
David Z. Morris
David Z. Morris
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June 16, 2018, 11:47 AM ET
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Citibank on Friday reached a settlement with 42 U.S. states to pay a $100 million fine for manipulation of LIBOR, a key measure of global interest rates that impacts trillions of dollars worth of loans worldwide, including consumer products.

The settlement contains details of instant messages and emails exchanged between Citibank employees as they concealed or misreported what they were paying for interbank loans, mostly in 2008 and 2009. Citi wanted to avoid the appearance of weakness that might have come from being charged high interest rates. The settlement also claims that Citi made millions of dollars in “unjust gains” in deals with governmental and non-profit entities by fixing the rate. New York Attorney General Barbara Underwood described Citi’s actions as “fraudulent conduct” that undermined financial markets.

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LIBOR, or the London Interbank Offered Rate, has been described as the most important interest rate in the world. It is based on a basket of major currencies, and sets the price banks pay one another for loans. It has a major direct impact on everyday borrowers, with rates on loans such as mortgages pegged to LIBOR.

But manipulation of LIBOR has been disturbingly widespread among major banks, particularly before the 2008 financial crisis. U.K. bank Barclays reached a $453 million settlement over rate-fixing in 2012. The same year, UBS agreed to pay a staggering $1.5 billion in fines for fraud and bribery linked to LIBOR manipulation. Such manipulation may have contributed to the U.S. mortgage crisis by driving up home loan rates.

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