Bloomberg News

Citigroup Penalty Sought in Japanese Tibor Probe, Nikkei Says

December 09, 2011

Dec. 9 (Bloomberg) -- Japanese securities watchdogs are seeking to punish Citigroup Inc. for attempted manipulation of the Tokyo interbank offered rate, the Nikkei newspaper reported, citing unidentified sources.

Regulators are examining whether employees at a Japanese unit of Citigroup, the third-biggest U.S. lender by assets, pushed banks to submit interest rates that would ensure that Tibor moved to the brokerage’s advantage, Nikkei said. The rate is calculated by compiling quotes submitted by major banks.

The nation’s Securities and Exchange Surveillance Commission is urging the Financial Services Agency to penalize the Citigroup Global Markets Japan unit, Nikkei said.

Citigroup is part of a global investigation by regulators into whether some of the world’s biggest banks manipulated the interest rates at which they borrowed from each other. The U.S. Justice Department and the Securities and Exchange Commission may be investigating whether banks colluded to artificially reduce the London interbank offered rate, or Libor, a person with knowledge of the inquiry said in March.

Citigroup has already attracted the attention of Japanese regulators. The Financial Services Agency is preparing to penalize its Citibank Japan Ltd. unit for failing to fully explain product risk to retail customers, two people with knowledge of the situation said this month. Darren Buckley, chief executive officer of the unit, may step down as soon as month to take responsibility for the breach, the people said on condition of anonymity.

Libor Probe

Danielle Romero-Apsilos, a spokeswoman for New York-based Citigroup, declined to comment on the Nikkei report when reached by Bloomberg News. There was no answer to a call to a phone number listed on the commission’s website outside of normal business hours.

Citigroup, led by Chief Executive Officer Vikram Pandit since 2007, has been asked to make employees available to testify as witnesses before the U.K. Financial Services Authority on the Libor manipulation probe, two other people briefed on the plans said in March. Deutsche Bank AG, Bank of America Corp. and JPMorgan Chase & Co. were also included in the request, the people said.

The investigation came to light earlier this year after UBS AG, Switzerland’s biggest bank, said it received subpoenas from U.S. and Japanese regulators. Barclays Plc has also said it’s cooperating with U.S. and British market watchdogs.

Tibor rates are set daily by the country’s banks through the Japanese Bankers Association, a trade group. Citigroup joined the pool of banks used to set the rates in April 2010.

Libor rates, a benchmark for more than $350 trillion of financial products worldwide, are set by the British Bankers’ Association. The rates are based on data from banks reflecting how much it would cost them to borrow from each other for various periods of time.

The SESC was established in Japan in 1992 after a series of financial scandals to ensure fair transactions in securities and financial futures markets, according to its website.

--With assistance from Steven McPherson in Seattle and Lindsay Fortado in London. Editors: Steve Dickson, Russell Ward

To contact the reporter on this story: Donal Griffin in New York at dgriffin10@bloomberg.net

To contact the editor responsible for this story: David Scheer at dscheer@bloomberg.net


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