Bloomberg News

Citigroup Said to Face Possible Penalty in Japan Tibor Probe

December 09, 2011

(Updates with Libor, FSA probes from the third paragraph.)

Dec. 9 (Bloomberg) -- Citigroup Inc.’s Japanese brokerage unit faces possible punishment after it attempted to influence the Tokyo interbank offered rate, two people familiar with the situation said.

The Securities and Exchange Surveillance Commission may recommend the Financial Services Agency penalize Citigroup Global Markets Japan Inc. after staff tried to alter interest rates that would ensure Tibor moved to the brokerage’s advantage, the people said. They asked to remain anonymous because the investigation is continuing.

Citigroup is part of a global probe by regulators into whether some of the world’s biggest banks manipulated the interest rates at which they borrowed from each other. In Japan, apart from the Tibor inquiry, Citigroup is facing potential penalties for compliance breaches at its local banking unit.

Mika Nemoto, a Tokyo-based spokeswoman at Citigroup, declined to comment. An SESC official, who didn’t want to be identified, declined to comment, citing the commission’s policy. The Nikkei newspaper reported the Tibor investigation earlier.

Citigroup shares fell 6.3 percent to 2,158 yen in Tokyo trading at 11:29 a.m. local time.

Libor Investigation

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, 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, 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.

Citigroup has already attracted the attention of Japanese regulators. The FSA 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 this month to take responsibility for the breach, the people said on condition of anonymity.

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 Donal Griffin in New York, Steven McPherson in Seattle and Lindsay Fortado in London. Editors: Russell Ward, Chitra Somayaji

To contact the reporter on this story: Takahiko Hyuga in Tokyo at thyuga@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net


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