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Posted: June 17, 2018

Citigroup Agrees to Pay $100 Million to Settle State LIBOR Investigations

Bloomberg reports that Citigroup has agreed to pay $100 million to settle claims by 42 states against it relating to”misrepresent[ing] the integrity of the Libor benchmark to state and local governments, not-for-profit organizations and institutional trading counterparties.”

According to Bloomberg,

“[t]he settlement agreement quoted extensive electronic and phone communications obtained in the case, including a communication on March 28, 2008, between a New York-based manager and former Libor submitter to one of his backups.

‘Avoid Being Highest’
“Also I note that our 1-6mths LIBORS were the highest out of all contributors,” the submitter said. “Given the potential negative publicity that this could have I would go lower (and certainly try to avoid being the highest).”

Other messages showed submitters expressing concern that a high Libor would signal the bank was “in trouble” while one that’s too low would attract unwanted attention, according to the settlement agreement. The bank moved its submissions up after a Wall Street Journal report in April 2008 questioned whether Libor submissions truly reflected the banks’ borrowing rates, according to the settlement.

“[T]here is a little bit of internal political pressures for us to be seen, but not heard anywhere at all in the market,” one message said.

Another message by a Citi financial strategist said the British Bankers’ Association, which used to oversee Libor, was “simply sticking its head in the sand and not acknowledging what everyone in the market recognizes — LIBOR is nowhere near where banks may (or may not) extend unsecured credit.”

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