) has recently become the latest global banking giant to be
subject to investigations related to foreign exchange trading
(Forex). This has made bankers and investors increasingly wary of
a scandal similar to the LIBOR scam.
Like other global banking behemoths such as
Deutsche Bank AG
JPMorgan Chase & Co.
), Citigroup has promised to cooperate in the foreign exchange
trading related investigations.
Citigroup declared that it was working with the U.S. and
international regulatory authorities on issues related to foreign
exchange trading. At least 6 regulatory authorities around
the globe, including the US Department of Justice, the European
Commission and the Hong Kong Monetary Authority, are
investigating the alleged manipulation of currency markets.
However, Citigroup did not reduce the range of its expected loss
as a result of legal and regulatory issues. The bank's unreserved
litigation costs were $5 billion, stable from the prior
Investigators are examining the possible transfer of information
by traders from one bank to another through electronic medium.
Further, suspicion lingers around certain traders using
information about large trade orders from customers to maneuver
Manipulation of foreign exchange trade and the rigging of London
Interbank Offered Rate (LIBOR) by banks have stimulated
regulatory authorities to undertake stringent measures. Last
) filed a lawsuit against 9 major banks and British Bankers
Association (BBA) for their alleged role in rigging LIBOR.
) had alleged that the banks and BBA colluded together to reap
profits from LIBOR manipulations from 2007 to 2010.
Investigation of the foreign exchange rate manipulation marks the
latest scrutiny of financial standards that involve substantial
amount of money in both personal and business transactions. With
Citigroup willing to cooperate with the regulatory authorities,
it appears that the bank will likely come out clean. However, the
proof of any wrongdoing can tarnish the bank's reputation and
weigh on its financials.
Citigroup currently carries a Zacks Rank #3 (Hold).
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