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Citigroup Settles Yen Libor Manipulation Suit for $23M

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Citigroup Inc.C is set to shell out $23 million to resolve claims of conspiring to manipulate the benchmark yen Libor rate. On Monday, settlement papers were filed in the U.S. District Court in Manhattan. The agreement awaits court approval.

The accord has been called as an "ice-breaker settlement" by the lawyers for the plaintiffs that could push some 20 other defendant banks to settle. The plaintiffs including Sonterra Capital Master Fund, Hayman Capital Management and the California State Teachers' Retirement System alleged that from 2006 through at least 2010, the banks conspired to rig yen Libor, Euroyen Tibor (Tokyo Interbank Offered Rate) and Euroyen Tibor futures contracts in order to benefit their own trading positions.

Citigroup has also agreed to cooperate with the plaintiffs. Vincent Briganti, a lawyer for the plaintiffs justified the early settlement with Citigroup owing to bank's "limited involvement" in the case. A Citigroup spokeswoman mentioned "We are pleased to have the matter resolved."

One of the defendants, RP Martin Holdings Ltd., a London-based brokerage has also settled. Other defendants in the concerned suit include Mitsubishi UFJ Financial Group, Inc. MTU , Barclays PLC BCS , Deutsche Bank AG DB , Sumitomo Mitsui Trust Holdings Inc. and JPMorgan Chase & Co.

Libor or the London Interbank Offered Rate is an important benchmark that financial institutions use to set the interest rates for lending purposes on numerous financial transactions. It is used to set interest rates in trillions of dollars worth of loans and investments. Set by the British Bankers' Association, LIBOR is calculated for 10 currencies including the U.S. dollar. On a daily basis, the member banks submit a figure based on the estimation of what rate they would be charged when borrowing funds from other banks. The Euroyen Tibor is a reference rate that is overseen by the Japanese Bankers Association.

Manipulation of such benchmark interest rates by major financial institutions triggered thorough investigations by regulatory bodies across Europe, Asia and America and has claimed billions of dollars as settlements and fines.

The latest settlement will put to rest a long-drawn investigation and bring reprieve to Citigroup. Also, we remain encouraged by the New York based banking giant's efforts to resolve its legal woes. Notably legal and related expenses stood at $411 million in fourth quarter 2015, significantly down from $2.9 billion in the prior-year quarter.

Citigroup currently carries a Zacks Rank #5 (Strong Sell).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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