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DOJ Targets Citigroup Unit for Guilty Plea in Forex Probe - Analyst Blog

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Citigroup Inc.C is likely to face another blow as regulators are beefing up investigations pertaining to the alleged manipulation in the foreign exchange (forex) market by several global banks. Per a Bloomberg report, the U.S. Department of Justice (DOJ) is seeking Citigroup's main banking subsidiary - Citibank NA - to plead guilty to criminal charges related to fixing of forex markets.

In its standing, the New York based company has countered with an offer that the plea would come from its subsidiary, which is smaller compared to the Citibank NA unit. Bloomberg further stated that an agreement is likely to be reached next month and the fine amount may reach upto $1 billion. However, the DOJ is mulling over all options and has not yet taken its decision on a particular entity.

Citibank contributed to 70% of the company's revenue for 2014. A guilty plea is likely to limit Citigroup's ability to conduct certain types of businesses by this core banking subsidiary, which may ultimately create top line pressure for the firm.

Global authorities are investigating into the forex market as traders at several banks are believed to have conspired jointly and misused information about client orders, which led to price manipulation. Also, the metal business of a number of banks has come under regulatory scrutiny in recent times.

Notably in Nov 2014, Citigroup along with four other major global banks - UBS Group AG UBS , HSBC Holdings plc, Bank of America Corporation BAC and JPMorgan Chase & Co. JPM were slammed with a $3.4 billion fine by U.S., British and Swiss regulators related to the forex market manipulation.

It is believed that last month several banks including Citigroup, Barclays PLC, JPMorgan and The Royal Bank of Scotland Group plc were engaged in settlement talks with the DOJ. The DOJ is seeking roughly $1 billion from each of the major global banks under investigation for settling foreign currency manipulation probe. (Read more: U.S. Claims Billions from Banks to Settle FX-Rigging Probe ).

Bottom Line

Regulatory authorities are investigating scandals further related to the heightening foreign exchange rate fixing and are determined to put forward a landmark judgment to terminate such practices in the future, bring justice to the sufferers and punish the wrongdoers. While probable settlements of such issues will put to rest a long-drawn investigation and bring reprieve to the banks, these are likely to impact the companies' financials and call for more transparency and disclosure in their dealings.

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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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