FSA hauls in Citigroup for 'Doctor Evil affair,' imposes £13.9m fine |
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Published
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Wed, 29 Jun 2005 05:35
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The Financial Services Authority, the UK's financial watchdog, has imposed a fine of 13.96 million pounds ($25.44 million) on the world's largest bank, Citigroup for irregularities in bond trading last year.
The FSA said that Citigroup had failed to conduct its business with "due skill, care and diligence," when it disrupted Europe's bond market on August 2 last year. The group had sold bonds worth 12.9 billion euros ($15.6 billion) and brought back 3.8 billion euros within no time causing much heartburn in the markets. As a result several traders were suspended.
The trading strategy, dubbed the "Doctor Evil affair", invited ire of the government officials from Germany and Portugal, who complained that the bank broke a "gentlemen's agreement." Citigroup had registered a profit of 10 million pounds as a result of playing the market. This affair emerged after a memorandum published by Citigroup had detailed an aggressive plan designed to undermine the German government bond market. This was a systemic move aimed at eliminating weaker competitors.
Commenting on the unsavory incident, Hector Sants, the FSA's managing director for wholesale business, said in a statement, "Citigroup Global Markets Limited planned, authorized and executed a trading strategy without having due regard to the risks and likely consequences of its action for the efficient and orderly operation of the MTS (electronic market for government bonds) platform. The FSA expects high standards from all its regulated firms but especially from firms such as Citigroup, whose size and resources allow them to trade in large volumes and take significant risks."
Responding to the fine imposed on it, William J Mills, the bank’s chairman of Corporate and Investment Banking for Europe, the Middle East and Africa, said, "We regret that this trade took place because it did not meet our high standards and consequently caused damage to Citigroup’s reputation." The bank said that the move to play the bond market had been "juvenile."
Charles Prince, Citigroup’s chief executive, said, "We are pleased to conclude this matter with the FSA. Citigroup and its employees have made a number of changes in how we do things as a result of this case."
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