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Citigroup Takes $50 Million Loss in Libor Probe

Citigroup was forced to write off $50 million after two traders accused of attempting to influence global lending rates left the bank, according to people familiar with a worldwide investigation that is gathering pace.

Steve Cole | Vetta | Getty Images

Nine separate enforcement agenciesin the US, Europe and Japan have been probing whether US and European banks manipulated the London Interbank Offered Rate or Libor , the benchmark reference rate for $350 trillion worth of financial products, and other interbank lending rates.

So far, only Japan’s Financial Services Agency has formally sanctioned banks in connection with the probe. In December, regulators found that two former Citigroup employees in Tokyo attempted to pressure colleagues and employees at other banks involved in the rate-setting process for the Tokyo Interbank Offered Rate, or Tibor.

While the regulator did not publicly name the traders involved, people familiar with the case identified them as Thomas Hayes, a trader of yen-related products, and Christopher Cecere, his former boss.

According to those people, the alleged attempts to influence Tibor were uncovered after another Citi employee in London reported the activity. Citi took a $50 million loss when it unwound the traders’ positions and reported the matter to regulators, according to people familiar with the case. However, other Citi sources suggested the losses were significantly in excess of that amount. The investigation into possible manipulation of global interbank lending rates has accelerated in recent weeks, with more than a dozen traders at banks including Royal Bank of Scotland , Deutsche Bank , UBS and JPMorgan Chase fired, suspended or placed on administrative leave.

A former Barclays trader, Philippe Moryoussef, is being investigated in connection with the setting of Euribor, the rate at which banks lend euros, according to people familiar with the case. Mr. Moryoussef left Barclays in 2007, long before US, European and Japanese regulators launched their probe into interbank lending rates and now works in an unrelated position for Nomura in Singapore.

Barclays took the information to European Commission officials, who are now investigating and declined to comment. Mr. Moryoussef did not respond to an email seeking comment and calls to his home went unanswered.

A Nomura spokesman said: “Nomura is aware of the investigation into the setting of Euribor and Libor rates. The allegations against Mr. Moryoussef are related to a period of time before he joined Nomura. We would point out the fact that Nomura is not a member of either the Euribor panel or the Libor panel, and therefore has no role in the setting of these rates.”

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