Citigroup is ready to cut a deal with the UK's Financial Services Authority (FSA) over allegations that it deliberately manipulated the European bond market last year, the Sunday Telegraph reported. The paper said it is believed that Citigroup may be prepared to admit that it suffered "failure of risk management" if the regulator drops its investigation into whether the US giant is guilty of more serious market abuse allegations. Citigroup declined to comment, while FSA officials were not available to comment on the report, which did not reveal the source of its information.
The world's largest financial services company sold more than 12 billion euros ($15.54 billion) of euro-denominated government debt and bought back almost 4 billion euros of bonds within minutes last August 2, provoking sharp price movements and consternation among other brokers.
Citigroup has said it regretted the trade because it did not meet its own standards, but believes it did not violate any rules. The trade is being investigated by other European regulators.
Last September, Citigroup sent out an internal memo in which it said it regretted the trade, and its Chief Executive Chuck Prince has since described the trade as "knuckle-headed" to the press.
The Sunday Telegraph report said that if Citigroup did admit to a charge of failure of risk management, it would acknowledge a lack of adequate internal procedures in place to prevent unsound transactions being made.
"But the bank could admit the charge without there being any implication that it wilfully disregarded market regulations," the paper said, adding that the FSA could still impose a fine but the damage to Citigroup's reputation would be reduced.
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