Britain's Financial Services Authority said this morning it had fined the world's largest bank Citigroup £14m (€21m) for failing to control its bond trading business effectively.
Europe's most powerful financial regulator said Citigroup had failed to conduct its business with “due skill, care and diligence” after it disrupted the European government bond markets on August 2nd with a multi-billion euro bond trade.
The fine is the second-largest ever levied by the FSA and is made up of the £9.96 million pounds of profit Citigroup made from the trade and an additional penalty of £4 million.
“Citigroup Global Markets Limited planned, authorised 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 (market for government bonds) platform,” Hector Sants, the FSA's managing director for wholesale business, said in a statement.
“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.“
Citigroup sold €12.9 billion of cash bonds in one minute on August 2nd and bought back €3.8 billion of the paper within an hour, the FSA said.
Citigroup said it regretted that the trade took place but said it did not breach market conduct rules.
The trade caused liquidity in the electronic market to temporarily dry up and sparked multiple probes in Europe, further damaging Citigroup's reputation.
Last September the US. giant ws forced to shut its private banking operation in Japan after uncovering manipulative lending practices and a failure to screen out suspected money laundering.
In April Germany's financial regulator BaFin criticised state prosecutors for failing to pursue the Citigroup traders behind the controversial trade.