Citigroup to pay historic fine
July 14, 2014
The settlement announced by US Attorney General Eric Holder on Monday, included a $4-billion (2.9-billion-euro) civil penalty that is not tax-deductible and which is the largest handed out so far since the shake-up of the banking sector in the wake of the financial crisis. Another $500 million will go to the US federal government and the remaining $2.5 billion are to be paid in various forms of consumer relief by the end of 2018.
"This historic penalty is appropriate given the strength of the evidence of the wrongdoing committed by Citi," said Holder, adding that the bank's activities "contributed mightily to the financial crisis that devastated our economy in 2008."
Citigroup and other US banks have been investigated for allegedly misleading customers over loans before bundling these into mortgage-backed securities and selling them.
"They did so at the expense of millions of ordinary Americans and investors of all types - including other financial institutions, universities and pension funds, cities and towns, and even hospitals and religious charities," said Holder.
But despite the historic fine and the possibility that Citigroup and its employees could face criminal charges, the bank's chief executive Michael Corbat was optimistic the deal would help the bank in the long run.
"We believe that this settlement is in the best interests of our shareholders, and allows us to move forward and to focus on the future, not the past," Corbat said.
The settlement weighed on Citi's second-quarter earnings reported on Monday. The company took a $3.8 billion pre-tax charge, which dragged Citi's earnings down 96 percent to $181 million. But excluding the legal settlement, the bank's results translated to profits of $1.24 per share, beating market expectations and sending shares up by more than 3 percent in midday trading.
In recent months other US banks also agreed to pay hefty fines and damages to resolve government claims over mortgage-backed securities. JPMorgan Chase, America's largest bank, for instance agreed to pay $13 billion in fines and damages. Bank of America is also under investigation and could itself face billions in penalties, according to news reports.
nk/uhe (AP, dpa)