Citi agrees to pay more than $500m over toxic asset claims

City A.M. Reporter
CITIGROUP has reached a $590m (£372.5m) settlement over litigation accusing the bank of fraudulently concealing tens of billions of dollars of exposure to risky collateralised debt obligations (CDO) heading into the global financial meltdown, the banking giant announced yesterday.

The settlement is one of the largest arising from the financial crisis. It resolves claims that Citigroup failed to take timely writedowns on the CDOs, many of which were backed by subprime mortgages, and that shareholders suffered billions of dollars of losses once the risks were realised.

Citigroup in a statement called the accord “a significant step toward resolving our exposure to claims arising from the period of the financial crisis.” It said the $590m is covered by existing litigation reserves.

However the bank continues to deny the allegations, explaining it “is entering into this settlement solely to eliminate the uncertainties, burden and expense of further protracted litigation.”

The settlement covers Citigroup shareholders from 26 February 2007 to 18 April 2008, according to papers filed in the Manhattan federal court.

“Although plaintiffs believe that the defendants knowingly or recklessly misrepresented Citigroup’s CDO exposure and valuation, defendants have raised a host of factual and legal challenges, increasing the uncertainty of a favourable outcome absent settlement,” lawyers for the shareholders said in settlement papers.