Money & Banking

Citigroup fined $400 million by US regulators for deficiencies in risk management

Hemani Sheth Mumbai | Updated on October 08, 2020

Federal banking regulators in the United States on Wednesday levied a $400 million fine on Citigroup for deficiencies in risk management and internal controls.

The Office of the Comptroller of the Currency (OCC), an agency of the US Treasury Department assessed a $400 million civil money penalty against Citibank for “deficiencies in enterprise-wide risk management, compliance risk management, data governance, and internal controls.”

“The OCC took these actions based on the bank’s unsafe or unsound banking practices for its long-standing failure to establish effective risk management and data governance programs and internal controls,” the agency said in an official release.

It has also issued a cease and desist order against the bank. As per the order, the bank will require to improve its systems. Furthermore, it will be necessary to seek the OCC’s approval before making any “significant new acquisitions.”

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OCC will also have the authority to implement additional business restrictions or making changes in senior management if need be in case the bank’s board fails to comply with the order and make sufficient progress.

Federal Reserve Board took a separate but enforcement-related action against the bank’s holding company Citigroup. The board flagged “significant ongoing deficiencies in implementation and execution by Citigroup with respect to various areas of risk management and internal controls.” These included “data quality management and regulatory reporting, compliance risk management, capital planning, and liquidity risk management.”

“We are disappointed that we have fallen short of our regulators’ expectations, and we are fully committed to thoroughly addressing the issues identified in the Consent Orders,” Citigroup said in a statement.

“Citi has significant remediation projects underway to strengthen our controls, infrastructure and governance,” it said.

“These projects are each multi-year and have received significant investment. However, while we have made progress in each of these areas, we recognize that substantial improvement is still required to meet the standards we have set for ourselves and that our regulators expect of us,” it added.

It further said that it had “accelerated investments” and “made structural changes” to improve these deficiencies. The group will invest over $1 billion this year as part of its risk management and controls efforts. It has also hired Karen Peetz as Chief Administrative Officer “to centralize program management and steer these programs to completion,” it said.

The new order imposes added responsibility and a long to-do list for the bank which is currently grappling with the economic uncertainty amid the Covid-19 pandemic. This will be shouldered by Jane Fraser who will be taking over as Citigroup's CEO from February 2021 after the current Citi CEO Michael Corbat’s retirement.

Published on October 08, 2020

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