Two government regulators Citigroup Citi on Wednesday fined itself $135.6 million for failing to resolve long-standing internal control and risk issues, a major blow to Chief Executive Jane Fraser, who has staked her career on trying to turn Citi into a leaner, less complex bank.
The penalties were imposed by the Federal Reserve and the Office of the Comptroller of the Currency, which said in separate statements that Citigroup had defaulted on its debt. 2020 Consent Order The fines relate to the bank’s risk and control issues. While regulators said the bank had made progress, significant problems remained with the bank, forcing the OCC and the Fed to impose additional fines.
“Citibank must complete its reforms and fully address its long-standing deficiencies in a timely manner,” Acting Comptroller of the Currency Michael J. Su said in a statement.
The $135.6 million penalty is on top of the $400 million penalty Citi paid in 2020, when the original consent order was signed. As part of this latest round of fines, Citi will pay $61 million to the Fed and $75 million to the OCC.
In a statement, Fraser acknowledged the bank was not moving forward quickly enough and said Citi could mitigate the risks itself.
“We have always said that progress is not linear, but I have no doubt that we will be successful in getting to where we need to be in terms of transformation,” she said.
Citigroup was the archetype of a “too big to fail” bank after the 2008 financial crisis. After nearing collapse and being bailed out by the government, its executives had to shrink its sprawling balance sheet, sell businesses they no longer needed and exit financial markets where they didn’t dominate.
Citi grew in size and complexity through a series of acquisitions and mergers in the 1990s and early 2000s as the bank sought to become a financial conglomerate that could serve the needs of all its clients. But many of the companies it acquired used software and internal controls that didn’t work with the rest of Citigroup. So while Citi is less complex than it was in 2008, it’s still a bank that regulators have serious concerns about to this day because a lack of internal communication can cause problems.
Banking regulators in June rejected Citi’s “living will,” a document that would have laid out how to safely and orderly liquidate Citigroup in the event of bankruptcy.
Mr. Fraser has bet his tenure as CEO on fixing the bank’s internal controls, an effort he said would require thousands of employees, billions of dollars and years of work.Some of his efforts to slim down Citi have been successful, including the sale of parts of Citi’s consumer banking business, most notably a planned spinoff of Citi’s Banamex business in Mexico.
But investors still value Citigroup’s shares at a discount relative to Wall Street peers, including JPMorgan Chase. Goldman Sachs and Morgan Stanley This is due in part to Citi’s ongoing costs in resolving its internal control issues.
