In a Cease and Desist Order to the bank, the Federal Reserve faulted Citigroup for falling short in various aspects of risk management and internal controls. The regulator cited data management, regulatory reporting, and capital planning as some of the concern areas.
Citigroup to pay $400 million fine
The order comes alongside another sanction from the Office of the Comptroller of the Currency. The order requires Citigroup to correct practices singled out by the Board. The bank has agreed to pay $400 million. Additionally, it must seek authorization from the government to sign-off for major acquisitions. In the order, Citigroup was issued with several deadlines to analyze and report back to the Fed on how it’s fixing the highlighted issues. The order requires the bank’s board of directors to submit a report detailing how it will hold senior management accountable and how executive compensation will be consistent with risk management objectives with 120 days. Furthermore, within 45 days, Citigroup’s board of directors needs to submit written progress reports. The reports should detail the form and manner of all actions taken to secure compliance with the order. The order cast the spotlight on Citigroup senior management on rectifying the issues. According to the Fed order:
The bank will invest $1 billion in rectifying internal systems
In response to the Fed order, Citigroup, which had to agree to the consent orders, stated that it was disappointed for falling short in the regulator’s expectations. The statement acknowledges some of the measures put in place by the lender to address some of the issues raised. The lender added that it has invested over $1 billion into making structural changes. According to Citigroup: The development means that Citigroup will venture into another costly, long investments in its risk infrastructure and controls. Over the years, Citigroup ha faced questions regarding its core operating systems. The issues became more complex by the many acquisitions made by the lender. Notably, there are concerns over Citibank’s inability to improve the ways it manages data and handles risks. Following the order, Citigroup’s shares dropped by at least 2%.
