Us bank regulators have fined citigroup $400m for failing to correct longstanding deficiencies in its risk and control systems, and ordered the lender to upgrade its processes and its technology.
The fine comes on the heels of news that, in august, citi mistakenly wired $900m to creditors of one of its clients, revlon, sparking a protracted legal fight. last month, the bank announced mike corbat would retire as chief executive in 2021, several years earlier than expected.
In a consent order agreed to by the bank, the federal reserve found that citi has not taken prompt and effective actions to correct practices previously identified [in] compliance risk management, data quality management, and internal controls. the fed ordered citi to submit a remediation plan within four months.
In conjunction with the feds action, the office of the comptroller of the currency issued a similar order and levied a $400m fine against the bank. the occ demanded corrective actions including the thorough redesign of data architecture, re-engineering of processes, and modernisation of system applications and information technology infrastructure.
The regulators actions had been expected. speaking at an industry conference in september, mark mason, citis chief financial officer, acknowledged we are still not where we need to be on controls and risk management, noting the revlon error. he said the bank was making $1bn in new infrastructure investments in 2020.
A person familiar with the banks thinking described the deficiencies as back-office stuff that caused no consumer harm. the person added: the heavy lift will be the technology upgrade, which [the regulators] will micromanage.
Citi said: we are disappointed that we have fallen short of our regulators expectations, and we are fully committed to thoroughly addressing the issues identified. the bank said complying with the regulators demands would not affect its ability to serve customers.
Citigroups shares have fallen 44 per cent this year, worse than the financial sector more broadly, which is down by about a third. activist investor valueact has had a position in citi for several years, and has pushed for change at the bank, which has perennially underperformed other large us financial groups in returns and stock performance.
The incoming chief executive, jane fraser, a citi veteran, will take the helm in february. she will become the first woman to run one of the big us banks.