Citigroup hit with $US400m fine for faulty risk management


The Fed gave Citigroup a series of deadlines to analyse and report back on how it’s repairing multiple issues. Within 120 days, the bank’s board of directors must submit a report detailing how it will hold senior management accountable and how executive compensation will be “consistent with risk management objectives,” the Fed said.

The orders mean the bank will be embarking on another round of costly, years-long investments in its risk infrastructure and controls just as Jane Fraser takes the helm as chief executive officer in February.

“Citi has significant remediation projects underway to strengthen our controls, infrastructure and governance,” the bank said in a statement. ‘While we have made progress in each of these areas, we recognise that substantial improvement is still required to meet the standards we have set for ourselves and that our regulators expect of us.”

The bank noted it’s made structural changes to better comply with the regulators’ orders, including by hiring Karen Peetz as its new chief administrative officer to “steer these programs to completion.”

The orders come just weeks after Citigroup mistakenly sent $US900 million to lenders of the cosmetics giant Revlon. The bank ultimately chalked the wayward payment up to employee error, noting it was in the middle of transitioning to new software for its syndicated loan business.

The ensuing legal battle was an embarrassment for the bank as many of the lenders balked at Citigroup’s pleas to return the funds. For regulators, who began scrutinising the mistaken payment within days, the incident was illustrative of broader problems at the bank.


“We appreciate the urgency of the tasks at hand and we are committed to fulfilling our obligations to all of our stakeholders,” Citigroup said in the statement.

The Fed order requires Citigroup to conduct a so-called gap analysis of its company-wide risk management framework and controls. While the bank has already pledged that it would spend $US1 billion on improving those systems this year, the order says the lender will need to use the analysis to determine how to improve processes around three key areas: capital planning, liquidity risk management and compliance risk management.

Citigroup for years has been plagued by issues with its core operating systems, which were cobbled together through the many acquisitions that made the company into a financial behemoth as part of executives’ hopes to turn it into a one-stop financial supermarket in the early 2000s. Decades later, regulators are now requiring the bank to improve the ways it manages data and handles risk.

A Global Asset Management Seoul Korea Magazine

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