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The regulators' demands relate to Citigroup's ongoing risk management overhaul, which is meant to address a pair of consent orders issued in 2020 by the Federal Reserve and the Office of the Comptroller of the Currency.
Benjamin Girette/Bloomberg
More than three years after Citigroup was penalized in connection with risk management problems, regulators have stepped up their pressure on the New York megabank, according to a Reuters article Monday.
Citi received three notices late last year from the Federal Reserve, which implemented six-month and 12-month deadlines by which the bank must make changes to the way it measures particular risks, according to the story, which cited an email and an anonymous source.
The $2.4 trillion-asset bank also recently failed exams by the Office of the Comptroller of the Currency, the report said. Those exams were meant to determine whether the company is advancing on data integrity as much as it says it is.
Reuters also reported that Citi's own audit staff have said that some of the work related to risk management isn't sufficient and that the bank hasn't fulfilled regulators' requirements that the board of directors and the senior management team receive more information about firmwide risks.
The regulators' demands relate to Citi's ongoing risk management overhaul, which is meant to address a pair of consent orders issued in 2020 by the Fed and the OCC. Those orders, and an accompanying $400 million civil penalty paid to the OCC, followed several risk-related blunders at Citi, including a mistaken payment of $900 million to the creditors of cosmetics company Revlon.
Ever since, Citi has been investing heavily — both in dollars and increased staffing — in what bank executives call a "transformation" of its risk and controls systems. A large part of that process involves moving from manual processes to more automated ones in order to avoid human errors.
Citi on Monday did not confirm the reporting in the Reuters story. In an email, a spokesperson for the bank said that its top priority is "meeting the expectations" of regulators.
"We're making steady progress simplifying and modernizing our bank," Citi's statement read. "Like any multiyear effort of this scale, progress isn't linear and there are important learnings along the way that we're incorporating into our efforts, including in the areas of regulatory reporting, infrastructure and data enhancement. We continue to advance this critical body of work."
According to Reuters, the Fed sent three notices of "matters requiring immediate attention" to Citi. One of them reportedly has a six-month deadline, and the other two have deadlines of one year.
The notices "instruct Citi to improve its data and governance around how it sets aside capital to account for counterparty credit risks," according to an unnamed source in the Reuters story.
The latest developments come as Jane Fraser enters her fourth year as CEO of Citi. The company, which has long lagged behind similarly sized U.S. banks in terms of efficiency and shareholder returns, is in the midst of a multiyear plan to improve in both areas by simplifying itself.
The company plans to cut about 5,000 roles by the end of March, which will result in $1 billion of run-rate savings, executives told analysts in January. That's on top of roughly 7,000 jobs that were axed in the fourth quarter of 2023 and 6,000 during the first nine months last year.
Citi is aiming for an efficiency ratio of less than 60%, a common equity tier 1 capital ratio of 11.5% to 12% and a return on tangible common equity ratio of 11% to 12%. The latter metric was 4.9% last year.
Citi's stock price fell about 1.5% soon after the market opened on Monday, but it finished the day down just 0.1%.
With Sen. Mark Warner, D-Va., occupied on the Senate Intelligence Committee, Sen. Elizabeth Warren, D-Mass., is one step closer to leading Democrats on the Senate Banking Committee.
Senate Majority Whip Dick Durbin, D-Ill., has scheduled a hearing on swipe fees for Nov. 19, but executives from Visa and Mastercard aren't among the confirmed witnesses for the lame duck hearing.
The Federal Reserve Board's top payments official said the agency should not move forward with its push to lower the cap on debit interchange fees until it has a better understanding of recent Supreme Court decisions.
