Citigroup was fined $135.6 million by government regulators on Wednesday for not making enough progress in addressing longstanding internal control and risk issues. This decision is a significant setback for Citigroup CEO Jane Fraser, who has been focused on making the bank more efficient and less complicated.
The Federal Reserve and the Office of the Comptroller of the Currency (OCC) imposed the fines, stating in separate releases that Citigroup had not fulfilled its obligations from a 2020 consent order related to its risk and control issues. While acknowledging some progress, the regulators emphasized that major problems still persist, necessitating further penalties from the OCC and Fed.
Acting Comptroller of the Currency Michael J. Hsu emphasized the need for Citigroup to complete its transformation and promptly address its longstanding deficiencies. “Citibank must see through its transformation and fully address in a timely manner its longstanding deficiencies,” Hsu stated.
This $135.6 million fine adds to the $400 million penalty Citigroup paid in 2020 when the original consent order was signed. As part of the new penalties, Citigroup will pay $61 million to the Federal Reserve and $75 million to the OCC.
Fraser acknowledged in a statement that the bank has not progressed as quickly as necessary but affirmed her commitment to making Citigroup less risky. “We’ve always said that progress wouldn’t be linear, and we have no doubt that we will be successful in getting our firm where it needs to be in terms of our transformation,” she said.
Following the 2008 financial crisis, Citigroup was seen as a prime example of a “too big to fail” institution. The near-collapse and subsequent government bailout forced Citigroup executives to downsize the bank’s extensive balance sheet, divest unnecessary businesses, and exit financial markets where it couldn’t maintain a dominant position.
In the 1990s and early 2000s, Citigroup expanded rapidly through acquisitions and mergers, aiming to become a financial conglomerate serving every customer need. However, many acquired businesses had software and internal controls incompatible with other parts of Citigroup. Despite being less complex than in 2008, Citigroup still faces significant regulatory concerns due to these internal communication issues.
Banking regulators rejected Citigroup’s “living will” in June, a document intended to outline how the bank could be wound down safely and orderly in case of failure.
Fraser has committed her tenure as CEO to improving Citigroup’s internal controls, a task requiring thousands of employees, billions of dollars, and several years of effort. Some of her initiatives have been successful, such as selling parts of Citigroup’s consumer banking business, notably the planned spin-off of Citi’s Banamex operations in Mexico.
