WASHINGTON, July 10 (Reuters) – U.S. banking regulators slap a new tab on Citigroup (CN) for showing “inadequate progress” in fixing data management issues identified in 2020. , imposed a $136 million fine and required banks to prove they are devoting sufficient resources to those efforts.
The joint enforcement action by the Federal Reserve and the Office of the Comptroller of the Currency (OCC) concerns Citi’s efforts to remediate data management issues and put controls in place to manage ongoing risks, the Fed announced Wednesday. .
The fine is the latest blow for Chief Executive Jane Fraser, who is addressing the bank’s regulatory shortcomings and streamlining the organization after laying off thousands of employees. .
In 2020, regulators fined Citi $400 million after identifying “continued deficiencies” in its handling of various areas of risk management and internal controls, including data quality management.
The bank agreed to a sweeping plan to fix the data flaws, but a Fed inspection last year found the bank still had deficiencies and had not made sufficient progress, the Fed said. .
“Citigroup delayed achieving milestones included in its approved plan and violated its 2020 order,” the Fed said Wednesday.
Fraser said in a memo to employees seen by Reuters that the OCC is asking the bank to institute a new quarterly process to ensure it devotes sufficient resources to meet milestones. .
“We know that setbacks like today are visible and can be disappointing,” Fraser wrote. “But we absolutely cannot distract from the work we do in every corner of the bank…An initiative of this magnitude and importance is undoubtedly difficult.”
A Citigroup spokeswoman confirmed the memo but declined to comment further.
Frazier’s major reorganization included layoffs of employees involved in regulatory mandates, according to two sources familiar with the situation who spoke on condition of anonymity to discuss personnel matters.
A company spokesperson declined to comment when asked about the layoffs.
Fraser said in a separate statement that the bank has increased its focus and increased investment in its transformation efforts over the past few months.
“While we are making good progress in simplifying and responding to consent orders, there are some areas, such as data quality management, where we are not moving fast enough,” she said.
Mr Fraser said the City would spend the necessary funds to address regulatory issues, adding: “We have always said progress is not linear.”
Shares fell 1% in after-hours trading.
“Citibank has always had some regulatory overhang, so this is all the more unsurprising,” said David Wagner, portfolio manager at Aptus Capital Advisors, who remains positive on the stock. “It’s not important to the whole equity theory.”
Piper Sandler analyst Scott Schieffers said in a note that the fine is a negative reminder that Citi’s regulatory work is “more of a marathon than a sprint, with bumps along the way.” I wrote. He added that the stock could face weakness in the short term.
Reuters reported in February that U.S. regulators asked Citi to urgently change the way it measures counterparty default risk, and the bank’s auditors found it lacked a plan to improve internal oversight. It was reported that. Last month, the Federal Deposit Insurance Corporation also escalated its stance. There are concerns about Citi’s plans for a living will that would be implemented in the event of Citi’s bankruptcy.
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Michelle Price and Pete Schroeder reported in Washington and Tatiana Bautzer in New York, with additional reporting by Saeed Azhar. Editing: Lannan Nguyen, David Gregorio, Jamie Freed
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