US banking regulators require Citigroup to take urgent action to correct the plan

The Federal Reserve and Federal Deposit Insurance Corp have identified a flaw in Citigroup’s so-called “living will,” a plan that details how a company can be dissolved in the event of collapse.

US banking regulators said Citi’s data governance issues could adversely affect its ability to produce accurate and timely data during a time of financial stress.

Citi shares fell 2% following the announcement, with the decline continuing into the afternoon.

The shortage “requires urgent attention from the company’s senior management and board of directors,” FDIC interim chairman Martin Gruenberg said in a statement.

Regulators have given Citi until January to find solutions to long-standing shortcomings, while also approving plans for seven other major banks.

The Office of the Comptroller of the Currency (OCC) fined Citi $400 million in 2020, citing similar concerns.

Citi said it is making significant investments in data integrity and management and is “fully committed” to addressing the shortage, according to a statement released Wednesday.

“The result of these efforts will be leaner systems that improve the quality of our data and the speed with which it can be accessed,” the bank said.

Reuters reported in September that Citi had submitted a comprehensive multi-year plan to the Fed and the OCC, outlining steps to correct deficiencies in risk management and internal controls.

Troubles in Citigroup’s internal controls were highlighted by a failure to transfer nearly $900 million to creditors of struggling cosmetics firm Revlon two years ago. In May, a botched swap by Citigroup led to a “flash crash” in shares in Europe.

While the Fed and FDIC acknowledge that Citi has continued to address data issues, the agencies said the bank needs to continue to improve its cash resolution capability, as well as the processes by which it uses data to execute the resolution plan.

Morningstar banking analyst Eric Compton said regulators often highlight data handling issues at banks because they can be interrelated and can have a broad impact.

In the 2019 regulators’ review of large bank resolution plans, which is conducted every two years, the Fed and FDIC identified deficiencies in the filings of Bank of America, BNY Mellon, Citigroup, Morgan Stanley, State Street and Wells Fargo.

These issues concerned banks’ ability to produce data under stressed conditions to implement their resolution plans.

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Source: Terra

Camila

Camila Luna is a writer at Gossipify, where she covers the latest movies and television series. With a passion for all things entertainment, Camila brings her unique perspective to her writing and offers readers an inside look at the industry. Camila is a graduate from the University of California, Los Angeles (UCLA) with a degree in English and is also a avid movie watcher.