EXCLUSIVE-Citigroup Presents Multi-Year Plan to Address Sources of Fed’s Concerns

EXCLUSIVE-Citigroup Presents Multi-Year Plan to Address Sources of Fed’s Concerns

Written by Said Azhar and Beth Schroeder

NEW YORK (Reuters) – Citigroup has submitted a comprehensive, multi-year plan to the Federal Reserve and the Office of the Comptroller of the Currency that outlines steps to fix weaknesses in risk management and internal controls, two sources familiar with the matter said.

The plan, presented to regulators this week, aims to address the Fed’s 2020 guidance asking the bank to correct several “long-standing deficiencies” in its internal controls. The Office of the Comptroller of the Currency (OCC) imposed a $400 million fine on Citi in 2020, citing similar concerns.

The sources told Reuters that the document lays out a multi-year roadmap to correct the problems by the end of 2027 or early 2028. One person said the program includes more detailed steps the bank will take next year as it prioritizes fixing its most dangerous areas.

The plan outlines how Citi aims to improve its risk infrastructure, data quality and internal governance, the two sources said. The Wall Street Journal reported earlier this week that City Group (NYSE:) The plan was due to be presented on Thursday. Reuters is reporting its report, the expected length, and other previously undisclosed details.

One person said about 30,000 people, or 13% of the bank’s 231,000 employees, are working on the improvements. The people also said she sought help from outside advisors.

People said Citi hopes to make significant progress in fixing compliance weaknesses faster than outlined in the plan, which could allow it to get out of the box more quickly.

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The Federal Reserve declined to comment. OCC did not immediately respond to a Reuters request for comment.

Citigroup said it has invested significant time and resources in transformation efforts over the past two years, which have laid the foundation for faster and better implementation, according to a spokesperson.

“We have taken decisive action to streamline our company and will continue to work urgently to modernize the bank for the digital age and enhance our risk and control environment,” the company said in a statement. β€œWe are fully committed to sustaining this effort and delivering at the level expected of us.”

The 2020 Fed’s approval order does not specifically preclude the bank from doing any particular business, but the OCC requires the bank to obtain its permission before making significant new acquisitions.

The OCC also has the power to implement additional business restrictions or request changes to senior management and the bank’s board of directors if the bank does not make sufficient and timely progress in complying with the order.

Regulators are expected to provide feedback on the plan over the next few weeks and determine if the bank needs to make changes.

Gaps in Citigroup’s internal controls were highlighted by the failed transfer of nearly $900 million to lenders to troubled cosmetics company Revlon two years ago. In May, a wrong deal by Citigroup caused a so-called rapid crash in European stocks, Reuters exclusively reported at the time.

Top priority

Jane Fraser, Citigroup’s CEO, has made fixing organizational problems a top priority. Fraser, the first woman to run a major bank on Wall Street, inherited a long-running string of troubles when she took over from Michael Corbat, who ran the company from 2012 to early 2021.

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It has already announced plans to get out of Russia in an effort to trim risky assets and cull consumer firms in 13 other countries to focus on multinationals and wealthy clients.

The bank is strengthening its risk and compliance teams, and hiring rival bankers and former auditors to address long-standing concern that the bank’s risk infrastructure is lagging behind larger competitors such as JPMorgan (NYSE: & Chase), which is seen as a market. Someone said.

Citigroup promoted Tom Anderson to the new Chief Compliance Officer earlier this year after he joined from JPMorgan in 2021.

The company said earlier this year that Citigroup is increasing spending on technology it can use to assess its risks and prevent future errors.

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