Citigroup faulted by U.S. banking regulators for poor data management in ‘living will’ review

Finance

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CEO of Citigroup Jane Fraser testifies during a hearing before the House Committee on Financial Services at Rayburn House Office Building on Capitol Hill on September 21, 2022 in Washington, DC.
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Citigroup needs to address weaknesses in how it manages financial data, according to a review of the biggest banks’ so-called living will plans, U.S. banking regulators said Wednesday.

The New York-based bank’s issues could hurt its ability to produce accurate reports in times of duress, and that could hamper its ability to successfully execute resolution planning, the Federal Reserve and the Federal Deposit Insurance Corporation told the bank in a letter.

The biggest and most important U.S. banks have to submit detailed plans to regulators that explain how they can be quickly unwound in the event of a massive disruption or bankruptcy, part of the reforms that emerged from the 2008 financial crisis. In a previous round, six companies including Bank of America, Wells Fargo and Morgan Stanley were found to have shortcomings in their ability to produce data, but the firms addressed those concerns, the regulators said.

For the latest review, Citigroup was the only bank among the eight institutions that was found to have a shortcoming in its resolution plan, the regulators noted.

The finding shows that Citigroup, led by CEO Jane Fraser since early 2021, is still struggling to improve its systems after an embarrassing incident that helped accelerate the retirement of Fraser’s predecessor. Fraser has said that one of her main priorities was to address regulators’ concerns and regain credibility with investors.

The issues stem from earlier concerns after the bank accidentally wired $900 million to Revlon creditors in 2020. Regulators hit the bank with a $400 million fine and a pair of consent orders after that episode and demanded improvements to its risk management, data and internal controls.

“Issues regarding the Covered Company’s data governance program could adversely affect the firm’s ability to produce timely and accurate data and, in particular, could degrade the timeliness and accuracy of key metrics that are integral to execution of the firm’s resolution strategy,” the agencies told Citigroup in a letter dated Nov. 22.

The company has to deliver a roadmap to address the issues by January, they said.

In a statement, Citigroup said it was “completely committed” to addressing the shortcoming found in its 2021 resolution plan.

“As part of the transformation Citi has embarked upon, we are making significant investments in our data integrity and data management, as the letter notes,” the bank said. “We will leverage that work to remediate the shortcoming identified today, as we acknowledge there is much more work to do.”

Shares of Citigroup slipped 2.2% in early trading.

With CNBC’s Jeff Cox.

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