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Citigroup Criticized by U.S. Banking Regulators for Poor Data Management in 'Living Will' Review

According to a review of the biggest banks' so-called living will plans, U.S. banking regulators said Wednesday that Citigroup needs to address weaknesses in how it manages financial data.

November 23, 2022
6 minutes
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According to a review of the biggest banks' so-called living will plans, U.S. banking regulators said Wednesday that Citigroup needs to address weaknesses in how it manages financial data.

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 letter noted that the bank's issues could have a negative impact on its ability to produce accurate reports during periods of stress, and that this could in turn impede its ability to successfully execute resolution planning.

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.

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

The finding indicates that Citigroup, under the leadership of CEO Jane Fraser since early 2021, has yet to make significant improvements to its systems following an embarrassing incident that hastened the retirement of Fraser's predecessor. Fraser has stated that one of her primary goals is to address regulators' concerns and regain trust with investors.

The issues at hand 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. This has led to the current situation where the bank is facing more scrutiny from regulators.

The agencies told Citigroup in a letter dated Nov. 22 that issues with the Covered Company's data governance program could adversely affect the firm's ability to produce timely and accurate data. This could degrade the timeliness and accuracy of key metrics that are essential to executing the firm's resolution strategy.

The company said that they have to deliver a roadmap to address the issues by January.

Citigroup has issued a statement saying that it is fully committed to addressing the shortcomings identified in its 2021 resolution plan. The bank says it is taking this matter very seriously and is working to make the necessary improvements.

Citi said that it is making significant investments in data integrity and data management as part of its transformation process. The bank acknowledged that there is more work to be done in this area, but said that it will leverage the work that has been done to remediate the shortcoming identified today.

Citigroup's shares fell by 2.2% during early trading hours.

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