The Federal Reserve imposed a penalty of $400 million on Citigroup Inc (NYSE:C) on Wednesday and asked the latter to “correct several longstanding deficiencies.”
What Happened: Citigroup failed to take “prompt and effective actions” to correct practices the regulator previously identified, particularly in compliance risk management, data quality management, and internal controls, the Federal Reserve Board said in a statement.
The Office of the Comptroller of the Currency, which oversees Citibank, imposed a $400 million civil money penalty against the New York-headquartered bank, the regulator said in a separate statement.
OCC and the Federal Reserve worked in tandem on the action against the lender.
“We are disappointed that we have fallen short of our regulators’ expectations, and we are fully committed to thoroughly addressing the issues identified in the Consent Orders,” Citigroup said in a statement issued in response.
Why It Matters: In August, Citibank came under fire as it accidentally wired $900 million to several companies that provided loans to cosmetics firm Revlon Inc (NYSE:REV) and consequently struggled to recover the amount as the recipients refused to return the funds, CNN reported.
The public penalty and chastisement of the banking group is an indicator that behind the scenes push of the regulators’ to get Citigroup to overhaul its risk systems has not been enough, the Wall Street Journal reported.
The action of the regulators’ took months and has reportedly hastened the retirement process of Citigroup CEO Michael Corbat.
Corbat is being replaced by Jane Fraser, the first-ever female CEO of any U.S. megabank, and implementing the required changes would largely fall upon her, the Journal reported.
The orders from the regulators mandate that the lender form a new board committee to oversee the risk overhaul and draw new plans for holding management responsible.
OCC has ordered Citigroup to seek its approval for any acquisition.
Price Action: Citigroup shares closed almost 1% higher on Wednesday and fell 0.25% in the after-hours session.
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