Regulators Penalize Citibank Over ‘Unsound’ Risk Management Practices

Citibank agreed to pay a fine of $400 million after the banking regulators cited the company’s deficiencies and unsound practices regarding its risk management and data governance.

Citibank was fined with an amount of $400 million regarding alleged “unsafe or unsound practices” among its internal controls processes. The banking regulators said that Citi had failed to address the problems regarding the company’s risk management practices.

Civil Money Penalty

Citibank will need to pay $400 million in penalties over “serious and longstanding deficiencies” among its risk management and data governance, the Office of the Comptroller of the Currency said. The agency is under the Treasury Department. Meanwhile, Citibank’s holding firm, Citigroup, also faces another different but related enforcement action from the Federal Reserve Board.

The move comes amid an economic turmoil due to the pandemic, and a change in leadership for the bank. By next year, Jane Fraser will replace Michael Corbat as the new chief executive of Citi.

Addressing the Issues

In addition to the fines, the OCC also said it issued a cease and desist order. Basically, the agency requires Citibank to address its failure by taking corrective actions. The OCC mandates the bank to form a new committee to deal with its risk management overhaul. They also laid out some requirements on how the bank can enhance their data management practices and compliance risk management program, CNN Business reports.

“The order requires the bank to seek the OCC’s non-objection before making significant new acquisitions,” the agency said

Citi to Take Action

In a statement, the bank responded and expressed their disappointment for failing to meet the expectations of regulators. Citibank said that it will address the issues raised by the OCC.

“Citi has significant remediation projects underway to strengthen our controls, infrastructure, and governance,” the company stated.

Such efforts will include making structural modifications. Citibank said that it will allot $1 billion for this area. Moreover, it said it had hired a chief administrative officer in this regard.

Phillip Malone

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