Citi Fined $136 Million for Failing to Fix Regulatory Issues

Citigroup Inc. will pay almost $136 million in fines to US bank regulators over issues related to data-quality management and risk controls.

The Federal Reserve said Wednesday that its penalty was for Citi violating an enforcement action from 2020. The bank will pay $61 million to the Fed and about $75 million to the Office of the Comptroller of the Currency.

“Citigroup has made insufficient progress remediating its problems with data-quality management and failed to implement compensating controls to manage its ongoing risk,” the central bank said in a statement.

Citi didn’t admit or deny the allegations. The bank is “taking steps to correct the violations” and come into compliance, the Fed said.

The fines underscore how Chief Executive Officer Jane Fraser has a ways to go in turning around the fourth-largest US bank by assets, which has struggled with meager profitability and a lackluster share price. Since taking the helm in 2021, she’s set out to streamline the lender by exiting international retail markets and implementing a restructuring that’s simplified the bank into five key businesses.

Fraser said in a statement that the company is was making good progress in addressing regulators’ demands, but that it hadn’t been fast enough in data-quality management.

“As we’ve said from the beginning of this multiyear effort, we’re committed to spending what is necessary to address our consent orders,” Fraser said. “We’ve always said that progress wouldn’t be linear, and we have no doubt that we will be successful in getting our firm where it needs to be in terms of our transformation.”

Shares of the company, which have gained 28% this year, fell 1.4% to $66.05 at 10:50 a.m. in New York.

The OCC said in its order that, before the bank subsidiary can declare dividends or approve capital distributions, it must submit a plan to the OCC examiner-in-charge that details whether adequate resources are allocated toward “timely and sustainable compliance” with the regulator’s order.

“This is a negative indictment of management and not surprising given recent media articles and an employee lawsuit,” analysts at JPMorgan Chase & Co. led by Vivek Juneja said in a note. “It is very surprising to see that the board, which is comprised of three former regulators, has been lacking in its oversight.”

Fraser said in the company’s statement that bank officials are “confident that we have the financial resources to support both our transformation and investment in our businesses as well as meet our strategic and financial goals, including the capital distribution we described in late June.”

The fines stem from back-to-back regulatory actions in October 2020.

The OCC levied a $400 million penalty for shortcomings with the bank’s risk management, data-governance programs and internal controls. At the same time, the Fed issued a cease-and-desist order directing the bank to correct certain compliance risk management, data-quality and internal controls practices.

The actions came months after Citi reported that it had mistakenly sent $900 million of its own money to creditors of Revlon Inc., leading to a lengthy court fight to get the money back.

The bank later filed plans with regulators to fix weaknesses with its risk management and internal controls.

Top photo: Citibank. Photographer: Christopher Dilts/Bloomberg.