Regulators are expected to reprimand Citigroup for its faulty risk management system, which works to detect problematic transactions, risky trades and other such issues, and that has apparently sped up retirement plans for Chief Executive Michael Corbat, according to a report in The Wall Street Journal.
Corbat was expected to keep serving in his position for several more years, but will now be stepping down in February, Citi announced.
Citing sources, the news outlet reported that while regulators didn't ask Corbat to retire, the CEO came to believe the costly, years-long overhaul of the risk system would be a job best fit for his successor, Jane Fraser.
The reprimands expected from the Office of the Comptroller of the Currency and the Federal Reserve could impel the bank to come up with a plan to fix its risk system, which is affected by the firm's infrastructure. The issue is that Citi's various business arms, including for commercial banking, credit cards and corporate advisory services all run on their own individual systems, with different methods for tracking customers and transactions, the Journal reported.
That can mean a customer with multiple reasons to do business at Citi could find themselves with numerous different identification codes. Regulators require banks to track customers across all operations, with an eye toward catching crimes such as money laundering. The myriad of different systems Citi has in place could make it vulnerable to attacks, some sources said, according to the newspaper.
One example is the $900 million recently sent by mistake to a group of Revlon lenders, which Citi discovered was due to outdated software installed in the 1990s.
The consent order could require Citigroup to develop and execute a plan to fix its risk management system, though it's unclear what level of regulation or oversight there could be on that plan. In January, a Citigroup executive said there was a plan to hire 2,500 coders to help with the technology underpinning dealings with investment and corporate banking.
And in June, the hiring of Karen Peetz as chief administrative officer was intended to work on bank safety issues and, according to Corbat, bring more clarity to dealings with regulators.
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