Citi Fined $400M Over Faulty Risk Management Systems

Citi Reports Jump In Commercial Online Usage

Federal banking regulators have fined Citigroup $400 million, ordering the third-largest U.S. bank to fix the "significant ongoing deficiencies" in its risk management systems, The Wall Street Journal (WSJ) reported.

In a consent order which Citi's board agreed to, the bank was chastised for failing in various areas of risk management and internal controls. According to WSJ, the bank failed at data management, regulatory reporting and capital planning. The risk management systems include an expansive, complex network of procedures to track risky trades, problematic transactions and other things that could harm the bank.

An overhaul, expected to be expensive and difficult, will fall in the hands of new CEO Jane Fraser, WSJ reported, as current CEO Michael Corbat steps down in February, earlier than expected.

In a statement, Citi said it is "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.” The bank added that it had significant projects underway to strengthen controls, infrastructure and governance.

Citigroup is coming out of a scandal in which it sent almost $1 billion to Revlon creditors before claiming that was a mistake and asking for the money back, saying the payment didn't make sense because it was around 100 times larger than the expected payout. The bank had to file an injunction against one investor, Brigade Capital Management, which received a $175 million payment.

A trial is scheduled for November regarding the matter, and the creditors have asked for permission to include testimony from an individual to share their opinion on whether the creditors should've known the payment was a mistake.

Citi said the root of the problem is with obsolete software installed decades ago.

Last month, Citi expected to face regulators over the aforementioned issues with its risk management systems.



New forms of alternative credit and point-of-sale (POS) lending options like ‘buy now, pay later’ (BNPL) leverage the growing influence of payments choice on customer loyalty. Nearly 60 percent of consumers say such digital options now influence where and how they shop—especially touchless payments and robust, well-crafted ecommerce checkouts—so, merchants have a clear mandate: understand what has changed and adjust accordingly. Join PYMNTS CEO Karen Webster together with PayPal’s Greg Lisiewski, BigCommerce’s Mark Rosales, and Adore Me’s Camille Kress as they spotlight key findings from the new PYMNTS-PayPal study, “How We Shop” and map out faster, better pathways to a stronger recovery.