Citigroup Slapped with $135.6 Million Fine – CEO Jane Fraser’s Career on the Line!

New York, NY – Citigroup faced a significant setback as government regulators imposed a hefty fine of $135.6 million on the bank for its failure to adequately address internal control and risk issues. The fines were issued by the Federal Reserve and the Office of the Comptroller of the Currency, highlighting Citigroup’s ongoing struggles in meeting its obligations outlined in a 2020 consent order related to risk management and control issues. While some progress has been made, regulators identified significant lingering problems within the bank, necessitating additional penalties.

Acting Comptroller of the Currency Michael J. Hsu emphasized the urgency for Citibank to address its longstanding deficiencies promptly, urging the bank to prioritize its transformation efforts. The recent fine adds to the $400 million penalty that Citigroup paid in 2020 when the initial consent order was established, with $61 million allocated to the Fed and $75 million to the OCC as part of the latest enforcement actions.

Citigroup’s CEO, Jane Fraser, admitted that the bank has not progressed as swiftly as desired in addressing internal control issues. However, she remained optimistic about the firm’s transformation efforts, emphasizing that success may take time and non-linear progress is to be expected. Fraser has dedicated her tenure as CEO to streamlining the bank’s operations and reducing its complexity, a task that requires considerable resources and time.

Following the 2008 financial crisis, Citigroup underwent a restructuring to shed its “too big to fail” image. The bank divested non-essential businesses, downsized its balance sheet, and exited certain financial markets to streamline its operations. Despite these efforts, concerns persist among regulators regarding Citigroup’s internal communication and control mechanisms, highlighting the potential risks of inadequate coordination within the organization.

Fraser’s emphasis on improving internal controls has led to some successful initiatives, such as the sale of parts of Citigroup’s consumer banking business, including the planned spin-off of its Banamex operations in Mexico. However, Citigroup continues to trade at a discount compared to its peers on Wall Street, reflecting ongoing investor concerns about the bank’s internal control challenges and the associated costs of remediation.

In June, banking regulators rejected Citigroup’s “living will,” a document outlining the bank’s orderly winding down in case of failure. This rejection underscored the continued scrutiny faced by the bank in demonstrating its ability to manage risks effectively. Despite ongoing challenges, Citigroup remains committed to its transformation journey, aiming to address internal control deficiencies and regain investor confidence in the long run.