{"id":2174090,"date":"2024-02-12T12:14:02","date_gmt":"2024-02-12T17:14:02","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/exclusive-citi-hit-by-new-fed-rebuke-setbacks-on-consent-orders\/"},"modified":"2024-02-12T12:21:47","modified_gmt":"2024-02-12T17:21:47","slug":"exclusive-citi-hit-by-new-fed-rebuke-setbacks-on-consent-orders","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/exclusive-citi-hit-by-new-fed-rebuke-setbacks-on-consent-orders\/","title":{"rendered":"Citi faces fresh Fed rebuke, consent order setbacks"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">16<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/www.facebook.com\/sharer.php?u=https%3A%2F%2Fwww.conservativenewsdaily.net%2Fbreaking-news%2Fexclusive-citi-hit-by-new-fed-rebuke-setbacks-on-consent-orders%2F\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Facebook<\/span><\/a><a class=\"mashicon-twitter mash-medium mash-nomargin mashsb-noshadow\" href=\"https:\/\/twitter.com\/intent\/tweet?text=&amp;url=https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=2174090&amp;via=ConservNewsDly\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Twitter<\/span><\/a><a class=\"mashicon-subscribe mash-medium mash-nomargin mashsb-noshadow\" href=\"#\" target=\"_top\" rel=\"nofollow\"><span class=\"icon\"><\/span><span class=\"text\">Subscribe<\/span><\/a><div class=\"onoffswitch2 mash-medium mashsb-noshadow\" style=\"display:none\"><\/div><\/div>\n            <\/div>\n                <div style=\"clear:both\"><\/div><\/aside>\n            <!-- Share buttons by mashshare.net - Version: 4.0.47--><p><!DOCTYPE html PUBLIC \"-\/\/W3C\/\/DTD HTML 4.0 Transitional\/\/EN\" \"http:\/\/www.w3.org\/TR\/REC-html40\/loose.dtd\"><br \/>\n<?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><?xml encoding=\"utf-8\" ?><html><body><\/p>\n<div class=\"entry-content\">\n<p>February 12, 2024 \u2013 \u20637:46 AM PST<\/p>\n<figure class=\"wp-block-image size-full\"><figcaption class=\"wp-element-caption\">The logo for \u2064Citibank is seen on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York\u2063 City, U.S., August 3, 2021. REUTERS\/Andrew Kelly\/File Photo<\/figcaption><\/figure>\n<p>NEW YORK (Reuters) \u2013 U.S.\u2064 regulators\u200b have asked \u200dCitigroup\u00a0(C.N) for urgent \u2064changes to the way it \u2062measures\u200b default risk of its trading partners and the bank\u2019s own auditors have found a plan to improve internal oversight to be lacking, developments that could hinder CEO Jane Fraser\u2019s plans to revive the bank\u2019s fortunes.<\/p>\n<div id=\"div-gpt-ad-1663871513696-art-3\" style=\"min-width: 320px; min-height: 50px; text-align: center;\">  \t<script>  \t\tgoogletag.cmd.push(function() { googletag.display('div-gpt-ad-1663871513696-art-3'); });  \t<\/script>  <\/div>\n<div class=\"ad-slot__ad-label\">Advertisement<\/div>\n<\/p>\n<p>Late last year, the Federal Reserve sent Citi three notices directing the bank to address in the coming\u2064 months how it measures risk of default by\u2063 counterparties in derivative transactions, a source with \u2064direct knowledge of the matter\u200b said.<\/p>\n<p>Separately, Citi\u2019s internal audit unit said more work was needed in at least\u2062 one instance to address problems previously raised by regulators, according to an email seen by \u2064Reuters. The work was in response to enforcement actions, called consent orders, that\u200b date back to October 2020.<\/p>\n<p>In \u2063December,\u200c the internal audit unit found some of the work done to improve risk management across the bank to be inadequate, according to the email. \u200bThe audit unit also found that Citi failed\u200d to meet a requirement that it have procedures in place to ensure the board and senior management receive comprehensive reports about risks across the company, the email showed.<\/p>\n<p>Another banking\u200c regulator, the Office of the Comptroller of the Currency, also\u200c conducted exams \u2063in September and October to\u2064 assess whether Citi had made as much progress on data integrity as it \u200bclaimed, a source with direct knowledge of the matter said, requesting anonymity to \u2063discuss confidential information. Citi failed those exams, forcing\u200b it to do additional work, the source\u200c said.<\/p>\n<p>The\u2063 regulatory notices come as the bank works through two \u200d2020 consent orders, in which the Fed and the OCC directed the bank to fix \u2062longstanding and widespread deficiencies in\u200d its risk management, data governance and internal controls. The enforcement actions followed Citi\u2019s botched transfer of about $500 million\u200b to\u00a0lenders\u2062 of \u200bcosmetics firm Revlon in 2020. Citi has thousands of employees focused on resolving these issues.<\/p>\n<p>The notices from the Fed and the problems with the separate \u2064work around the\u200c consent orders have not been previously reported. Reuters could not determine \u200bthe impact these \u2064issues have had on Citi\u2019s overall efforts to resolve its regulatory problems.<\/p>\n<p>The new details provide insight into the complexity of the task facing CEO Fraser as she carries out the bank\u2019s biggest overhaul in decades to boost profits and shares, which have lagged peers. The third-largest U.S. lender has been selling businesses and\u00a0laying\u200b off thousands of employees\u00a0to simplify the bank\u2019s structure.<\/p>\n<p>In a statement to Reuters, Citi said meeting its\u200c regulators\u2019 expectations was \u2064a top priority, and it was \u201cmaking steady progress simplifying and modernizing our bank.\u201d<\/p>\n<p>\u201cLike any multi-year effort of this scale, progress isn\u2019t linear\u2063 and there are \u200bimportant learnings along the way that\u200b we\u2019re incorporating into our efforts, including in the areas of regulatory reporting, infrastructure and data enhancement,\u201d the\u200d bank said.<\/p>\n<p>Citigroup shares fell\u2062 almost 1%\u200b to $53.51 in Monday morning trading, contrasting with the KBW index\u00a0(.BKX)\u00a0of bank stocks, which gained more \u2063than 1%.<\/p>\n<p>Regulatory notices and examinations are standard practices in bank supervision, said a source close to Citi who requested anonymity to discuss confidential regulatory matters.<\/p>\n<p>The Fed and the OCC declined to comment.<\/p>\n<p>Progress on its regulatory issues is crucial\u200b for \u200bthe bank.\u00a0Regulators have the authority, for example, \u200bto limit Citi\u2019s growth and\u200b ask for \u2063changes in senior management or the board \u200dif the bank\u200d is not timely at complying with the consent orders.<\/p>\n<p>Julie Hill, a professor at the University \u2062of Alabama School of Law, characterized the \u2062demand for urgent action from regulators and the incomplete compliance with prior consent\u200b orders as \u2063serious issues for any\u200b bank\u200c that could result in tougher and more costly enforcement. Hill\u200b was speaking generally about the regulatory process rather than specifically\u200b about Citi.<\/p>\n<h2 class=\"wp-block-heading\">FED NOTICES<\/h2>\n<p>The three Fed notices sent to Citi \u2064late last year are called Matters Requiring Immediate Attention. The requests typically concern deficiencies and banks\u2063 can \u200chave many outstanding\u2064 MRIAs at any given time, but they are confidential and rarely \u2063come into\u200b public view.<\/p>\n<p>The content of the three MRIAs was described to\u200c Reuters by a source with direct knowledge of them. They have deadlines of six \u2063months to\u2062 a year, the source said. They instruct Citi to \u200dimprove its data and governance around how it sets aside capital to account for counterparty credit\u2062 risks, the source \u2064said.<\/p>\n<p>Banks measure the riskiness\u200b of their derivatives business to help\u2062 determine how much capital they need to set aside to \u2064withstand potential losses.<\/p>\n<p>One of Citi\u2019s MRIAs has a six-month deadline and relates to \u2063data, laying\u200b out more than a dozen issues that the bank needs to fix, the \u200csource said.<\/p>\n<p>The other two have one-year deadlines. One relates to how Citi uses proxies in calculating counterparty credit risk when the data is not available, and the other relates to governance failings, specifically around lack of clarity over who is responsible in various legal entities of the bank, the source said.<\/p>\n<p>Citi\u2019s two consent orders lay out several major issues that the bank needs to resolve, with work further broken down into smaller steps. Problems with \u2064any of the steps can \u2063lead to the bank\u2064 not being able to resolve \u2062the main issue\u200c even if it has made progress in other areas, according to two sources familiar with the matter.<\/p>\n<p>The\u200b finding of Citi\u2019s internal audit\u200b unit \u200crelates\u2063 to a \u201ccorrective action \u2064plan\u201d by\u2062 the bank to address an issue \u200cthat appears in both consent orders, calling for the leadership to have better oversight of the bank, the \u200demail showed.<\/p>\n<p>The audit email \u200balso shows how \u2063the \u2064work had been delayed. The original due date on the matter was June \u200c30, 2022, but had been revised\u200d to Sept. 30, 2023. Under a column titled \u2018status\u2019, it said, \u201cRe-Open.\u201d<\/p>\n<p>Subsequently, Citi set a target date of July 31, 2024, to clear the\u200c audit, according to one\u2063 of the sources.<\/p>\n<p><sup>Reporting by Tatiana Bautzer, Saeed Azhar and Lananh Nguyen in New York; Additional reporting from Pete Schroeder in Washington and Stefania Spezzati in London; \u2063Editing by Megan Davies, \u2064Paritosh Bansal and Anna Driver<\/sup><\/p>\n<\/p>\n<div id=\"rc-widget-10bad2\" data-rc-widget data-widget-host=\"habitat\" data-endpoint=\"\/\/trends.revcontent.com\" data-widget-id=\"278641\"><\/div>\n<p class=\"dpsp-share-text\" style=\"margin-bottom:10px\"> \t\t \t\tShare this post!\t<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Since the <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/taylor-swift-shares-the-glare-with-kelce-mahomes-on-super-bowl-sunday\/\" title=\"Taylor Swift joins Kelce and Mahomes in the Super Bowl spotlight\">pandemic animal shelters<\/a> have been inundated with owner \u2062surrenders, and stray cats have flooded\u2064 their facilities.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>The Homeward Bound Pet Adoption Center launches a \u201dNeuter Your Ex\u201d campaign.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>The White House rebukes the Special Counsel \u2062report, Imran Khan\u2064 declares victory in Pakistan and Happy Chinese New Year.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>President Biden has responded to the special counsel\u2019s report on his handling \u200bof classified documents. The White House counsel is now\u2062 asking for a\u2063 revision of Robert Hur\u2019s report. <\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Nvidia\u00a0briefly surpassed Amazon.com Inc\u00a0in market capitalization on Monday.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Nvidia\u00a0is building a new business unit focused on designing bespoke chips for cloud computing firms and others.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Pinterest\u00a0dropped over 10% in a sign that <a href=\"https:\/\/www.conservativenewsdaily.net\/breaking-news\/facebook-ceo-calls-for-regulations-that-would-stifle-competitors\/\" title=\"Facebook CEO Calls for Regulations That Would Stifle Competitors\">smaller social media platforms<\/a> could be losing the battle \u2063to bigger players for ad dollars.<\/p>\n<\/p><\/div>\n<div class=\"entry-content\">\n<p>Google says consumers can pay for better reasoning capabilities as it vies with Microsoft\u00a0to win subscriptions.<\/p>\n<\/p><\/div>\n<p> rnrn  <\/p>\n<h2> What specific actions does Citi need to take to improve risk\u2062 management, data governance, and internal controls as outlined in the consent orders\u2062 from the Federal Reserve and the OCC?<\/h2>\n<p><span>  , 2024, to address \u200cthe issue,\u2062 according\u2063 to the \u200bemail.<\/p>\n<p>The email also highlights the need for comprehensive reports on risks across \u200bthe \u200dcompany to be \u200cprovided to the board and senior management. The audit\u200b unit found that Citi failed to meet this requirement, indicating a lack\u2062 of transparency and oversight.<\/p>\n<p>In addition to the notices from the\u2063 Federal\u2062 Reserve, Citi also faced examinations from the Office of the Comptroller of \u2062the\u200d Currency (OCC) \u200din September\u2064 and October. These exams assessed Citi&#8217;s progress\u200c on data integrity and found that the bank had not made sufficient progress. As a result, Citi had\u200b to do \u2064additional work to meet the OCC&#8217;s requirements.<\/p>\n<p>These regulatory\u2064 actions come as\u200d Citi continues to address longstanding deficiencies in risk management, data \u200bgovernance, and internal controls. \u200cThe bank has been working to resolve these issues since the botched\u200c transfer of $500 million to lenders of cosmetics firm Revlon in 2020. Citi&#8217;s efforts \u200cto resolve these problems have involved thousands of employees and significant restructuring.<\/p>\n<p>The impact of the regulatory notices and the \u200bchallenges in compliance with the consent orders on Citi&#8217;s overall efforts is unclear. \u200cReuters could not determine the extent\u2063 to which these issues have hindered the bank&#8217;s plans to revive its fortunes under CEO Jane Fraser.<\/p>\n<p>Citi acknowledged that meeting regulators&#8217; \u2063expectations is a top\u200c priority for the \u2063bank. In a statement\u200b to Reuters, Citi said it \u200cis making steady progress \u200bin simplifying and modernizing its operations. However, Citi&#8217;s shares \u200dfell almost 1% in response to\u2063 the news, highlighting investor\u2062 concerns and the potential impact\u200b on the bank&#8217;s performance.<\/p>\n<p>Regulatory notices and examinations are common practices in bank supervision. However, the urgency of the actions taken by regulators \u2064and the incomplete compliance with prior consent orders raise serious concerns for any bank. Failure to comply with \u200bregulatory requirements can result in stricter enforcement and increased costs\u200c for\u200b the \u2063bank.<\/p>\n<p>The details provided\u200d in\u200c this report shed light on the\u2063 complex challenges \u200cfaced by \u200dCEO Jane Fraser as she \u2062leads Citi&#8217;s overhaul to boost profits and\u200d shares. The bank&#8217;s ongoing restructuring efforts, including the sale of businesses and layoffs, are part of the largest overhaul the bank has seen \u2063in \u2062decades.<\/p>\n<p>Ultimately, Citi&#8217;s ability to address its\u2064 regulatory issues is crucial\u2063 for\u2064 its future. Regulators\u2062 have the authority to impose limitations on the bank&#8217;s growth and demand changes \u200din senior management or the board if Citi fails to comply with consent orders in a timely manner.<\/p>\n<p>Industry\u200b experts, such as Julie Hill, a professor \u2063at the University of Alabama School of Law,\u2062 view the demand \u200bfor urgent action \u2064from regulators and the incomplete compliance as serious issues that can result in tougher enforcement and \u200bgreater costs for the bank. These\u2064 concerns \u200bapply not only to Citi but to any bank facing similar challenges in regulatory compliance.<\/p>\n<h2 class=\"wp-block-heading\">FED NOTICES<\/h2>\n<p>The three notices sent by the Federal Reserve to\u200c Citi in late 2023, called Matters Requiring \u2064Immediate Attention (MRIAs), highlight deficiencies and areas that require improvement. While MRIAs are confidential, the content of these notices was described by a source with direct \u2062knowledge of them.<\/p>\n<p>The notices instruct Citi to\u2064 improve its data and governance related to the measurement of counterparty credit risk in derivative transactions. This entails\u2062 setting aside sufficient capital to mitigate potential losses. The \u200dMRIAs \u2063outline specific issues that Citi needs to address, including data management, the use of proxies in calculating \u2063counterparty credit risk, and governance failings.<\/p>\n<p>The bank has been given deadlines \u200branging from six months to\u2064 a year to address the issues highlighted in\u2064 the\u200b MRIAs. Failure to comply with these deadlines can have significant implications for\u200d Citi&#8217;s \u2064operations and regulatory \u200dstanding.<\/p>\n<p>In addition to the \u200bMRIAs, Citi has consent orders \u2062from the Federal Reserve and the \u200bOCC that outline major issues the bank needs to resolve. These consent \u200borders require Citi\u2062 to take specific\u200b actions to improve \u200drisk management, data governance, and internal controls. Progress in these areas is essential for Citi to resolve its \u2062regulatory problems and meet the expectations of regulators.<\/p>\n<p>The findings\u2063 of \u2064Citi&#8217;s internal audit unit raise further concerns about the bank&#8217;s \u2062ability\u200b to address these issues effectively. The audit unit identified a &#8220;corrective action plan&#8221;\u2064 meant to address a \u200cspecific\u200d issue present in both consent \u200corders, but the email shows that the work on this plan has been delayed.\u2062 This delay indicates a lack of progress \u2062and raises questions about Citi&#8217;s commitment to resolving its regulatory\u2064 problems.<\/p>\n<p>The challenges faced by Citi highlight the complexity and importance of regulatory compliance in \u2062the banking sector. The bank&#8217;s ability to \u2064effectively address its regulatory issues will determine\u200b its future success\u200c and \u200dstanding in the industry.<\/p>\n<p>Overall, the regulatory notices and examinations \u2063faced by Citi underscore the need for effective risk management \u2062and compliance in \u2063the\u2063 banking sector.\u200d These actions serve as reminders for other banks to prioritize regulatory compliance and \u2063address deficiencies promptly to avoid potential enforcement actions and\u2064 costly \u2062consequences.<\/p>\n<\/p><\/div>\n<p><\/body><\/html><\/p>\n","protected":false},"excerpt":{"rendered":"<p>U.S. regulators urgently request Citigroup to revise its default risk measurement methods. The logo of Citibank is observed on the trading floor at the New York Stock Exchange (NYSE) in Manhattan, New York City, U.S., August 3, 2021. REUTERS\/Andrew Kelly\/File Photo<\/p>\n","protected":false},"author":1911,"featured_media":2174091,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"https:\/\/c3.oann.com\/wp-content\/uploads\/2024\/02\/SVDFB72XSVKT7CXIQQ67N24WTI.webp","fifu_image_alt":"","footnotes":""},"categories":[542],"tags":[],"class_list":["post-2174090","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-oann"],"fifu_image_url":"https:\/\/c3.oann.com\/wp-content\/uploads\/2024\/02\/SVDFB72XSVKT7CXIQQ67N24WTI.webp","_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2174090","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1911"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=2174090"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/2174090\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2174091"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=2174090"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=2174090"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=2174090"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}