By Michelle Price, Beth Schroeder, and Tatiana Bautzer
WASHINGTON (Reuters) – U.S. banking regulators have fined Citigroup Inc $136 million for making “insufficient progress” in fixing data management issues identified in 2020 and required the bank to demonstrate it is devoting sufficient resources to the effort.
The U.S. Federal Reserve said on Wednesday that the joint enforcement action by the Fed and the Office of the Comptroller of the Currency relates to Citi’s efforts to fix data management issues and implement controls to manage ongoing risks.
The fines are the latest blow to the bank’s chief executive, Jane Fraser, as she tries to address the bank’s regulatory failures and streamline its structure after thousands of staff were laid off.
Regulators fined Citi $400 million in 2020 after identifying “persistent deficiencies” in its handling of various areas of risk management and internal controls, including data quality management.
The bank has agreed to a comprehensive plan to fix its data errors, but the Fed said its review last year found the bank still had deficiencies and had not made sufficient progress.
“Citigroup violated the 2020 order by delaying completion of milestones included in its approved plan,” the Fed said Wednesday.
The Office of the Comptroller of the Currency is also asking the bank to enact a new quarterly process to ensure sufficient resources are allocated to meet its milestones, Fraser said in a memo to staff seen by Reuters.
“The setbacks we face today are clear to see, and I know they can be disappointing,” Fraser wrote. “But they cannot distract us from the work we are doing in every corner of the Bank…. Efforts of this magnitude and importance are undoubtedly difficult.”
A Citigroup spokesman confirmed the contents of the memo but declined to comment further.
Fraser’s sweeping reorganization included layoffs of employees working on regulatory orders, according to two people familiar with the situation who declined to be identified discussing personnel matters.
A company spokesman declined to comment when asked about the job cuts.
The bank has intensified its focus and increased its investment in transformation efforts over the past few months, Fraser said in a separate statement.
“While we have made good progress in streamlining our company and processing our consent orders, there are areas where we have not progressed quickly enough, such as our data quality management,” she said.
Fraser said City would spend what was necessary to address the regulatory issues, adding: “We have always said that progress will not be linear.”
Shares were down 1% in after-hours trading.
“Citibank has always had some regulatory constraints, so this is increasingly unsurprising,” said David Wagner, portfolio manager at Aptos Capital Advisors, who remains bullish on Citibank shares. “It’s not material to the overall thesis for the stock.”
The fines are a negative reminder that Citi’s regulatory work is “a marathon, not a sprint, with bumps along the way,” Piper Sandler analyst Scott Sievers wrote in a note, adding that the stock could face some near-term weakness.
In February, Reuters reported that U.S. regulators had asked Citibank to make urgent changes to the way it measures the default risk of its trading partners, and the bank’s auditors found themselves unable to come up with a plan to improve internal controls.
Last month, the Federal Deposit Insurance Corporation expressed concerns about Citi’s plans for a living will, which would be enforced if the company ever declared bankruptcy.