US Fed terminates Citi notices that demanded bank improve risk controls, sources say
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By Elisa Martinuzzi, Lananh Nguyen and Tatiana Bautzer
LONDON/NEW YORK, Dec 17 (Reuters) – The Federal Reserve said it had shut down formal notices to Citigroup requiring the bank to correct trading risk management weaknesses. This is an important step in improving oversight and control deficiencies that have bogged down the third-largest U.S. bank, according to people familiar with the matter.
The Fed issued notices to Citi in late 2023 addressing three issues called Matters Requiring Immediate Attention, or MRIAs, which describe problems with how the bank calculates and manages the risks of trading partners and allocates capital to mitigate potential losses on those transactions, Reuters previously reported. According to sources, these announcements have now been terminated.
Citi officials and Fed officials who oversee major banks declined to comment.
The sources declined to be identified because the supervisory matters are confidential.
The resolution of the filings, first reported by Reuters, represents a boost to CEO Jane Fraser’s years-long goal to address risk management and control issues that have weighed on the bank’s profitability.
One of Citi’s biggest problems was the inconsistency of bank data resulting from multiple systems that were not yet fully integrated after major acquisitions. These problems left the bank stuck and led to several regulatory reprimands.
Banks may have many outstanding MRIs at any given time, but these are confidential and rarely made available to public view.
The management team is expected to develop a robust plan to fix MRIs, and those changes are then expected to be reviewed by the regulator. Failure to address MRIs could potentially lead to more serious sanctions, such as a regulatory rating downgrade.
One of the three MRIAs ordered Citi to improve its data and management of how it allocates capital to account for counterparty credit risks, Reuters reported. Banks measure the riskiness of their derivatives businesses to help determine how much capital they need to allocate to withstand potential losses.
Other MRIAs relate to how Citi uses proxies to calculate counterparty credit risk when data is not available. Another relates to management failures, particularly a lack of clarity about who is in charge across the bank’s various legal entities, the source said.
Michelle Bowman, President Donald Trump’s pick to oversee regulation at the Fed, is overhauling bank oversight, including addressing MRIAs. In a memorandum issued in October, a senior Fed supervisor instructed investigators to immediately terminate MRIAs if the bank’s internal audit function determined the problem had been resolved.
Besides MRIAs, Citi is also working on other significant regulatory penalties dating back years.
Transfers 900 million dollars
For creditors who took out Revlon loans in 2020, the bank operates under two regulatory penalties;
The bank needs to improve controls on orders to be removed and initially executed.
He had difficulty making progress.
Fed and Office of the Comptroller of the Currency also fined Citi in 2024
Because they fail to improve the management and quality of data.
Last week, the finance chief echoed the CEO’s previous comments, saying the bank had made significant progress in its transformation efforts to solve the problems. (Reporting by Elisa Martinuzzi, Lananh Nguyen and Tatiana Bautzer; Additional reporting by Saeed Azhar in New York and Pete Schroeder in Washington. Editing by Michelle Price and Nick Zieminski)
