Interface News Reporter | Han Yuhang
On July 10th local time, two regulatory agencies in the United States, the Federal Reserve Board and the Office of the Superintendent of the Currency, imposed a fine of $135.6 million (approximately RMB 990 million) on Citigroup.
According to the Federal Reserve's announcement, Citigroup was fined for failing to fulfill its obligations under the consent order related to the bank's risk and control issues in October 2020.
Due to significant deficiencies in Citigroup's execution in various areas of risk management and internal control, including data quality management and regulatory reporting, compliance risk management, capital planning, and liquidity risk management, Citigroup is required by the Federal Reserve's 2020 directive to submit a plan to strengthen its data quality management program, including data governance, and take action to ensure that appropriate compensatory controls are implemented and maintained throughout Citigroup until the expected final state is achieved and functioning properly. In 2020, Citigroup agreed to this order and paid a fine of $400 million to the Office of the Superintendent of the Currency (OCC).
However, in the review conducted by regulatory authorities in 2023 regarding the execution of the aforementioned orders, it was found that Citigroup's progress in implementing the plan to strengthen its data quality management program and implementing appropriate compensation controls was not sufficient. Therefore, this huge fine was issued.
The Federal Reserve has issued a fine of approximately $60.62 million against Citigroup
Due to the aforementioned risk management negligence, Citigroup is required to pay a civil fine of approximately $60.62 million to the Federal Reserve, while the Office of the Superintendent of the Currency (OCC) has also imposed a fine of approximately $75 million on it.
This is not the first time Citigroup has been fined this year.
On May 22nd of this year, the Financial Conduct Authority and the Prudential Regulation Authority under the Bank of England issued a fine of £ 61.65 million (approximately RMB 568 million) for Citigroup's trading system and control deficiencies, with a "discount" of 30% based on a settlement between the two parties.
According to an official statement from the Financial Conduct Authority (FCA) in the UK, the fine of over 500 million was due to a trader's "mistake": a trader at Citigroup in London had originally intended to sell $58 million worth of stocks, but made an input error when entering instructions, resulting in the creation of a basket of stocks worth $444 billion. As a result, $1.4 billion worth of stocks were sold into the market, triggering a sudden drop in European stock markets.
For Citigroup, the first half of 2024 is undoubtedly a "turbulent season".
On January 12th of this year, Citigroup announced that it would lay off 20000 employees. Citigroup did not specify the specific reasons for the layoffs, but the recently released fourth quarter financial report before the layoff order seems to illustrate some of the situation. Citigroup's fourth quarter loss reached $1.8 billion, setting the worst quarterly financial performance in 14 years.
According to Citigroup's estimate, layoffs could result in costs of up to $1.8 billion, but after the layoffs are completed by 2026, it is expected to save $2.5 billion annually.
According to Citigroup's first quarter 2024 financial report released in April, Citigroup's revenue decreased by 1.6% year-on-year to $21.104 billion in the first quarter of this year, and its net profit shrank by 26.81% year-on-year to $3.371 billion. Citigroup stated that if the revenue from selling assets such as its Indian consumer business last year is excluded, the first quarter revenue of this year will increase by 3% year-on-year, mainly benefiting from investment banking, US personal banking, and service businesses, but the revenue from market and wealth businesses will decline.