Citigroup, one of the largest financial institutions in the United States, has been hit with a significant fine of $135.6 million by government regulators. The Federal Reserve and the Office of the Comptroller of the Currency imposed the fine, citing Citigroup's failure to adequately address internal control and risk issues. This development poses a challenge for Jane Fraser, the CEO of Citigroup, who has been working towards streamlining the bank's operations and reducing complexity.
The fine stems from a 2020 consent order related to Citigroup's risk and control problems. While some progress has been made, regulators found that there are still substantial issues that need to be resolved. The Acting Comptroller of the Currency emphasized the importance of Citigroup addressing its deficiencies promptly to ensure a successful transformation.
This latest fine adds to the $400 million penalty that Citigroup paid in 2020 when the initial consent order was issued. The bank will now pay $61 million to the Federal Reserve and $75 million to the Office of the Comptroller of the Currency as part of the recent penalties.
In response to the fine, CEO Jane Fraser acknowledged that Citigroup has not made progress as quickly as desired but expressed confidence in the bank's ability to reduce risk and enhance its operations. Citigroup, once considered 'too big to fail' following the 2008 financial crisis, has undergone significant restructuring efforts over the years to simplify its operations and reduce complexity.
The bank's expansion through acquisitions and mergers in the 1990s and early 2000s led to a complex organizational structure that posed challenges for internal communication and control. While Citigroup has made efforts to streamline its operations, regulators remain concerned about the bank's internal communication issues and the potential risks they pose.
Despite CEO Jane Fraser's efforts to improve internal controls, Citigroup continues to face scrutiny from investors and regulators. The rejection of Citigroup's 'living will' in June, which outlines the bank's plan for an orderly wind-down in case of failure, underscores the ongoing challenges the bank faces.
While Citigroup has made progress in certain areas, such as divesting parts of its consumer banking business, investors still view the bank with caution compared to its peers on Wall Street. The ongoing costs associated with addressing internal control issues have contributed to Citigroup's shares being undervalued relative to other major financial institutions.
