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Citi hit by new Fed rebuke, regulatory setbacks

STORY: U.S regulators have asked Citigroup for urgent changes to the way it measures default risk of its trading partners.

A source tells Reuters the Federal Reserve sent the bank three notices about this late last year.

Reuters U.S. Finance Editor Lananh Nguyen explains:

“This is a notice from regulators that is saying you have to fix this thing urgently and you have to have a time frame or deadline under which to fix it. Now, if the bank does not fix these issues, then the regulators can escalate into something called an enforcement action, which means regulators could impose, say, a fine, change management.”

This is just one of several issues the bank is facing.

It’s own auditors also found that a plan to improve internal oversight is lacking.

That’s according to an email seen by Reuters which said the work was in response to enforcement actions that date back to late 2020.

Meanwhile, a source said Citi failed exams conducted in the fall by another banking regulator, the Office of the Comptroller of the Currency, to assess whether the bank had made as much progress on data integrity as it claimed.

The new details provide insight into the complexity of the task facing CEO Jane Fraser as she carries out the bank's biggest overhaul in decades to boost profits and shares, which have lagged peers.

The third-largest U.S. lender has been selling businesses and laying off thousands of employees to simplify the bank’s structure.

In a statement to Reuters, Citi said meeting its regulators' expectations was a top priority, and it was quote, "making steady progress simplifying and modernizing our bank."

The Fed and the OCC declined to comment.

Shares of Citigroup fell as much as two percent in morning trading.