Key facts
- Citigroup is seeking to resolve regulatory demands that have long affected the bank.
- The demands, which began in 2020, have led to costly fines and distractions.
- The bank is aiming to submit paperwork to regulators by the end of the year or in the first quarter.
- Citigroup is reportedly about 90% done with the required regulatory work.
- The bank spent $3.3 billion on 'transformation' work last year.
- The wealth division had a return of 12.6% in the first half of the year.
Citigroup is actively working to resolve long-standing regulatory demands that have impacted its operations and growth since 2020. The bank aims to submit comprehensive audit paperwork to the Federal Reserve and the Office of the Comptroller of the Currency by the end of this year or in the first quarter of next year, according to sources familiar with the matter. This push is intended to lift consent orders related to risk management and data governance issues, which have led to significant fines and operational distractions.
CEO Jane Fraser has indicated that the bank is approximately 90% complete with the remediation work required under these orders. Resolving these issues is seen by analysts as crucial for freeing up resources, potentially boosting the bank's stock performance, and validating its restructuring efforts. The bank spent $3.3 billion on "transformation" work last year, and is set to report its earnings soon.
Rivals have reportedly capitalized on a lighter regulatory environment, while Citigroup's expansion efforts, particularly in its wealth management division, have faced closer scrutiny. The wealth division, which had a 12.6% return in the first half of the year against a long-term goal of 20%, could benefit from increased scale through acquisitions or branch expansion, but such moves are more closely monitored by regulators while the consent orders are in place.
The regulatory issues trace back to a $900 million erroneous transfer in 2020, which prompted the Fed and OCC to demand fixes for risk management and data governance problems. The bank was fined $400 million at the time, and later received another fine from the OCC for delays in addressing data issues. An internal audit this summer reportedly rejected a version of the data tracing remediation plan, highlighting the detailed scrutiny involved. The lifting of the consent orders requires sign-off from both the Fed and OCC.