Citigroup has been fined more than half a billion dollars after CEO Jane Fraser used her term to fix the bank

Two federal regulators on Wednesday fined Citigroup $135.6 million for failing to make sufficient progress in fixing longstanding internal control and risk problems. It’s a blow to Jane Fraser, the bank’s CEO, who has spent her career making Citi leaner and less complex.

The fines come from the Federal Reserve and the Office of the Comptroller of the Currency, which said in separate press releases that Citigroup had failed to meet its obligations under a 2020 consent order regarding the bank’s risk and controls problems. While regulators said the bank had made progress, significant problems remained at the bank that prompted the OCC and Fed to impose additional penalties.

“Citibank must continue its transformation and address its longstanding deficiencies in a timely manner,” Acting Comptroller of the Currency Michael J. Hsu said in a statement.

The $135.6 million fine is in addition to the $400 million fine Citi repaid in 2020 when the original consent order was signed. Citi will pay $61 million to the Fed and $75 million to the OCC as part of this round of fines.

Fraser acknowledged in a statement that the bank has not progressed quickly enough and that it is possible that Citi is de-risking itself.

“We’ve always said that progress would not be linear, and we have no doubt that we will be successful in getting our business to where it needs to be in terms of our transformation,” she said.

Citigroup was the go-to example of “too big to fail” after the 2008 financial crisis. The near-collapse and government bailout required Citi executives to shrink their massive balance sheet, sell businesses they no longer needed, and exit financial markets where they could not establish a dominant position.

Citi grew in size and complexity in the 1990s and early 2000s through a series of acquisitions and mergers in an attempt to transform Citigroup into a financial conglomerate that served every customer. But many of those acquired companies had software and internal controls that didn’t work with other parts of Citigroup. So while Citi is less complex than it was in 2008, it’s still a bank that regulators have serious concerns about to this day, as the lack of internal communication could lead to problems.

Banking regulators in June rejected Citi’s “living will,” a document that was supposed to show how Citigroup could be liquidated safely and orderly in the event of bankruptcy.

Fraser has focused her tenure as CEO on fixing the bank’s internal controls, saying the effort would take thousands of employees, billions of dollars and years of work. Some of her efforts to slim down Citi have been successful, including the sale of parts of Citi’s consumer banking business, notably the planned spin-off of Citi’s Banamex operations in Mexico.

However, investors still price Citigroup’s stock lower than Wall Street peers JPMorgan, Goldman Sachs and Morgan Stanley, partly because of Citi’s ongoing costs to fix its internal control problems.

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