US regulators rebuff Citigroup’s ‘living will’ resolution plan

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US banking regulators rejected Citigroup’s so-called living will — a detailed plan to wind itself down in the event of catastrophic failure — in the latest rebuke for a bank under orders to improve risk controls for nearly four years.

In a closed-door meeting, the majority of the Federal Deposit Insurance Corporation’s five-member board voted on Thursday to reject Citi’s resolution plan. The nation’s largest banks, as part of reforms passed in the wake of the financial crisis, are required to have such plans to insulate taxpayers and the financial system from the impact of their failure. They are recertified every other year by the FDIC and the Federal Reserve.

The FDIC called Citi’s data controls “deficient”. That was a downgrade from two years ago, in which the FDIC and the Fed passed Citi’s living will but called its data controls a “shortcoming”.

The Fed has yet to hold its own vote on Citi’s living will. Citi would face penalties if its plan is rejected by both regulators.

A Citigroup spokesman said: “We continue to make substantial investments to modernise our infrastructure, including the work we’re doing to automate data and regulatory reporting processes.” The bank said it was confident “Citi could be resolved without the use of taxpayer funds or an adverse impact on the financial system”.

In late 2020, Citi was fined $400mn by the Fed and the Office of the Comptroller of the Currency, another banking regulator, for failing to detect risky transitions and other control issues. The fine followed an incident in which the bank mistakenly sent $900mn to a group of hedge funds that were creditors of cosmetics company Revlon.

On Tuesday, Jane Fraser, Citi’s chief executive, told an investor conference that resolving regulatory issues was one of the areas in which the bank had moved too slow in recent years. Mark Mason, Citi’s chief financial officer, said at the same event that the bank was renewing its effort to address regulatory issues and would spend whatever it takes to resolve them.

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