(Bloomberg) — Citigroup Inc. is grappling with compliance issues related to Federal Reserve rules designed to safeguard customers’ insured deposits, according to a source familiar with the situation.
The bank has repeatedly violated Regulation W, which restricts transactions between banks and their subsidiaries, Reuters reported Wednesday, citing an internal company document.
Citigroup’s spokeswoman stated in an emailed statement, “We are fully committed to complying with laws and regulations and have a strong Regulation W framework in place to ensure prompt identification, escalation, and remediation of issues in a timely manner.”
These breaches come as CEO Jane Fraser’s efforts to revitalize the bank face increasing scrutiny. Fraser’s turnaround plan, which includes addressing consent orders imposed by the Fed and the Office of the Comptroller of the Currency (OCC) in 2020, has encountered hurdles due to regulatory challenges and operational shortcomings.
Earlier this month, Citigroup agreed to pay nearly $136 million in fines for failing to make sufficient progress in addressing these regulatory orders. The bank is now required to complete a resource review plan for the OCC, which may involve hiring additional staff or investing in new technologies to meet the compliance requirements.
In addition, last month, Citigroup and three other major banks were instructed to improve their contingency plans for a potential wind-down, as regulators identified weaknesses in their current strategies.
Citigroup’s stock showed little movement in early New York trading at 8:44 a.m.
The issues with Regulation W are distinct from the bank’s broader efforts to address the 2020 consent orders, according to the source. Fraser has previously emphasized that resolving these orders is her top priority as CEO. She has acknowledged that the bank has fallen behind in enhancing its data-quality management systems, a gap she has committed to addressing.
“We’ve been transparent this year about our delays in this area and have increased our investment accordingly,” Fraser told analysts earlier this month. “Addressing these gaps is the primary focus of our transformation and our No. 1 priority.”