Federal banking regulators ordered Citigroup Inc. to improve its data management practices after discovering weak links in its resolution plans. File Photo by John Angelillo/UPI | License Photo
Nov. 23 (UPI) -- Federal banking regulators warned Citigroup Inc. of flaws in its data management practices that could hurt the financial institution's execution of resolution plans in the future.
A resolution plan is a plan for liquidating, reorganizing or resolving a financial institution should it need to during a time of financial struggle, such as facing bankruptcy. The Federal Reserve and Federal Deposit Insurance Corporation found Citigroup's weaknesses in its data management practices that could undermine its overall targeted plan.
"The Agencies have identified weaknesses in the Covered Company's processes and practices for producing certain data that could materially impact the firm's resolution capabilities sufficient to constitute a shortcoming in the Covered Company's 2021 Targeted Plan," a letter to Citigroup said.
In particular, the federal agencies found that data integrity and data quality management issues could make it difficult for Citigroup to produce pertinent documents in a timely manner under "stress conditions." Citigroup is ordered to address the issues and submit a document outlining its plans for remedy by Jan. 31, 2023.
Regulators will continue to track the progress of Citigroup in its attempts to shore up its practices, according to the letter signed by Fed Reserve Board Secretary Ann E. Misback and FDIC Secretary Debra A. Decker.
The regulators issued reviews of the eight biggest financial firms operating in the United States, including Wells Fargo, Bank of America and Goldman Sachs. Citigroup was the only institution among them that had this type of issue.
The flaws in Citigroup's practices are not new. In 2021, the bank mistakenly paid $900 million to Revlon lenders. The makeup company was supposed to receive about $7.8 million in interest payments from Citigroup but instead was wired $900 million on top of the $7.8 million owed. A federal court ruled the lenders could keep about $500 million of the money sent.
"We have a rigorous, firm-wide resolution planning process across Citi's businesses, functions and regions. We continue to have confidence that we can be resolved without the use of taxpayer funds or an adverse systemic impact," Citigroup said in a statement.
Citibank is a subsidiary of Citigroup Inc.