Citigroup Repeatedly Violated Fed's Inter-company Transaction Policy: Reuters

(RTTNews) - Citigroup Inc. (C) has repeatedly violated U.S. Federal Reserve Regulation W, which has led to discrepancies in its internal liquidity reporting due to intercompany transactions, according to reports.

This information comes from a report by Reuters, referencing an internal document from the company. It's worth noting that this is the first time such violations have been disclosed.

Regulation W is in place to require banks to limit transactions, such as loans, with their controlled affiliates to protect depositors whose funds are federally insured up to $250,000.

Citigroup's breaches were quite extensive and took place over a considerable period, primarily revolving around intercompany transactions that went beyond the limits set by Regulation W. These transactions included loans and other financial activities with Citigroup's subsidiaries, which should have been curtailed to reduce risks to the bank's depositors.

According to the internal document from December, cited by Reuters, the bank's handling of the violations led to added complexities. In particular, subsequent actions resulted in significant inaccuracies in its internal liquidity reporting, undermining the reliability of Citigroup's regulatory submissions and complicating the assessment of the bank's liquidity and capital status by authorities.

These violations aren't isolated incidents and point to systemic inadequacies in Citigroup's regulatory compliance practices. Notably, in 2020, authorities criticized its risk management practices as "unsafe and unsound," and in 2023, they reprimanded Citigroup for its approach to measuring counterparty risks. This year, regulators raised concerns about the bank's resolution planning and imposed a $136 million fine due to insufficient progress on compliance.

In response to these concerns, Citigroup has ramped up its efforts in compliance. CEO Jane Fraser has stressed the bank's commitment to improving its risk management practices and addressing regulatory issues. A bank spokesperson stated, "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."