Governors punish Citigroup $136 million, hurting CEO Jane Fraser.

Citigroup (C) was fined $136 million for failing to fix long-standing controls and risk management issues, a blow for CEO Jane Fraser during her turnaround of the massive New York bank. The Federal Reserve and Office of the Comptroller of the Currency announced the action late Wednesday, two days before Citigroup reports second-quarter earnings.  

A 2020 consent decree requires Citigroup to improve its enterprise-wide risk management, compliance risk management, data governance, and internal controls, but the regulators stated Citigroup made inadequate progress.  

Acting Comptroller of the Currency Michael J. Hsu stated the bank's board and management had made considerable progress, including simplifying the bank, but data gaps remain. Citigroup will pay the OCC $75 million and the Fed $60.6 million, in addition to $400 million from the 2020 consent order.  

On Wednesday, Fraser said, "we've always said that progress wouldn't be linear, and we have no doubt that we will be successful in getting our firm where it needs to be in terms of our transformation." The CEO stated, "We'll spend what's needed to comply with consent orders."  

Fraser, who became CEO in March 2021, began the transformation two years ago to focus on serving international firms, cut non-profitable operations, and improve efficiency.  

That required global consumer banking withdrawals. Fraser dubbed the internal restructure the "most consequential" reform to Citigroup in nearly two decades, involving job cuts and business line reorganization. The strategy unwound a 1990s-era "financial supermarket" that claimed to provide all consumer, business, and government services.  

Last month, Fraser and other bank executives gave investor presentations on their transnational services division, which helps corporations shift money around the world. In his presentation, Citigroup CFO Mark Mason called 2024 a "inflection year" and said the company intends to boost revenue by $6 billion and cut expenses by $500 million by 2026.  

At the June event, Fraser and Mason admitted that the bank needed to improve its regulatory and compliance functions. "We recognize there are places where progress has been too slow, so we have intensified our efforts in regulatory processes and data remediation," Fraser said in June.  

Days later, authorities found flaws in Citigroup and three other large banks' "living wills" outlining how they would shut down if something catastrophic happened.  

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