Record £44m fine for Citigroup over regulatory reporting failures

The Bank of England has slapped Citigroup’s UK operations with a record £44m fine after discovering a string of failings in their regulatory reporting governance and internal controls over a four-year period

The Prudential Regulation Authority (PRA) has imposed a combined financial penalty of £43.9m on Citigroup Global Markets Ltd (CGML), Citibank N.A. London branch (CBNA) and Citibank Europe Plc UK branch (CEP) after identifying errors and misstatements in the firms’ returns which it said raised fundamental concerns about the effectiveness of Citi’s UK regulatory reporting control framework.

The PRA’s investigation focused on CGML’s capital and leverage returns, CGML’s liquidity returns and CEP UK and CBNA London’s branch returns. 

The regulator said that between 19 June 2014 and 31 December 2018, the firms’ UK regulatory reporting framework was not designed, implemented or operating effectively. As a result, they failed to submit complete and accurate regulatory returns to the PRA.

While Citi remained in surplus to its liquidity and capital requirements at all times, the failings persisted over a significant length of time and were serious and widespread in nature. They included six substantive matters which had a material or potentially material impact on the returns.

The reporting failures led to significant errors in the firms’ returns, which were judged to be unreliable and did not provide the PRA with an accurate picture of CGML’s capital or liquidity position.

According to the PRA’s report, CGML had been misreporting its liquidity coverage ratio by up to 47% between October 2015 and June 2016, while the potential cumulative impact of the errors identified in CGML’s capital return resulted in the understatement of its risk-weighted assets by $15.4bn (£12bn).

The PRA said that, although during the period under investigation Citi had begun to undertake a significant remediation programme to address data quality issues, the internal controls and governance arrangements were inadequate to ensure accurate regulatory reporting for an organisation of Citi’s size, complexity and systemic importance.

In particular, Citi failed to allocate adequate human resources to ensure that CGML’s liquidity returns were complete and accurate, while its documentation of multiple aspects of its UK regulatory reporting control framework was not adequate given its size, complexity and systemic importance.

CGML’s approach to technical interpretations of reporting requirements was judged to be insufficiently robust given the complexity of those decisions and the impact they could have on the accuracy of the returns.

Sam Woods, deputy governor for prudential regulation and the PRA’s CEO said: ‘Accurate regulatory returns from firms are vital for the PRA in fulfilling our role. Citi failed to deliver accurate returns and failed to meet the standards of governance and oversight of regulatory reporting which we expect of a systemically important bank.’

Citi agreed to resolve this matter and therefore qualified for a 30% reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been £62.7m.

In a statement, Citi said that it ‘places a high priority on meeting its regulatory reporting requirements, and has devoted significant resources to UK financial reporting before, during and after the period to which the PRA’s notice relates’. The bank said it had resolved all of the failings highlighted by the PRA.

Bank of England final notice on Citigroup

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