Citigroup, long beleaguered by challenges in risk management and regulatory compliance, faces renewed scrutiny from Sen. Elizabeth Warren, a sharp critic of the banking industry and a member of the Senate banking committee.
In a letter directed to Michael Hsu, the acting head of the Office of the Comptroller of the Currency (OCC), Warren urged regulators to “impose growth restrictions and other penalties” on Citi, underscoring her concerns over the bank’s ongoing internal control failures. Warren emphasized that Citi's persistent shortcomings demand stronger regulatory actions.
Warren’s critique is a pointed reminder that Citigroup’s turnaround remains a work in progress, despite efforts led by CEO Jane Fraser. Fraser, who took over in March 2021, embarked on a strategic overhaul aimed at addressing Citi’s legacy issues. These include divesting from consumer banking operations in numerous international markets and bolstering leadership in key sectors like technology and investment banking.
However, Warren believes these measures have not sufficiently addressed the deeper structural problems at Citi. The senator referred to the OCC’s established escalation framework for dealing with deficiencies at major financial institutions: starting with private warnings, followed by public enforcement, growth restrictions, and, in extreme cases, the potential breakup of a bank. Warren's letter raises the possibility of a more drastic intervention if Citi fails to meet regulatory expectations.
The OCC is under no obligation to act on Warren’s recommendations, but the senator's letter highlights growing frustration with the bank's slow progress. Citigroup was fined by the OCC and the Federal Reserve in July for failing to comply with consent orders issued four years ago, underscoring the regulatory impatience with the bank’s pace of reform.
Despite these setbacks, Fraser remains focused on simplifying and strengthening the bank. She has already made significant moves, such as selling off Citi’s trust business and tackling dysfunction in its wealth management unit. Fraser has repeatedly expressed her commitment to resolving the issues outlined in the consent orders, assuring investors and regulators that the necessary resources are being allocated.
As Citi prepares to report its third-quarter earnings in October, investors will be keen to see evidence of real progress in resolving the bank’s complex problems. Analysts are expected to press Fraser on how far the bank has come in addressing its regulatory challenges and whether Citi is on track to meet its long-term goals.
