Citi Fined in UK for Reporting Failures

The UK’s Prudential Regulatory Authority (PRA) has handed Citigroup a GBP 43,890,000 fine for failings in relation to its internal controls and governance arrangements underpinning compliance with PRA regulatory reporting requirements.

Between 19 June 2014 and 31 December 2018, or parts thereof, three entities within the group, Citigroup Global Markets Limited (CGML), Citibank N.A. London branch (CBNA London) and Citibank Europe Plc UK branch (CEP UK), failed to install a framework to meet UK regulatory reporting framework that was operating effectively. This led to the entities failing to submit complete and accurate regulatory returns to the PRA.

The PRA stresses that Citi remained in surplus to its liquidity and capital requirements at all times, however it adds the failings persisted over a significant length of time and were “serious and widespread” in nature. They led to significant errors in the firms’ returns, including six substantive matters which had a material or potentially material impact on the returns, the PRA states, this meant the returns submitted were unreliable and did not provide the PRA with an accurate picture of CGML’s capital or liquidity position.

The PRA’s investigation focused on CGML’s capital and leverage returns, as well as its liquidity returns and CEP UK and CBNA London’s branch returns. The PRA’s investigation identified 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 which underpinned Citi’s UK regulatory reporting were not in a number of respects designed, implemented or operating effectively. “They were therefore inadequate to ensure accurate regulatory reporting for an organisation of Citi’s size, complexity and systemic importance,” the PRA says. “This led to the significant number of errors and misstatements identified in Citi’s returns.”

In particular, the PRA says that Citi failed to ensure that systems and controls supporting its UK regulatory reporting framework were designed, implemented and operating effectively. It also failed to allocate adequate human resources to ensure that CGML’s liquidity returns were complete and accurate;  and its documentation of multiple aspects of its UK regulatory reporting control framework was inadequate given its size, complexity and systemic importance. It adds that CGML’s approach to technical interpretations of reporting requirements was insufficiently robust given the complexity of those decisions and the impact they could have on the accuracy of the returns; and the overall bank’s oversight and governance in relation to regulatory reporting fell “significantly below the standards expected of a systemically important institution”.

Although the actual fine was reduced from GBP 62,700,000, the PRA says the pervasiveness of the errors and misstatements identified in the firm’s returns “raised fundamental concerns about the effectiveness of Citi’s UK regulatory reporting control framework, did not provide the PRA with an accurate picture of CGML’s capital or liquidity position, and negatively impacted the PRA’s ability to supervise Citi”.

“Accurate regulatory returns from firms are vital for the PRA in fulfilling our role,” says Sam Woods, deputy governor for prudential regulation and CEO of the PRA. “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.”

Colin Lambert

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