Citi CEO Leaves First Female Boss To Face Fed Music For Systems SNAFU

Just days after making history by appointing the first woman to lead a major Wall Street megabank, Citigroup is seeing its shares tumble after WSJ reported that the company is facing a federal reprimand for failing to fix its risk-management systems.

The company’s shares tumbled on the news.

WSJ also reported that CEO Michael Corbat’s departure was moved up because of the expected rebuke, which comes courtesy of the Office of the Comptroller of the Currency and the Fed. Corbat’s successor, Jane Fraser, the bank’s current president, is expected to take over early next year.

Reports about Corbat’s timetable for leaving being moved up hit shortly before the WSJ published its report. Offering more details about the impending punitive action, WSJ revealed that Corbat wasn’t asked to step down by regulators. However, the bank felt that an “expensive, multiyear systems overhaul designed to address regulators concerns” was best left in the hands of his successor.”

Critics on the left jumped on the news, suggesting that Citigroup’s size and complexitiy make AML risks endemic.

A $2 trillion Wall Street bank can’t seem to fix its risk management capabilities after a decade of trying.

A “public rebuke” isn’t going to cut it. Maybe a smaller, less complex Citigroup could solve these issues. https://t.co/UYv94q0SDo

— Gregg Gelzinis (@FinGregg) September 14, 2020

Citi is of course still operating from consent orders in 2012 and 2013 that were imposed after the bank reportedly failed to improve its AML controls back then. It was later fined in 2017 for failing to abide by the 2012 order. WSJ didn’t offer too many details about the bank’s specific wrongdoings, though the reporters offered details about certain shortcomings, like how the bank’s various business lines all run on their own independent systems.

The report did say a recent mistake involving a missing $900 million had something to do with it.

These reports come as a shock, since Corbat was being lauded just the other day for his progressive vision in maneuvering Fraser into position to be his replacement. It’s certainly a blemish that Corbat, who has served as CEO since 2012, will see tarnish his legacy on his way out, while also making Citi vulnerable to political backlash during an election year.