Citigroup CEO Jane Fraser testifies during a hearing of the Senate Committee on Banking, Housing, and Urban Affairs titled “Annual Oversight of the Nation’s Largest Banks” at Hart Building on Thursday, September 22, 2022.
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banking regulator friday disclosed They found flaws in the resolution plans of four of the eight largest U.S. banks.
The Federal Reserve and the Federal Deposit Insurance Corporation said so-called living wills – plans to dissolve large institutions in the event of distress or failure – Citigroup, JPMorgan, Goldman Sachs and Bank of America The 2023 submission was insufficient.
Regulators found fault with how each bank planned to unwind its massive derivatives portfolio. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.
For example, when asked to quickly test Citigroup’s ability to unwind a contract using inputs different from those chosen by the bank, the company performed poorly, according to to regulatory agencies. This part of the job seems to have put all the banks that were having a hard time on the exam into trouble.
“An assessment of the covered firm’s ability to unwind its derivatives portfolio under conditions different from those set out in the 2023 scheme revealed significant limitations on the firm’s ability,” the regulator said. explain Citigroup’s.
Living wills are an important regulatory measure mandated following the 2008 global financial crisis. Every other year, the United States has the largest. Banks must submit their plans to reliably relax themselves in the event of a disaster. Banks with weaknesses must address them in the next wave of living wills filed in 2025.
While JPMorgan Chase, Goldman Sachs and Bank of America’s plans were all deemed “flawed” by both regulators, Citigroup was deemed to have more serious “flaws” by the FDIC, meaning the plan would not be able to get an order if Resolution: U.S. Bankruptcy Code.
Because the Federal Reserve disagrees with the FDIC’s assessment of Citigroup, it generally believes that Citigroup’s “defective” rating is less serious.
“We are fully committed to addressing the issues identified by regulators,” New York-based Citigroup said in a statement.
“While we have made substantial progress on our transformation, we acknowledge that we must accelerate work in some areas,” the bank said. “More broadly, we remain confident that Citi can operate without adverse systemic impacts or the need to pay taxes. The situation was resolved without human funds.”
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