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When Citigroup’s press release hit the wire at 8:30 am last Thursday, it caught all of Wall Street off guard.
Current CEO Mike Corbat, just 60, would be stepping down as head of the third largest US bank in February, and handing the reins to 53-year-old Jane Fraser. The change sets up Fraser to become the first ever female CEO of a major US bank.
Fraser’s selection wasn’t what surprised people – as the bank’s president since October 2019, she was the heir apparent – but the announcement’s timing did. When Corbat named Fraser as president last October, he said he looked forward to “leading our firm in the coming years.”
Read more: Wall Street shatters a glass ceiling as Jane Fraser is announced as Citigroup’s new CEO, becoming the first woman to lead a major US bank
Instead, he chose to retire after it became clear regulators were losing patience with his inability to fix risk, compliance and technology systems, according to those familiar with the matter.
Business Insider spoke to seven current and former Citi employees, all of whom requested to speak anonymously to describe private conversations, about the lead up to Corbat’s early retirement.
“It was always Mike’s plan to retire in 2021,” according to a company spokeswoman.
Around the time Fraser was named Corbat’s heir apparent, the CEO told some board members that it was his intention to finish out a three-year financial plan that ended Dec. 31, 2020, according to a person with knowledge of the matter. Whether that meant retiring two months after that or staying on longer, the CEO wouldn’t say, the person said.
Under Corbat, Citigroup has had trouble with compliance and tech
Authorities at the Office of the Comptroller of the Currency and the Federal Reserve are now preparing to punish Citigroup for failing to fix its control systems, The Wall Street Journal reported Monday. Regulators are expected to issue a consent order requiring the bank to fix its risk systems, the newspaper said.
They didn’t, however, demand that Corbat step down, according to a person with knowledge of those conversations.
“While we never comment on our discussions with regulators, we are completely committed to improving our risk and control environment,” according to a Citi spokeswoman. “We appreciate the urgency of the tasks at hand.”
The decision is an end result of earlier efforts to persuade Citigroup to fix its risk controls. Coming into this year, for example, Citigroup had a number of outstanding compliance and technology-related issues that had been outlined in regulatory notices known as Matters Requiring Attention and Matters Requiring Immediate Attention, according to one of the people familiar with the matter.
Citigroup had a number of them long past due, the person added.
The notices are issued privately by regulators when they find controls or systems that aren’t up to standards, and they typically come with firm deadlines in which the bank is expected to fix the weaknesses or present a plan to do so. The board of directors is often included on those communications.
As 2020 …read more
Source:: Business Insider