Dive Overview:
- Citi has stepped up infrastructure modernization efforts to fix deficiencies in its data quality controls, CEO Jane Fraser said during the bank’s second-quarter 2024 earnings call on Friday.
- The announcement came two days after the Federal Reserve and the Office of the Comptroller of the Currency fined the bank $60.6 million and $75 million, respectively, for violating a consent decree in 2020. “Citigroup has not made sufficient progress in remediating its data quality control issues,” the Fed said in a statement on Wednesday.
- “Our reforms address decades of underinvestment in much of the City’s infrastructure and risk and control environment,” Fraser said, pointing to “fragmented technology platforms” and process inefficiencies. “This is a massive undertaking that goes far beyond the consent decree…This isn’t old-fashioned City Band-Aid, this is the City addressing the fundamental issues head-on.”
Dive Overview:
Since taking over as CEO in March 2021, Fraser has been a strong advocate for digital transformation.
The bank invested more than $12 billion in technology last year and said in March it had completed a “major effort” to simplify its organisation that it had begun six months earlier.
As the financial industry turns to generative AI to improve processes, Fraser last month welcomed former PwC senior partner Tim Ryan to the bank’s technology leadership team. As head of technology and business enablement, Ryan will help drive the bank’s digital strategy.
“The technology investments we’ve made are paying off,” Fraser said Friday. “We’ve reduced the time it takes to book loans, automated controls to reduce trader error, moved risk and analytics to cloud-based infrastructure, and increased the resiliency of our platform to reduce downtime.”
The company’s ongoing regulatory woes highlight the deep connections between technology stacks, data assets and compliance controls in modern banking. CFO Mark Mason said Citi is focusing its IT investments to streamline data operations, automate processes and controls and improve operational efficiency.
“We continue to invest in transformation and technology to modernize our operations and our risk and controls infrastructure,” Mason said on Friday. “That said, we have had weak data quality controls, particularly around regulatory reporting, which we have publicly acknowledged since earlier this year.”
Mason also detailed some of the bank’s simplification accomplishments, including data center closures and platform downsizing.
“In fact, we spent about $3 billion on transformation-related work last year and plan to spend a little more this year,” Mason said. “As we continue to move forward with our transformation, we’ve had to spend more than we had planned on as we address some of the things that Jane and I mentioned earlier, including the regulatory reporting-related data.”
Citi reported revenue of $20.1 billion for the three months ended June 30, up 4% from the same period a year ago. Bank expenses were $13.4 billion, down 2% compared with the second quarter of 2023. Mason attributed the decrease to savings from organizational simplification, partially offset by Fed and OCC fines and ongoing reform costs.
