The US Federal Reserve has lifted formal supervisory notices that required Citigroup to address weaknesses in its trading risk management.
According to a Reuters exclusive, the decision marks a meaningful easing of regulatory pressure on the third-largest US bank, which has spent years working through control and data issues.
The notices, issued in late 2023, focused on how Citi measures counterparty risks and allocates capital against potential trading losses.
Their termination signals that regulators are satisfied with the bank’s remediation work, even as broader supervision of large banks continues to evolve.
Fed ends key oversight actions
The Federal Reserve had issued three Matters Requiring Immediate Attention or MRIA to Citigroup last year, flagging deficiencies in trading risk controls.
As reported by Reuters, these notices required immediate fixes and close regulatory engagement.
Banks can carry multiple MRIAs at any point, but unresolved issues can escalate into tougher sanctions, including regulatory rating downgrades.
Their closure therefore, represents a tangible regulatory relief for Citi.
Focus on counterparty risk
One of the MRIAs is centred on how Citi calculates and manages counterparty credit risk within its trading business.
Banks assess the risk posed by trading partners to determine how much capital they must hold to absorb potential losses, particularly in derivatives markets.
Another notice addressed Citi’s use of proxies when direct counterparty data is unavailable.
Regulators had raised concerns about how these substitutes were applied and governed.
The third MRIA focused on governance weaknesses, including unclear accountability across different legal entities within the bank.
Citi’s remediation plans were required to be detailed and verifiable, with progress reviewed by supervisors before the notices could be lifted.
Data challenges in the spotlight
Underlying several of the issues was Citi’s long-standing struggle with data consistency, notes Reuters.
The bank operates multiple legacy systems that were never fully integrated after large acquisitions.
These gaps have previously contributed to reporting errors, regulatory criticism, and enforcement actions.
Regulators have repeatedly pointed to weak data governance as a core risk, linking it to broader control failures.
One of the terminated MRIAs specifically required improvements in data quality and governance tied to capital allocation for counterparty exposures.
Shift in Fed supervision
The timing of the decision aligns with changes underway in how the Fed approaches bank supervision.
Michelle Bowman, US President Donald Trump’s pick to oversee regulation at the central bank, is leading a review of supervisory practices, including how MRIAs are resolved.
In an October memo, according to Reuters, a senior Fed supervisor instructed examiners to terminate MRIAs promptly once a bank’s internal audit function confirms that issues have been remediated, provided regulators are satisfied with the quality of that audit work.
Broader regulatory work continues
Despite the relief on trading risk notices, Citi remains subject to other regulatory actions dating back several years.
Following a mistaken $900 million transfer to Revlon creditors in 2020, the bank has been operating under two regulatory punishments that require further control improvements before they can be lifted.
In 2024, the Fed and the Office of the Comptroller of the Currency also fined Citi $136 million for failures tied to data governance and quality.
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