PRA imposed a combined financial penalty of GBP 43.9 million on Citigroup Global Markets Limited, Citibank N.A. London branch, and Citibank Europe Plc UK branch, for failings in relation to their internal controls and governance arrangements underpinning compliance with the PRA regulatory reporting requirements. Citigroup Global Markets Limited and Citibank N.A. London branch breached Fundamental Rule 6 of the PRA Rulebook while Citibank N.A. London branch and Citibank Europe Plc UK branch breached the Branch Return Rule (which was in effect from July 01, 2015). Additionally, all three firms breached Rule 6.1 of the Notifications Part of the PRA Rulebook.
Between June 19, 2014 and December 31, 2018, or parts thereof, the firms’ UK regulatory reporting framework was not designed, implemented, or operating effectively. This led to them failing to submit complete and accurate regulatory returns to PRA. Significant errors were found in the firms’ returns, which included six substantive matters that had a material or potentially material impact on the returns. The pervasiveness of the errors and misstatements identified in the returns raised fundamental concerns about the effectiveness of Citi’s UK regulatory reporting control framework, did not provide PRA with an accurate picture of capital or liquidity position of Citigroup Global Markets Limited, and negatively impacted the ability of PRA to supervise Citi. While Citi remained in surplus to its liquidity and capital requirements at all times, the failings persisted over a significant length of time and were serious and widespread in nature.
The investigation of PRA focused on, liquidity returns, capital, and leverage returns of Citigroup Global Markets Limited, Citibank Europe Plc UK, and Citibank N.A. London branch returns.The investigation identified that:
- Citi failed to ensure that systems and controls supporting its UK regulatory reporting framework were designed, implemented, and operating effectively
- Citi failed to allocate adequate human resources to ensure that liquidity returns of Citigroup Global Markets Limited were complete and accurate
- Citi’s documentation of multiple aspects of its UK regulatory reporting control framework was inadequate given its size, complexity, and systemic importance
- Citigroup Global Markets Limited's approach to technical interpretations of reporting requirements was insufficiently robust, given the complexity of those decisions and the impact they could have on the accuracy of the returns
- Citi’s oversight and governance in relation to regulatory reporting fell significantly below the standards expected of a systemically important institution
The firms agreed to settle during the discount stage of the PRA investigation. As a result, the firms qualified for a 30% settlement discount under the PRA Settlement Policy. Were it not for this discount, PRA would have imposed a financial penalty of GBP 62.7 million on the firms.
Keywords: Europe, UK, Banking, Citigroup, PRA Rulebook, Compliance Risk, LCR, Leverage Ratio, Regulatory Capital, Reporting, PRA
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