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McKinsey receives blame for Citi’s $136M regulatory fine
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August 05, 2024
Happy Monday, team!
Gossip roundup
Top story: McKinsey receives blame for Citi’s $136M regulatory fine
Source: Reuters
Regulatory Penalties: Citigroup faces a $136 million fine for significant loan reporting errors, exposing deep-seated data management issues.
ΜcKinsey to Blame: Despite hiring McKinsey to address regulatory shortcomings, Citi’s dissatisfaction grew as several McKinsey plans were rejected by regulators, leading to the termination of their partnership.
Internal Turmoil: High staff turnover and allegations of wrongful termination highlight Citi’s struggles with internal culture and regulatory compliance.
McKinsey is attached to yet another corporate scandal.
Citigroup was recently fined $136 million for significant loan reporting errors, revealing persistent data management issues and a strained relationship with McKinsey. The Federal Reserve uncovered these flaws during Citi’s annual stress test, demanding a corrective plan within 30 days or face restrictions on profit distributions.
CEO Jane Fraser, a former McKinsey partner, has prioritized fixing these issues since taking the helm in 2021 but faces criticism for not shifting a culture that favors quick fixes over addressing deep-rooted problems. Former employees note that committees and working groups often stall progress.
A central player in this saga is McKinsey, the consulting firm hired after a 2020 consent order to help Citi address its regulatory shortcomings. Despite McKinsey's prominent role, regulators rejected several of its action plans, leading to internal dissatisfaction at Citi. Many blame McKinsey for not effectively tackling the data and control issues. This specific project between Citi and McKinsey ended last year, just before the Federal Reserve discovered the loan errors.
The internal turmoil at Citi is exacerbated by significant staff turnover, particularly in critical technology and compliance roles. Kathleen Martin, a former executive, alleges she was wrongfully terminated for refusing to mislead regulators about the bank’s progress on data issues. Citi disputes this, citing performance reasons.
These developments underscore the chronic challenges Citi faces in resolving its long-standing problems, from data inaccuracies to cultural inertia. As the bank navigates these issues under regulatory scrutiny, the road to full compliance remains fraught with obstacles and uncertainties.
Read more here.
Valiant attempt at using Deloitte Green to make the insight ‘pop’ BUT this chart is a legitimate eye sore tbh…
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