The Prudential Regulation Authority (PRA) has fined Citigroup Global Markets, Citibank London and Citibank Europe £43.9 million for failings in relation to internal controls and governance arrangements.

Between 19 June 2014 and 31 December 2018, the firms’ UK regulatory reporting framework was not designed, implemented or operating effectively, which led to a failure to submit complete and accurate regulatory returns to the PRA.

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. They led to significant errors in the firms’ returns, including six substantive matters which had a material or potentially material impact on the returns. This meant the returns submitted were unreliable and did not provide the PRA with an accurate picture of Citigroup Global Markets’s capital or liquidity position.

Sam Woods, deputy governor for prudential regulation and chief executive of the PRA, said: “Accurate regulatory returns from firms are vital for the PRA in fulfilling our role - Citi failed to deliver accurate returns and failed to meet the standards of governance and oversight of regulatory reporting which we expect of a systemically important bank.”

The PRA’s investigation focused on Citigroup Global Markets’ capital and leverage returns, liquidity returns and Citi's branch returns. It identified that, although during the period under investigation Citi had begun to undertake a significant remediation programme to address data quality issues, the internal controls and governance arrangements which underpinned Citi’s UK regulatory reporting were not designed, implemented or operating effectively.

"They were therefore inadequate to ensure accurate regulatory reporting for an organisation of Citi’s size, complexity and systemic importance," read the decision. "This led to the significant number of errors and misstatements identified in Citi’s returns."

The pervasiveness of the errors and misstatements identified in the firm’s returns raised fundamental concerns about the effectiveness of Citi’s UK regulatory reporting control framework, did not provide the PRA with an accurate picture of capital or liquidity position, and negatively impacted the PRA’s ability to supervise Citi.

Citi agreed to resolve this matter and therefore qualified for a 30 per cent reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been £62.7 million.

Giles Nelson, chief technology officer for financial services at MarkLogic, commented: “This fine by the PRA is indicative of the difficult regulatory landscape facing financial institutions - what we see here is another example of a fine this year for serious issues with regulatory reporting to follow-on from Goldmans, UBS, Standard Chartered and others who were all fined by the FCA."

He continued: "Clearly the bigger picture is that, as the number of legislative initiatives that compliance teams need to stay on top of grows, it is becoming next increasingly difficult for firms to stay within the rules.

"It’s big organisations such as Citi and others who suffer in this respect because of their sheer size and complexity - the data they need to report on liquidity and capital requirements needs to be accessed from a myriad of different business areas and data systems within the bank, but Citi’s systems to bring this data together and construct an overall view of it, were obviously lacking."

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