US regulators reject Citi’s ‘living will’ resolution plan, FT reports

(Reuters) -U.S. banking regulators rejected Citigroup’s so-called “living will”, which is a detailed plan to wind itself down in the event of catastrophic failure, The Financial Times reported on Thursday.

In a closed-door meeting, the majority of the Federal Deposit Insurance Corporation’s (FDIC) five-member board voted to reject Citi’s resolution plan, calling the bank’s data controls “deficient”, according to the report.

An FDIC spokesperson declined to comment on the report when contacted by Reuters.

The banking regulator’s decision escalates its concerns over the bank’s ability to be safely resolved, and in particular, its ongoing efforts to get a handle on its data governance.

“We continue to make substantial investments to modernize our infrastructure, including the work we’re doing to automate data and regulatory reporting processes,” Citi said in a statement to Reuters.

“Our balance sheet and financial health remains strong, with high levels of capital, liquidity and reserves. We continue to have confidence that Citi could be resolved without the use of taxpayer funds or an adverse impact on the financial system.”

Citi has struggled for years to assuage regulatory concerns around its data management, and Reuters reported in February that it received fresh directives to fix problems in late 2023.

But beyond a public chastising, the move is expected to be largely symbolic as the Federal Reserve is not expected to follow suit, according to one government official who declined to be identified discussing private regulatory talks.

The Fed will release its own analysis of large bank “living wills” by the end of this month.

While a living will deficiency does clear a path for regulators to eventually take more extreme steps like imposing business limitations or ordering banks to divest certain pieces, the process only begins if both the Fed and FDIC deem a bank’s plan to be deficient.