A quick peek into ICM’s past annual crisis reports is telling: the banking industry is perpetually among the most crisis ridden, across the board. Wells Fargo can attest to that, as they are still dealing with the fallout that began in 2016 with its fake account scandal. By way of background, on September 8, 2016, federal regulators revealed that Wells Fargo employees had secretly created millions of unauthorized bank and credit card accounts without their customers’ knowledge or consent. This revelation led ultimately to billions of dollars in fines, settlements and legal costs for the bank and marked the beginning of a series of investigations, legal actions, and reforms that would continue for years afterward. It also cost more than a few people their jobs.
We have to note that by the time the scandal was publicly exposed in 2016, the fraudulent practices had been ongoing for several years. Wells Fargo later admitted that between 2002 and 2016, it had falsified bank records, harmed customers’ credit ratings, misused their personal information, and wrongfully collected millions in fees and interest.
Along with the series of crises Wells Fargo has faced over the past several years, rival Citigroup has faced its share of significant issues over the past few years, highlighting persistent problems with risk management, internal controls and data governance. For example, we learned recently that last year an employee at Citigroup made an $81 trillion error (count the zeroes: 81,000,000,000,000) by mistakenly crediting a customer’s account instead of $280. The error was detected after 90 minutes and reversed, but it raised concerns about operational controls.
Among their other blunders, in August 2020, Citibank mistakenly transferred $900 million to Revlon creditors, leading to legal action against lenders who refused to return the funds. In October of that year, regulators imposed a $400 million fine on Citigroup for failing to address deficiencies in risk management practices and internal controls. In July 2024, regulators fined Citigroup an additional $136 million for insufficient progress in resolving data management shortcomings identified in the 2020 consent order.
Ongoing Regulatory Concerns
The Office of the Comptroller of the Currency (OCC) and Federal Reserve Board have repeatedly cited Citigroup for deficiencies in enterprise-wide risk management, compliance risk management, data governance, internal controls and data quality management. Regulators have expressed frustration with Citigroup’s slow progress in addressing these issues, despite the bank’s efforts to simplify operations and improve systems.
Impact on Leadership and Operations
The ongoing challenges contributed to the resignation of CEO Michael Corbat in 2021. Current CEO Jane Fraser has prioritized enhancing risk management and internal controls, but progress has been declared insufficient by regulators. Further compromising its efforts to improve, Citigroup announced plans to cut approximately 20,000 jobs by 2026 following disappointing financial results.
Customer Complaints
The Better Business Bureau has reported numerous customer complaints against Citibank, including issues with dispute resolution, account closures, and customer service. These recurring problems have raised serious concerns among regulators, shareholders, and customers about Citigroup’s ability to manage risks effectively and maintain robust internal controls.
Let’s hope that Citi can clean up its act and move past its series of crises more quickly than Wells Fargo. And like Wells Fargo, it will likely take years to clean up the mess and regain the trust of their stakeholders and most important, their customers.
