The Bank of England's Prudential Regulation Authority has imposed a combined financial penalty on Citigroup Global Markets Ltd, Citibank NA London branch and Citibank Europe Plc UK branch of £43.9 million for failings in relation to their internal controls and governance arrangements that underpin their regulatory reporting capacity.

Between 19 June 2014 and 31 December 2018, according to the PRA, the firms’ regulatory reporting in the UK was not designed well or operating effectively and the bank therefore failed to submit complete and accurate regulatory returns to the PRA. The failings led to significant errors in the firms’ returns, including six substantive matters which made those returns unreliable and did not provide the PRA with an accurate picture of CGML’s capital or liquidity position.

Citigroup's headquarters are in New York. The Financial Stability Board, in consultation with the Basel Committee on Banking Standards and national regulators, has marked it out as a global systemically important bank or 'G-SIB.' It is the third largest US bank with total assets of about US$2 trillion and operations in around 100 countries. The UK is Citigroup’s largest jurisdiction outside of US in balance-sheet terms.

The Financial Conduct Authority regulates a large number of smaller firms for prudential purposes.

In particular:

• 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 Citigroup Global Markets' liquidity returns were complete and accurate. Moreover, the PRA thought that the records that it wrote about its regulatory reporting controls in the UK were inadequate in view of its size, complexity and systemic importance;
• CGML’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; and
• Citi’s oversight and governance in relation to regulatory reporting fell significantly below the standards expected of a systemically important institution.

As a result, Citi breached relevant requirements under the PRA Rulebook. Specifically, CGML and CBNA London breached Fundamental Rule 6 of the PRA Rulebook. CBNA London and CEP UK also breached the Branch Return Rule (which was in effect from 1 July 2015) and all three firms breached Rule 6.1 of the Notifications Part of the PRA Rulebook.

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 CGML’s 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% reduction in the fine imposed by the PRA. Without this discount, the fine imposed by the PRA would have been £62.7 million.

The Financial Services Authority is itself a prudential regulator for some 46,000 lesser firms. It has not taken enforcement action against any for bad prudential controls so far.