Jane
Fraser,
CEO
of
Citigroup,
testifies
during
the
Senate
Banking,
Housing,
and
Urban
Affairs
Committee
hearing
titled
Annual
Oversight
of
the
Nations
Largest
Banks,
in
Hart
Building
on
Thursday,
September
22,
2022.
Tom
Williams
|
CQ-Roll
Call,
Inc.
|
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Images
Banking
regulators
on
Friday
disclosed
that
they
found
weaknesses
in
the
resolution
plans
of
four
of
the
eight
largest
American
lenders.
The
Federal
Reserve
and
the
Federal
Deposit
Insurance
Corp.
said
the
so-called
living
wills
—
plans
for
unwinding
huge
institutions
in
the
event
of
distress
or
failure
—
of
Citigroup,
JPMorgan
Chase,
Goldman
Sachs
and
Bank
of
America
filed
in
2023
were
inadequate.
Regulators
found
fault
with
the
way
each
of
the
banks
planned
to
unwind
their
massive
derivatives
portfolios.
Derivatives
are
Wall
Street
contracts
tied
to
stocks,
bonds,
currencies
or
interest
rates.
For
example,
when
asked
to
quickly
test
Citigroup’s
ability
to
unwind
its
contracts
using
different
inputs
than
those
chosen
by
the
bank,
the
firm
came
up
short,
according
to
the
regulators.
That
part
of
the
exercise
appears
to
have
snared
all
the
banks
that
struggled
with
the
exam.
“An
assessment
of
the
covered
company’s
capability
to
unwind
its
derivatives
portfolio
under
conditions
that
differ
from
those
specified
in
the
2023
plan
revealed
that
the
firm’s
capabilities
have
material
limitations,”
regulators
said
of
Citigroup.
The
living
wills
are
a
key
regulatory
exercise
mandated
in
the
aftermath
of
the
2008
global
financial
crisis.
Every
other
year,
the
largest
US.
banks
must
submit
their
plans
to
credibly
unwind
themselves
in
the
event
of
catastrophe.
Banks
with
weaknesses
have
to
address
them
in
the
next
wave
of
living
will
submissions
due
in
2025.
While
JPMorgan,
Goldman
and
Bank
of
America’s
plans
were
each
deemed
to
have
a
“shortcoming”
by
both
regulators,
Citigroup
was
considered
by
the
FDIC
to
have
a
more
serious
“deficiency,”
meaning
the
plan
wouldn’t
allow
for
an
orderly
resolution
under
U.S.
bankruptcy
code.
Since
the
Fed
didn’t
concur
with
the
FDIC
on
its
assessment
of
Citigroup,
the
bank
did
receive
the
less-serious
“shortcoming”
grade.
“We
are
fully
committed
to
addressing
the
issues
identified
by
our
regulators,”
New
York-based
Citigroup
said
in
a
statement.
“While
we’ve
made
substantial
progress
on
our
transformation,
we’ve
acknowledged
that
we
have
had
to
accelerate
our
work
in
certain
areas,”
the
bank
said.
“More
broadly,
we
continue
to
have
confidence
that
Citi
could
be
resolved
without
an
adverse
systemic
impact
or
the
need
for
taxpayer
funds.”
JPMorgan,
Goldman
and
Bank
of
America
declined
a
request
to
comment
from
CNBC.
