US Senator Elizabeth Warren has called on the Office of the Comptroller of the Currency (OCC) to impose growth restrictions on Citi due to ongoing issues with the bank's risk management and internal controls.
In a letter to Acting Comptroller of the Currency Michael Hsu, Warren referenced a January 2023 speech in which Hsu outlined a four-step framework for escalating supervisory action against large banks. In that speech, Hsu warned that banks that are found to have grown "too big to manage" (or "TBTM"), as evidenced by repeated risk management and control failures, risk facing severe enforcement action up to and including being broken up through forced divestiture and simplification.
Warren argued that the OCC has been too lenient with Citi, especially after it imposed a $135.6 penalty over the summer for a failure to resolve issues laid out in consent orders issued in 2020. She argued that these fines have not sufficiently motivated Citi to reform its systems. "The evidence is clear: Citi has failed to make sufficient progress, despite being provided four years to do so," she wrote.
Warren criticized the OCC for what she sees as a lack of meaningful action to compel real change at Citi, despite Hsu's warnings for what would come of repeat offenders. She contended that, if growth restrictions do not lead to significant improvements, the OCC should consider breaking up the bank.
In the Preamble he contributed to the 2023 Compendium, Michael Hsu discussed whether or not some financial firms have become TBTM, and what the OCC is doing to respond.
"We have seen what happens when large banks become unmanageable and need government support to avoid disorderly failure," he writes. "The negative impacts of TBTM and too-big-to-fail on households and communities, on the banking system and economy, and on trust are immeasurable and can take years to mend." ▸ Read More
Join The Discussion