Citi close to agreement with US regulator

Citigroup is close to a "secret agreement" with one of its main regulators, which will increase scrutiny of the financial services behemoth, says a media report.     

"Citigroup is close to a secret agreement with one of its main regulators that will increase scrutiny of the US bank and force it to fix financial, managerial and governance issues," The Financial Times has reported.     

Attributing to people close to the situation, the daily said the deal had been discussed in recent weeks amid increased pressure on Citi from the Federal Deposit Insurance Corporation (FDIC) and could be finalised soon.     

"The proposed agreement requires, among other things, that Citi strengthens its board and governance, improves asset quality, better manages expenses and provides more information to regulators on its capital and liquidity," the newspaper added quoting these people.

The Financial Times noted the regulator's action highlights concern over Citi's financial health, governance and the strength of its management team, led by its chief executive Vikram Pandit.     

The FDIC is known to be frustrated with the slow pace of Citi's "toxic" assets sale, its losses and the lack of commercial banking experience at the top, the daily said.

According to the publication, an agreement would strengthen the FDIC's position in its dealings with Citi and its demands for detailed financial information as it deliberates over whether to include it on its list of "problem banks".     

Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, struck a similar agreement with another regulator late last year, the daily said citing industry executives.     

The Financial Times added the bank and its main regulators — the Office of the Comptroller of the Currency, the Federal Reserve and the FDIC — declined to comment.     

The report noted that the agreements between regulators, a bank's management and board, known as "informal actions", are not made public to avoid stoking investors' fears.     

"They can be in a 'memorandum of understanding' or a 'commitment letter' from the bank to the authorities and are fairly unusual and less serious than formal enforcement actions," the daily said.