Citigroup Fined £61.6 Million by UK Regulators for Major Trading Control Failures

Citigroup Global Markets Limited (CGML), the bank's London unit, experienced multiple failings, notably a mistaken $444 billion order in May 2022.

UK regulators have fined Citigroup £61.6 million ($78.5 million) for control failings in its trading operations, marking one of the largest sanctions for systems breaches.

These failures once caused a sudden drop in European stocks.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) investigated and fined Citigroup for lapses between April 2018 and May 2022, as stated in a joint announcement on Wednesday.

Citigroup Global Markets Limited (CGML), the bank’s London unit, experienced multiple failings, notably a mistaken $444 billion order in May 2022.

“Firms involved in trading must have effective controls in place to manage the risks involved,” said Sam Woods, CEO of the PRA and the Bank of England’s deputy governor for prudential regulation.

“CGML failed to meet the standards we expect in this area, resulting in today’s fine.”

On May 2, 2022, Citi processed a $444 billion order intended to be just $58 million, leading to $1.4 billion in mistaken sell orders.

The PRA identified the immediate cause as a trader’s “fat-finger” error, but noted “primary control failings” in Citi’s electronic trading system generated these erroneous orders.

The mistake led to significant short-term movements in several European indices before the trade was canceled.

The regulator highlighted the lack of “certain preventative hard blocks and the inappropriate calibration of other controls” as factors in the incident.

Despite “repeated supervisory communication” from the PRA to improve controls, weaknesses persisted.

Citi’s systems had identified problems, and various incidents had highlighted these deficiencies.

A Citi spokesperson said, “We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance.”

Under CEO Jane Fraser, Citi has aimed to address long-standing deficiencies in risk management, data governance, and internal controls.

These failings have prompted regulatory notices in the US from the Federal Reserve and the Office of the Comptroller of the Currency.

The PRA noted that Citi’s order management system in Europe lacked sufficient “hard blocks” to prevent erroneous trades.

The May 2 order triggered 711 alerts, including 65 hard blocks, which were overridden by traders that day.

The monitoring system failed to effectively manage these trades due to staff absences and subsequent mismanagement by a cover team.

The trader eventually canceled the erroneous order approximately 15 minutes later, revealing the inadequacy of the firm’s real-time monitoring.

The PRA fined Citi £33.9 million for trading system failings, reduced by 30% after Citi agreed to resolve the issue.