Citi Hit with $79 Million Fine Over $189 Billion Trading Blunder
UK regulators have fined Citigroup a total of £62 million ($79 million) for failures in its trading systems that nearly led to a catastrophic $189 billion stock sell-off on European markets.
The Financial Conduct Authority (FCA) imposed a fine of approximately £28 million ($36 million), while the Bank of England’s Prudential Regulation Authority (PRA) levied a nearly £34 million ($43 million) penalty. The fines were reduced by 30% due to Citigroup’s agreement to settle the matter. Without the settlement, the combined fine would have exceeded £88 million ($112 million).
A Citigroup spokesperson acknowledged the resolution of the incident, which stemmed from an individual error that was quickly identified and corrected. “We immediately took steps to strengthen our systems and controls, and remain committed to ensuring full regulatory compliance,” the spokesperson said. Citigroup declined to comment on speculation that the error was a “fat-finger” mistake, where incorrect data is inputted due to pressing the wrong key.
The incident occurred in May 2022 when one of Citigroup’s traders mistakenly sold $1.4 billion worth of stocks on European exchanges. The FCA noted that the trader intended to sell only $58 million worth of stocks but made an error that resulted in an order to sell $444 billion. Citigroup’s systems blocked $255 billion of that, leaving $189 billion to be processed for sale throughout the day. Before the trader canceled the transaction, $1.4 billion worth of stocks had already been sold.
The FCA criticized Citigroup’s lack of adequate controls, highlighting that the trader could override a pop-up alert without fully reviewing its details, and the bank’s real-time monitoring was insufficient to escalate alerts promptly. These deficiencies risked creating a disorderly market.
In response to the incident, Citigroup has implemented measures to enhance the security of its trading systems. Sam Woods, CEO of the PRA, emphasized the importance of effective controls for firms involved in trading, stating that Citigroup’s failure to meet expected standards resulted in the fine.
Another Costly Error for Citigroup
This isn’t the first significant error for Citigroup. In 2020, the bank mistakenly wired $900 million in interest payments to lenders of Revlon, far exceeding the intended amount. While some lenders returned the funds, others did not, leading to a US district court ruling that Citigroup could not recover the outstanding $500 million.
A separate trading mishap in 2014, unrelated to Citigroup, saw an anonymous broker in Japan make and then cancel orders for more than $600 billion worth of stocks, causing significant market disruption.
