The mistake was the latest in a string of glitches at the bank. In 2022, a Citi employee caused [a crash in Europe] by accidentally adding a zero to a trade, igniting a sell-off that at one point erased 300 billion euros, or about $322 billion, from European stocks. Last year, British regulators fined Citi 62 million pounds, about $78 million, for the incident.
In 2020, Citigroup [accidentally wired $900 million] to a group of lenders locked in a bitter fight with Revlon, the beauty company.
That year, U.S. regulators [also fined Citi $400 million], saying the bank had failed to address issues in its risk management procedures and internal controls.
The actual amount of the transaction was supposed to be $280. So, you know, close.
Hey I know let’s let Citi run the treasury. I bet they would pay us to let them run it. Everyone knows business’s do so much better than the government employees.
Citi has made lot of progress, still mistakes happen. The earlier issues are systemic issues, system is supposed to catch and risk control folks rubber stamped the trade. A fat finger became bigger issue, because the nature of the hedge is, you sell a basket to hedge the other side and that is what happened. Now, this kind of mistakes happen all the time. But Citi is under microscope. The earlier issue is a bigger problem because it caused cascading issues and a market sell-off. Today’s issue is not systemic.
In any case, British regulators, greedy as hell, took advantage of a situation and pocketed $78 M, even though the markets that are affected were all in EU, and not in UK.
Errors, mistakes happens whether in private or in government. The key here, specifically about Citi’s situation is, they identified this issue, caught it and reversed. The system caught it. No money left the bank.
detective controls promptly identified the inputting error between two Citi ledger accounts and we reversed the entry
It took 90 minutes before the error was identified and reversed. I’d have to opine that was not “promptly”, especially given the magnitude of the error.
How hard is it to put error bars over every transaction to make sure it doesn’t look nutso? If I go to the bank teller and ask for a million dollars, I’m pretty sure she’s not just going to reach under the desk and give it to me. Computers can’t manage this trick, somehow?
Just to put things in context… Citi Services group alone handles/ process $5 Trillion per day. These transactions span 135 countries and over 30 major currencies and clearing houses spread across 21 countries.
Now, when a transaction is entered you may check for the existence of account number, if you are withdrawing whether the account has cash and if you are doing bills pay, you may not necessarily check the balance at the time of the transaction entry but at the time of actual bill pay. This is pretty common. It happens everyday, at every financial institution. When you have an options spread during option expiry, technically, you first buy and then you sell, for the momentary period, your account may go on negative cash. But after all the transactions are completed, you are expected to have cash. For complex transactions, and heavy volume traders, this involves multiple positions, i.e., I may be losing money in one spread and getting money in another covered call, etc. So you have to wait until all the transactions are netted to determine.
SO, whether this should be caught earlier or not, is this exposes some other underlying control issues is something regulators and Citi needs to determine.
Separately, there were 13 near-misses on $1B transactions is bit concerning. if this spooks investors I can understand. I used the weakness to sell some puts. But does it provide a systemic risk, a risk that may somehow impact US financial system, I doubt it.
Like I said, there is more to this error… here you go…
Citi’s $81tn near miss in April was due to an input error and a back-up system with a cumbersome user interface, according to people familiar with the incident. In mid-March, four transactions totalling $280 destined for a customer’s escrow account in Brazil had been blocked by a screen that catches payments that are potential sanction violations.
The payment was quickly cleared, but nonetheless remained stuck in the bank’s system and unable to be completed normally.
Citi’s technology team instructed the payments processing employee to manually input the transactions into a rarely used back-up screen. One quirk of the program was that the amount field came pre-populated with 15 zeros, which the person inputting a transaction needed to delete, something that did not happen.
The comedy of errors is… This is not the first time, Citi’s UI screen design has caused multiple issues. I know they are rewriting, modernizing, etc.
