October 03, 2024

Warren Urges Banking Regulator to Address Citibank’s Failures, Consider Breaking Up the Bank

Senator Warns Michael Hsu, Head of Office of the Comptroller of Currency, that Citibank Has Become “Too Big to Manage”; OCC Has Not Taken Effective Action Despite Long List of Citi Problems 

“The evidence is clear: Citi has failed to make sufficient progress (in addressing its failures), despite being provided four years to do so. Following your own escalation framework, it may be time to break up Citi.”

Text of Letter (PDF)

Boston, MA – U.S. Senator Elizabeth Warren wrote to Michael Hsu, Acting Comptroller of the Office of the Comptroller of the Currency (OCC), urging stronger regulation of Citibank (Citi), which has become “too-big-to-manage” and committed a number of massive blunders in recent years.

Citi, the fourth largest bank in the United States, has failed to reform and modernize its operations despite being the subject of multiple enforcement actions by the OCC and the Federal Reserve. Citi has twice failed the Federal Reserve’s “stress test,” which measures a bank’s ability to make accurate projections during stressful scenarios. Citi was at the center of a 2014 $400 million fraud scandal, during which the bank failed to properly oversee its many units. This summer alone, Citi faced two crises. First, in June, regulators rejected Citi’s “living will,” a document that outlines how the bank will safely manage bankruptcy in the event that it fails. Then, Citi came under fire for repeated violations of a Federal Reserve rule meant to protect customer deposits. 

Despite Citibank's errors, including mistakenly wiring nearly $1 billion to one of its borrowers, Mr. Hsu has failed to take meaningful action to rein in the bank. 

In a speech last year, Mr. Hsu outlined a four-step framework to address large banks' “too-big-to-manage” problem. Hsu’s four steps, (1) private warnings; (2) public enforcement and fines; (3) growth restrictions; and (4) the breaking up of recidivist banks, must now be applied to Citi, which has repeatedly failed to protect its customers and meet bank regulators’ standards. Mr. Hsu has also argued that after three strikes, repeat offenders are “out.” 

Despite hundreds of millions of dollars in civil penalties and repeat enforcement orders since 2020, Citi has been unable or unwilling to address its repeat and serious failures.

“The evidence is clear: Citi has failed to make sufficient progress, despite being provided four years to do so. Following your own escalation framework, it may be time to break up Citi,” Senator Warren wrote.

Senator Warren has led the fight to hold banking regulators accountable to establishing and enforcing guardrails around the banking industry and preventing harmful bank mergers to protect the financial system, economy, and consumers: 

  • In September 2024, Senator Warren wrote to the OCC and the Fed with renewed concern that the OCC and the Fed could allow New York Community Bank to escape regulatory oversight despite “systemic failings” in the bank’s operation and management.
  • In April 2024, Senators Warren and Blumenthal probed the OCC for its regulatory failures amid NYCB’s financial spiral. 
  • In March 2024, a year after the collapse of Silicon Valley Bank, Senator Warren sent a letter to three key banking regulators: Michael Barr, Vice Chair for Supervision of the Federal Reserve, Martin Gruenberg, Chair of the Federal Deposit Insurance Corporation, and Acting Comptroller Hsu, seeking an update on their progress in delivering on their public commitments to strengthen regulatory standards for banks with assets of $100 billion or more. 
  • In February 2024, Senator Warren led 12 lawmakers urging the OCC and the Federal Reserve to block Capital One’s plan to acquire Discover Financial Services. Their letter also expressed concerns with the OCC’s proposed policy statement regarding merger approvals as essentially codifying a permissive approach.
  • In December 2023, Senator Warren led 6 senators in a letter to Acting Comptroller Hsu, calling on OCC to allow states to move forward with their efforts to protect consumers from harmful bank practices. The senators criticized the OCC for overstepping its preemption authority under the Dodd-Frank Wall Street Reform and Consumer Protection Act, which it used to block tough, state-level consumer protections.
  • In August 2023, chairing a hearing of the Senate Banking, Housing, and Urban Affairs Committee Subcommittee on Economic Policy, Senator Warren highlighted the need for regulators to implement the strongest version of bank merger review guidelines in order to ensure stability in the financial system. 
  • In June 2023, Senator Warren sent a letter to Assistant Attorney General Jonathan Kanter, Federal Deposit Investment Corporation Chairman Gruenberg, Acting Comptroller of the Currency Hsu, Federal Reserve Vice Chair for Supervision Michael Barr, and Treasury Secretary Janet Yellen, urging regulators to promote greater competition in the banking sector by toughening their stances on bank mergers and strengthening bank merger review guidelines.
  • In May 2023, at a hearing of the Senate Banking, Housing, and Urban Affairs Committee, Senator Warren questioned Acting Comptroller Hsu on his decision to approve JPMorgan Chase’s purchase of First Republic Bank after its collapse. This merger allowed a large, poorly supervised bank to be swallowed by America’s largest bank, making it $200 billion larger than it was before.
  • In May 2023, Senator Warren sent a letter to Acting Comptroller Hsu and FDIC Chair Gruenberg, questioning the terms of the sale of First Republic Bank to JP Morgan Chase and the rationale behind the OCC and FDIC’s approval of the deal. 
  • In December 2022, Senators Warren and Tina Smith (D-Minn.) sent letters to three key banking regulators: the Federal Reserve, FDIC, and the OCC, raising concerns about the ties between the banking industry and crypto firms following FTX’s bankruptcy. The senators asked each regulator how they assessed the banking system’s exposure to crypto risks. 
  • In December 2022, Senator Warren and Representative Ilhan Omar (D-Minn.) sent a letter to the heads of all U.S. banking regulators, including Acting Comptroller Hsu, calling on them to improve banking access for immigrant communities and communities of color.  
  • In August 2022, Senators Warren, Dick Durbin (D-Ill.), Whitehouse, and Sanders sent a letter to the OCC, calling on it to rescind the previously issued cryptocurrency guidance and replace it with more comprehensive guidance, in coordination with other prudential regulators. 
  • In September 2021, Senator Warren and Representative Jesús “Chuy” García (D-Ill.) reintroduced the Bank Merger Review Modernization Act, which would restrict harmful consolidation in the banking industry and protect consumers and the financial system from “Too Big to Fail” institutions, like those that caused the 2008 financial crisis.

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