- On Thursday, Citigroup announced that its CEO, Michael Corbat, would retire effective February 2021.
- The move came after it became clear that regulators were losing patience because he was unable to fix risk, compliance and technology systems, according to those familiar with the matter.
- A month before the announcement, Corbat sent a company-wide memo to employees outlining some of these challenges and steps the management team had taken to improve things and encouraging its employees to adopt a different stance on compliance.
- Read the full memo below.
- You can find more stories on the Business Insider homepage.
Citigroup CEO Mike Corbat announced his resignation last week and revealed plans to hand over control to Bank President Jane Fraser in February next year.
Corbat hastened his resignation when it became clear that the Office of the Currency Auditor and the Federal Reserve would reprimand the bank for failure to comply with its risk and compliance systems. The Wall Street Journal reported Monday. Business Insider has learned that this was the culmination of months of escalating tension with regulators.
Continue reading: This created months of tension between Citigroup and its regulators over the bank's technology and risk systems, which went into the CEO's early retirement
On August 10, Corbat sent a company-wide memo describing some of these challenges. He spelled out steps the management team had taken to improve things – including hiring new leaders – and pleaded with employees to change their stance on compliance. A month later he announced his resignation.
The full text of the memo can be found below:
Internal memo to all Mike Corbat employees
August 10, 2020
First of all, I would like to thank you once again for your excellent work in this very challenging time.
All of the hard work you have put in changing our model, making solid investments and building our financial strength creates a remarkable contrast in performance from the financial crisis.
Your efforts since the beginning of the current crisis have gone a long way in supporting one of my overall goals as CEO – to see Citi as an undeniably strong and stable institution. At the center of this goal is to ensure a first-class risk and control environment. We are the world's largest bank and we have to meet the obligations associated with this title, particularly with regard to security and soundness.
In the past few years we have worked on major cleanup projects to strengthen our controls, infrastructure and governance. As we have made progress, we must work to meet the standards that we must adhere to.
Over the past few months we've made the changes needed to get to where we need to be. In June, we centralized program management and regulatory affairs under a new role, Chief Administrative Officer, and hired industry veteran Karen Peetz for this new role. At the same time, Mary McNiff became our Chief Compliance Officer and was quick to introduce new thinking and new approaches. We have also asked outside firms to be open about what we need to do to improve our skills and effectiveness in these areas. As part of this effort, we also interviewed many of our colleagues to better understand the root causes of some of the execution problems we have experienced.
One thing became very clear to me through the first observations of Karen and Mary, the perspectives of Jane and Paco and the survey: We have to think very differently about infrastructure and controls. We cannot see them as something that is important to our regulators. It's not about running remediation projects or ticking check boxes.
In my last quarterly town hall, I referred to a quote from Mario Andretti. He said: "It is amazing how many drivers, even in Formula One, believe that the brakes are slowing the car down." His point was that it's the brakes that allow you to control the car. It's the brakes that keep you going fast. Better controls and a stronger infrastructure will make us more competitive, not slow us down.
To be best for our customers and to serve all of our stakeholders, we first need an industry leading risk and control environment. If we do this right, we can serve our customers better, attract new customers, get them on board faster and give them the peace of mind that they are doing business with an undeniably strong and stable institution.
We all play a role in changing the way we think. This is not just the job of some of our colleagues. They are all of our jobs, across companies, regions and functions. Goofy thinking that prioritizes the task of an individual or a group over the best outcome for the company is not acceptable. Our approach to risk and controls needs to be proactive, consistent across the company, deeply embedded in our business processes, and prioritized by everyone who works at Citi. We are measured as a company and individually by how well we accomplish this change, and I encourage you to see it as an opportunity.
I ask each of you to embrace this change. We have shown in the past what we can do when we act with collective purpose and determination. Sustained efforts like the emphasis on ethics have made us a better company. I am confident that we will do the same here, making our risk and control a strategic priority. In the coming months, you will learn more about it and how you can help move our company forward.
Thank you for all you continue to do for Citi.