Citi forced to update disclosures on Russia exposure by SEC

Citigroup was forced to update disclosures related to its exposure to Russia after being pressed by the US securities regulator, according to correspondence published on Friday, the latest example of the bank coming under pressure to improve risk management and compliance.

The Securities and Exchange Commission asked Citi to provide “enhanced” disclosures about which aspects of its business needed to be evaluated for possible impairment as a result of Vladimir Putin’s invasion of Ukraine, issues that would impede its effort to sell its Russian consumer bank, and other material risks.

The SEC sent similar letters to other institutions in May as part of a broader push to collect information on the impact of the war on the industry, according to a sample letter published online.

It also requested a more detailed breakdown of Citi’s cash flow from investing activities and asked it to revise future filings to comply with accounting standards.

“We remind you that the company and its management are responsible for the accuracy and adequacy of their disclosures,” the regulator wrote in the letter dated May 2.

The SEC often requests more information about corporate financial statements, according to a source familiar with financial reporting. Companies typically have 10 days to respond to such requests, and the correspondence is made public after a waiting period.

Citi, the most internationally-focused group among its Wall Street peers, has been more directly affected by the events in Russia and the financial sanctions imposed on the country. The bank said it had roughly $10bn worth of exposure to Russia through loans, debt and other assets at the end of 2021, although it had reduced it by $1.9bn in the first quarter of the year.

In its response to the SEC, Citi said none of its long-lived assets in Russia experienced any impairment in the first quarter.

The bank also said it “revised” its financial statements to present certain investments separately — a change that does not effect the net cash flow figure it had reported.

In 2020, Citi entered a consent order with the Office of the Comptroller of the Currency, a bank regulator, over its failure to address “longstanding” and “widespread” operational deficiencies across its business lines. It also paid a $400mn fine.

The action came just months after Citi mistakenly wired $893mn of its money to creditors of Revlon, a client, which sparked a legal battle over the funds.

“Enhancement of Citigroup’s financial statements and disclosures is an objective that we share with the staff of the Securities and Exchange Commission,” the bank said in its response to the regulator in a letter dated May 9.

Chief executive Jane Fraser has repeatedly said that one of her top priorities is to transform the bank and overhaul its technology infrastructure to satisfy regulators and better compete with peers. Executives have cautioned, however, that fully transforming Citi will be a heavy lift and probably not be completed for years.