Citigroup dressed-down by Japanese FSA again

LOSSES & LAWSUITS

The failures included a breakdown in the transaction processing system of the consumer bank division. When the payment and receipt transactions for May 3 through May 8 should have been processed at the time of automatic batch processing performed at night after business hours on Monday, May 8, the payment and receipt transactions for May 2 were processed redundantly by failure, and customers' transactions for May 3 through May 8 were unrecorded or undisplayed. This caused confusion and problems in customer account transactions, settlement, and so on. The system failure affected approximately 97,000 customers and approximately 100,000 accounts.

The regulator issued a statement in July indicating that, "In order to develop an oversight and control framework for system development and operation, data processing and related operations at Citibank, NA, Japan Branches (hereinafter referred to as ''the branches''), the branches' current system of governance, internal control and outsourced (or subcontracted) operations (including adequate staffing and the construction of a proper organisation and structure) must be fundamentally reevaluated and redeveloped".

The regulator is demanding an improvement programme be implemented with regular reporting to the supervisor on progress.

The regulator wrote, "Given the branches and outsourcee's response to the series of system failures and management's level of involvement, it is difficult to assume that voluntary actions of the branches alone would bring in necessary improvements".

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